* Gold down the most since July on China hike, dollar rise
* Silver biggest one-day loss in 3 months; PGM lower
* Sell signal surfacing on gold chart, MACD trend bearish
* Coming up: Federal Reserve's Beige Book due Wednesday
(Recasts, updates prices to market close, adds comments)
By Frank Tang
NEW YORK, Oct 19 (Reuters) - Gold fell nearly 3 percent on
Tuesday, its largest one-day fall since early July, as the
dollar surged after China unexpectedly raised interest rates
and the United States said it will not devaluate the dollar.
After steadily rallying by nearly 20 percent since mid-July
to a record near $1,400 last week, analysts said bullion was
primed for a correction and could be poised for more losses
after breaking below the bottom of its three-month rising
channel and a bearish cross-over in the MACD technical charts.
[]
(Graphic: http://link.reuters.com/tus29p)
"We have been due for a correction in the gold and some
other commodity markets, and China's rate hike and Geithner's
statement provided the vehicle for the heavy selling in
commodities and currencies across the board," said Bill
O'Neill, partner at commodities firm LOGIC Advisors.
Prices dived in heavy trading volume after China surprised
markets with its first rate hike since 2007. Fearing more
aggressive monetary tightening in the world's fastest-growing
major economy, investors cut risk exposure by selling equities
and commodities and buying the U.S. dollar.
Adding to the dollar index's 1.7 percent surge, its biggest
in more than a month, Treasury Secretary Timothy Geithner said
on Monday the United States would not devalue the dollar for
export advantage.
Spot gold <XAU=> fell 2.6 percent to $1,332.45 an ounce at
3:55 p.m. EDT (1955 GMT). U.S. gold futures for December
delivery <GCZ0> settled down $36.10 an ounce at $1,336.
Silver <XAG=>, which outperformed gold during the latest
three-month leg of the rally, dropped 4.2 percent to $23.34 an
ounce, its largest one-day fall since July, while the platinum
group metals were relatively more insulated against the broad
declines in the commodities sector.
China's decision to raise its benchmark one-year interest
rate put perceived risk currencies including the euro <EUR=>
and the Australian dollar <AUD=> under pressure, while sending
Wall Street 1.6 percent lower. [] []
RBS strategist Daniel Major said the dollar's surge had the
the biggest near-term impact on the commodities complex, most
notably the precious metals.
"The prospect of higher rates in China or elsewhere clearly
has got longer term implications as gold can't compete once
yields do return to more traditional (levels)," Major said.
DOLLAR RALLY HITS GOLD
Gold, which is denominated in dollars, tends to move in the
opposite direction to the U.S. currency. The correlation
between bullion and the U.S. currency has increased to a
negative 0.76, its strongest inverse relationship in 10 months,
Reuters data showed.
On an hourly basis, the gold/dollar inverse correlation has
largely strengthened throughout Tuesday as the sell-off in gold
accelerated.
Matthew Turner, an analyst at Mitsubishi Corp said China's
rate hike could point to a stronger yuan over the medium term,
which will reduce the need for the dollar to fall against other
currencies.
"Anything that alters the perceptions of where the dollar
and global monetary policy is headed is significant for gold at
the moment," Turner said.
Gold priced in euros <XAUEUR=R> and sterling <XAUGBP=R>
also fell after China's policy decision, by 1.1 percent and 1.5
percent, respectively.
Spot gold prices hit record highs at $1,387.10 an ounce
last Thursday, driven by concern over currency stability and by
expectations for further U.S. quantitative easing which could
undermine the dollar.
While they have since corrected, the metal could receive a
boost as investors looked ahead to further monetary easing at a
meeting of the Federal Open Market Committee next month.
Credit Agricole analyst Robin Bhar said the FOMC and the
upcoming G20 meeting are potentially friendly toward gold and
could push the dollar lower.
Platinum <XPT=> fell 1.8 percent to $1,660, and palladium
<XPD=> was trading down 2.5 percent at $569.00.
Prices at 4:18 p.m. EDT (2018 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1336.00 -36.10 -2.6% 21.9%
US silver <SIZ0> 23.780 -0.633 0.0% 41.2%
US platinum <PLF1> 1677.60 -20.70 -1.2% 14.0%
US palladium <PAZ0> 578.45 -9.65 -1.6% 41.5%
Gold <XAU=> 1332.30 -36.15 -2.6% 21.5%
Silver <XAG=> 23.35 -1.00 -4.1% 38.7%
Platinum <XPT=> 1663.00 -27.00 -1.6% 13.5%
Palladium <XPD=> 569.00 -14.58 -2.5% 40.3%
Gold Fix <XAUFIX=> 1339.00 -28.75 -2.1% 21.3%
Silver Fix <XAGFIX=> 24.26 24.00 1.0% 42.8%
Platinum Fix <XPTFIX=> 1672.00 23.00 1.4% 14.1%
Palladium Fix <XPDFIX=> 571.00 15.00 2.6% 42.0%
(Additional reporting by Jan Harvey and Amanda Cooper in
London;editing by Sofina Mirza-Reid)
