Gold falls 1 percent on oil slide, economic worries

Five-tael (6.65 ounces or 190 grams) gold bars are seen at a jewellery store in Hong Kong in this April 21, 2011 illustration photo.

NEW YORK (Reuters) - Gold fell 1 percent on Monday for its biggest one-day loss in over a month, succumbing to selling that hit most commodities on worries over economic growth and a European debt crisis.

Safe-haven buying was absent for precious metals despite a downgrade of Greece's credit rating. Silver tumbled over 4 percent, marking its biggest two-day drop in a month.

"Gold is on the risk-on trade, and that obviously is getting pummeled here. People look across their portfolio and see gold, metals and energy as all the same trade," said Bob Haber, chief investment officer of Haber Trilix in Boston, who manages $2 billion in assets.

Oil fell as much as $3 and U.S. equities also pared initial gains.

Spot gold was down 1.1 percent at $1,514.05 an ounce by 3:07 p.m. EDT (1906 GMT), its biggest one-day drop in five weeks. It hit a session low of $1,511.11, its weakest since May 23.

U.S. August contract settled down $13.60 at $1,515.60 an ounce, after trading in a range between $1,511.40 and $1,533.90 an ounce. Volume was around 110,000 lots, about half of its 30-day average, consistent with below-average turnover in recent weeks.

TECHNICALS IN FOCUS

Technical selling also weighed on prices after bullion fell below its 20-day moving average, a level it held for the past three weeks. Gold appears to find support after bouncing off its 50-day moving average at $1,507 an ounce. (Graphic of gold vs 20-day MA: r.reuters.com/peb22s)

Scott Meyers, senior analyst at Pioneer Futures, a unit of futures broker MF Global said Monday's U.S. gold settlement below recent lows near $1,520 could be the first sign of potential price softening but should not be viewed as an outright bear signal.

Adam Hewison, president of MarketClub.com, said that gold could bounce in an area near $1,517 and $1,507 an ounce, representing the 50 percent and 62 percent Fibonacci retracement levels from a high of $1,553 on June 6.

Fibonacci retracement levels are used by technical analysts to find potential support on charts.

Bullion extended losses from Friday when it came under pressure as the dollar rallied and Wall Street resumed its slide following weaker Chinese trade data.

The metal snapped a three-week winning streak last week, but it is up 3 percent in the past four weeks on a string of bleak U.S. economic data including a weak jobs report.

Spot silver fell 3.9 percent to $34.71 an ounce.

Crude oil and equities prices weakened further after Standard & Poor's cut Greece's credit ratings by three notches, saying the country is increasingly likely to restructure its debt in a way the ratings agency would consider a default.

Credit Suisse said in a note that the lingering discussion about the fiscal situation across developed economies should additionally promote gold's role as a store of value.

"Gold is suffering from liquidation of risk assets and it's going to face pressure of profit-taking, but the fundamental story that keeps people investing in gold is still in place," said Sean McGillivray, head of asset allocation for Great Pacific Wealth Management.

Among platinum group metals, platinum was down 1.4 percent at $1,799 and palladium fell 1.9 percent to $794.25.

(Additional reporting by Sue Thomas, Pratima Desai in London and Lewa Pardomuan in Singapore; Editing by Lisa Shumaker and Alden Bentley)