PRECIOUS-Gold drops 2 pct on fund selling, US rate hike fears

Reuters Middle East

* Prospect of rising US rates triggers profit taking in gold * Lower gold forecasts by bank analyst sap momentum * Palladium hits 2-1/2 year high, tracks gold * Coming up: US Case-Shiller home price data Tuesday (Adds comment, updates market activities) By Frank Tang and Jan Harvey NEW YORK/LONDON, March 24 (Reuters) - Gold prices tumbled about 2 percent on Monday, the biggest one-day drop in nearly two months, as hedge funds dumped the precious metal on fears that rising U.S. interest rates could spark a further retreat from last week's six-month high. The metal sank to a one-month low near $1,300 an ounce on a day when outside markets remained largely immune from gold's selloff. Recent forecasts of sharply lower gold prices at below $1,200 by Societe Generale and other bullion banks also prompted institutional investors to sell bullion, analysts said. Gold investor sentiment turned bearish last week after Fed Chair Janet Yellen said the central bank will probably end its massive bond-buying program this fall, and could start raising interest rates around six months later. "Momentum investors are capitalizing on the concern over a stronger dollar and rising interest rates by the end of the year," said Jeffrey Sica, chief investment officer at New Jersey-based Sica Wealth which manages over $1 billion in client assets. Spot gold was down 1.9 percent at $1,308.70 an ounce at 2:57 p.m. EDT (1857 GMT), its biggest daily fall since Jan. 30. Earlier, it hit $1,307.54, the lowest since Feb. 14. U.S. COMEX gold futures for April delivery settled down $24.80 an ounce at $1,311.20 an ounce, with trading volume about 35 percent above its 30-day average, preliminary Reuters data showed. "It's an extension of people digesting Yellen's comment about the interest rate," said Phillip Streible, senior commodities broker at RJ O'Brien. The lower U.S. stock market also triggered profit-taking across the board. The metal fell 3.5 percent last week, after Yellen's comments surprised world markets by signalling that U.S. interest rates could rise sooner than had been expected. Silver fell 1.6 percent at $19.93 an ounce, dragged down by gold's sharp losses. Among platinum group metals, palladium rose to a 2-1/2 year peak on supply worries due to a combination of a strike in South Africa, simmering tensions over Ukraine and the launch of two palladium-backed exchange-traded funds in Johannesburg. Palladium hit its highest since August 2011 at $799.50 an ounce. The autocatalyst metal later edged up 0.2 percent at $790.90 an ounce. Platinum was down 0.5 percent at $1,424.25 an ounce. 2:57 PM EST LAST/ NET PCT LOW HIGH CURRENT SETTLE CHNG CHNG VOL US Gold APR 1311.20 -24.80 -1.9 1308.50 1335.70 166,822 US Silver MAY 20.067 -0.243 -1.2 19.920 20.315 39,439 US Plat APR 1431.20 -4.80 -0.3 1428.50 1444.40 18,161 US Pall JUN 794.35 5.05 0.6 782.15 802.45 6,967 Gold 1308.70 -25.24 -1.9 1308.35 1334.36 Silver 19.930 -0.330 -1.6 19.940 20.280 Platinum 1424.25 -7.00 -0.5 1428.00 1439.75 Palladium 790.90 1.90 0.2 783.00 799.50 TOTAL MARKET VOLUME 30-D ATM VOLATILITY CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 224,753 170,457 185,433 17.45 0.69 US Silver 43,300 65,238 58,366 24.36 -1.49 US Platinum 30,859 13,903 13,233 19.13 0.50 US Palladium 7,008 7,634 5,687 22.68 1.29 (Additional reporting by Lewa Pardomuan in Singapore; Editing by Susan Fenton, Stephen Powell and Diane Craft)

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