PRECIOUS-Gold slides to 4-week low as investors sidestep bullion

* Funds sell out of New York's largest physical gold fund * Gold finds some relief as U.S. data hurts stocks * Physical buying seen underpinning (Recasts throughout; adds comments, byline, changes dateline) By Frank Tang and Jan Harvey NEW YORK/LONDON, May 16 (Reuters) - Gold dropped to a four-week low on Thursday, as renewed liquidation in gold-exchange traded funds and its recent drop below the $1,400-per-ounce level spooked bullion investors, prompting them to favor other assets. Traders said the fall below $1,400 in the previous session triggered heavy selling and that the yellow metal might retest two-year lows of $1,321.35 touched on April 16, when it recorded the worst daily loss for 30 years. "Bullion's price break below the psychological $1,400 an ounce level may introduce additional near-term pressure on gold. However, physical bullion demand is likely to pick up further, given the price drop, to help stem potential losses," said James Steel, chief precious metals analyst at HSBC. Spot gold was down 0.4 percent at $1,386.05 by 5:28 p.m. EDT (2128 GMT). U.S. gold for June delivery settled down $9.30 at $1,386.90 an ounce. Rallying Wall Street stock indexes have hurt bullion's appeal as an alternative investment this year, leading to hefty outflows from gold-backed exchange traded funds. The largest gold ETF, the SPDR Gold Trust, reported a further 4.5 tonne-drop in its holdings on Wednesday to 1,047.14 tonnes - the lowest since March 2009. "We're seeing some of the pension funds selling via the ETFs, which is a bit of a worrying sign," said Standard Chartered analyst Daniel Smith. Soros Fund Management LLC joined funds including Northern Trust and BlackRock in lowering its investment in the SPDR Gold Trust in the first three months of the year, a SEC filing showed on Wednesday. Gold investment nearly halved in the first quarter as a brighter view of the U.S. economy prompted investors in the West to favor assets such as stocks over bullion, the World Gold Council said on Thursday. GOLD PREMIUMS RALLY IN ASIA Lower gold prices have attracted physical buying in China. The world's second-largest consumer after India bought a large amount of gold on Thursday. Premiums for gold bars rallied to all-time highs in Hong Kong and Singapore on Thursday after bullion's steepest drop since its April selloff fueled another round of buying, constricting supply. That, however, did not counterbalance weaker investment demand. In other precious metals, silver edged up 0.4 percent to $22.66 an ounce. Platinum fell 0.5 percent to $1,479 an ounce, while palladium rose 1.6 percent to $736 an ounce. 5:28 PM EDT LAST/ NET PCT LOW HIGH CURRENT SETTLE CHNG CHNG VOL US Gold JUN 1386.90 -9.30 -0.7 1368.00 1397.00 221,681 US Silver JUL 22.659 0.001 0.0 22.060 22.770 44,017 US Plat JUL 1485.60 -5.10 -0.3 1470.00 1492.90 11,934 US Pall JUN 740.75 11.70 1.6 716.00 743.00 5,683 Gold 1386.05 -6.24 -0.4 1370.33 1397.91 Silver 22.660 0.090 0.4 22.150 22.800 Platinum 1479.00 -7.00 -0.5 1471.50 1491.50 Palladium 736.00 11.50 1.6 718.75 740.25 TOTAL MARKET VOLUME 30-D ATM VOLATILITY CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 246,876 230,923 177,992 23.78 -0.35 US Silver 45,950 78,524 55,088 34.65 5.01 US Platinum 12,996 12,218 11,815 19.62 -0.09 US Palladium 7,046 5,819 5,062 (Editing by David Goodman, James Jukwey, G Crosse)