* China bank reserve hikes trigger technical selling
* Bearish USDA crop report, oil drop pressure gold
* New U.S. ETFs bought 170,000 ounces of PGMs
(Recasts, updates comments, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 12 (Reuters) - Gold fell below $1,130
an ounce on Tuesday, losing 2 percent as the news of China's
tightening monetary policy curbed economic optimism, triggering
heavy technical selling.
"Gold's decline has a lot to do with China's raising
reserve requirements. It was massive liqudiation after prices
fell below important technical levels," said Bruce Dunn, vice
president of trading at New Jersey-based Auramet.
Platinum and palladium fell with gold's losses. The new
U.S. exchange traded funds, however, should provide underlying
support to prices after they bought a total of 170,000 ounces
platinum group metals in the first two days after the funds'
launch.
Spot gold <XAU=> hit a session low of $1,124.95 an ounce,
and was last at $1,126.80 an ounce at 2:35 p.m. EST (1935 GMT)
versus $1,151.10 late in New York trade on Monday.
Technical selling dragged prices lower after spot bullion
fell below its 50-day moving average at $1,130, analysts said.
Support could be seen at its 100-day moving average at $1,074
an ounce.
U.S. February gold futures <GCG0> settled down $22, or 1.9
percent, at $1,129.40 an ounce on the COMEX division of the New
York Mercantile Exchange.
China took its strongest step towards tightening monetary
policy with an increase in banks' required reserves. The move
came just days after China reported robust trade figures and
was the first time that the central bank had adjusted the ratio
since a cut in December 2008. []
A rise in interest rates, while seen by few as imminent, is
nonetheless the next logical move, analysts said. U.S. rates
slumped to historic lows in the fallout of the global economic
slump triggered in 2007.
"Gold doesn't like real interest-rate environments which
are very high and positive because it is a non-interest bearing
asset," said Michael Lewis, head of commodities research at
Deutsche Bank.
"It has a much better chance for competing for investment
inflows in low or negative real interest-rate environments."
Crude oil fell 2 percent on China's news and warmer U.S.
weather, while Wall Street also dropped more than 1 percent.
Bullion traders also cited a bearish report by the U.S.
Agriculture Department, which bumped up its estimate for 2009
corn production to a record. []
Gold often acts as a hedge against inflation for some
investors, but at the same time its lack of yield makes it
unattractive in an environment of rising interest rates.
PLATINUM, PALLADIUM INTEREST SEEN
Platinum <XPT=> was at $1,561 an ounce against its Monday
late New York quote of $1,591.50. Earlier in the session, it
reached $1,624, its highest since August 2008, while palladium
also hit an 18-month high of $439. It was last at $424 against
$431.
Platinum and palladium prices touched their highest since
mid-2008 earlier on Tuesday as the launch of new investment
products in the United States and hopes for a recovery in
industrial demand fueled buying.
"We have a new player on the market, and that is the new
palladium and platinum ETFs being traded in the United States,"
said Commerzbank analyst Eugen Weinberg. "We have seen strong
demand for them in the first two days of trading."
As of Monday, the ETFS Physical Platinum Shares <PPLT> have
bought 80,000 ounces of platinum, while the Palladium Shares
<PALL> held 90,000 ounces of palladium, a ETF Securities
spokeswoman said.
More than half of global platinum and palladium demand
comes from carmakers, which use the metals in autocatalysts.
Car demand figures are therefore closely watched by PGM
traders.
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For a graphic showing the relationship of platinum and
palladium prices to car sales, click on:
http://graphics.thomsonreuters.com/0110/CMD_PLDPLT0110.gif.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Analysts say investment buying sparked by expectations for
a recovery in car demand in 2010 could lead platinum and
palladium to outperform other precious metals this year.
[]
Silver <XAG=> was at $18.22 an ounce against $18.55.
(Additional reporting by Humeyra Pamuk in London; Editing by
Marguerita Choy)
