Gold tumbled nearly 3 percent on Thursday to more than $200 below Tuesday's record highs, as investors cashed in scorching gains in the precious metal after the CME Group hiked gold trading margins for a second time this month.

Investment appetite for gold has cooled ahead of a widely awaited central bankers' meeting at Jackson Hole, Wyoming, as speculation grows over whether or not the Federal Reserve will signal a further round of U.S. monetary easing.

More quantitative easing -- or money printing -- from the Fed could significantly lift gold, but it could have further to correct if no additional action is signalled.

Spot gold was down 1.6 percent at $1,722.50 an ounce at 1351 GMT in volatile trade, having earlier touched a low of $1,702.44.

Investors cashed in on gold's latest rally after the yellow metal surged nearly 20 percent in early August to record highs at $1,911.46 an ounce.

Spot prices fell 4.3 percent on Wednesday, their biggest one-day drop since December 2008, after U.S. durable goods data beat expectations. U.S. gold futures also posted their sharpest slide since 1980.

Gold seemed to be running ahead of where equity markets were pointing to in terms of downside risks -- those markets were stable and gold kept wanting to push higher and higher, said Macquarie analyst Hayden Atkins. Once we got an upside surprise in data, we saw some of those longs washed out.

Any recovery from these lows will be dependent on what happens in the next few days. It's not really clear what the Fed's intentions are, said Atkins. People are waiting and watching.

Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust , declined by more than 27 tonnes on Wednesday, their biggest one-day outflow since Jan. 25. They have dropped nearly 60 tonnes this week, worth around $3.25 billion at today's prices.

Gold's losses were exacerbated late on Wednesday after the CME Group, the world's largest commodities exchange, raised margins on gold futures by about 27 percent, the biggest hike in more than 2-1/2 years and the second increase in a month.

But the metal's overall uptrend, which has seen it climb more than 20 percent this year, is still intact, analysts said.

To be convinced you'd seen the top of the market you would have to see more signs of the issues that had lifted gold being resolved, such as the euro zone crisis, and U.S. growth coming back, said Mitsubishi analyst Matthew Turner.

Assets seen as cyclical or higher-risk than gold rose on Thursday as gold declined. European shares climbed after a raft of positive corporate results, oil prices firmed and the euro strengthened against the dollar.

U.S. gold futures GCv1 for August delivery were down $29.40 an ounce at $1,727.90.

Asset returns in 2011: r.reuters.com/suz52s

Gold correlation with dollar: r.reuters.com/ryx52s

Inflation adjusted gold price: r.reuters.com/pun62s

Gold in different currencies: r.reuters.com/wun62s

Gold/silver ratio: r.reuters.com/xyx52s

Gold/platinum ratio: link.reuters.com/xez92s

Gold futures positioning: link.reuters.com/ven43s

Gold volatility: link.reuters.com/gah43s

Gold/equities correlation: link.reuters.com/cen43s

EXPECTATIONS SCALED BACK

All eyes are now on Jackson Hole. Fed chief Ben Bernanke's speech on Friday is being closely watched for hints of a fresh round of quantitative easing, which some have speculated could be necessary to kick-start growth.

Bernanke is likely to use his speech to acknowledge disappointment over the pace of the recovery and explain how the Fed will tackle sluggish growth.

It is fair to say that gold should be one of the bigger beneficiaries of another round of quantitative easing; anticipation of such has been a driver of gold's strength recently given worries about financial stability and a deteriorating economic outlook, said UBS in a note.

That yesterday's U.S. durable good data release surprised on the upside raised a red flag, along with equities trading again in positive territory, and climbing Treasury yields.

As expectations of what Fed Chairman Bernanke can say at Jackson Hole tomorrow are scaled back, gold should be one of the assets that reacts most, it added. But there is also a positive aspect to this, in that gold appears to have already discounted disappointment at Jackson Hole.

Among other precious metals, silver was down 0.1 percent at $39.64 an ounce, spot platinum was up 0.1 percent at $1,804.74 an ounce, and spot palladium rose 0.8 percent to $749.50 an ounce. (Editing by Alison Birrane)