* Gold ended 5-day rally on Thursday, longest since May
* Gold on track to close week up for first time in 8 weeks
* China's gold holdings up 19 tonnes in July
(Rewrites paragraph 1, updates prices; adds comment, second
byline, NEW YORK dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Aug 14 (Reuters) - Gold turned slightly
lower on Friday as the dollar shifted higher on encouraging U.S.
data and as investors weighed the impact of China's currency
intervention on the timing for the first U.S. interest rate
increase in nearly a decade.
U.S. industrial output advanced at its strongest pace in
eight months in July as auto production surged, another bullish
sign for third-quarter economic growth that boosted the
prospects of a Federal Reserve interest rate hike next month.
ID:nL1N10P0Q2
Spot gold XAU= was down 0.2 percent at $1,112.36 an ounce
by 2:05 p.m. EDT (1805 GMT) after hitting $1,126.31 on Thursday,
its highest since July 20.
U.S. gold for December delivery GCcv1 settled down 0.3
percent at $1,112.70 an ounce.
The precious metals complex moved in the opposite direction
of U.S. crude oil, which turned higher after reaching a
6-1/2-year low O/R .
"I think there were allocation shifts in the market today,"
said Phillip Streible, senior market strategist at RJO Futures
in Chicago, explaining that it appeared some investors
re-allocated their money to oil from precious metals.
Spot silver XAG= saw deeper losses of 1.7 percent to a
session low of $15.15 an ounce.
Despite the day's turn lower, gold bullion was set to end a
seven-week losing streak after China's yuan devaluation
increased uncertainty over the global economy, and pushed
investors into assets perceived as safer such as gold.
"The market was caught by surprise by the Chinese currency
devaluation and there was some safe-haven buying but physical
demand is still not strong and only a test of the $1,110 could
change that," MKS SA head of trading Afshin Nabavi said.
Volatile markets were soothed as the yuan steadied after
China's central bank said there was no reason for the currency
to fall further given the country's strong economic
fundamentals.
The precious metal has gained nearly 2 percent in the week
so far, after a seven-week slide that was its longest retreat
since 1999.
China's gold reserves rose to 53.93 million ounces by the
end of July, up from 53.32 million at end-June, the central bank
said. The data was released following a June adjustment that was
the first in more than six years.
China's gold demand this year is expected to at least hold
steady with last year at just under 1,000 tonnes, the World Gold
Council said. ID:nL3N10O3OP
Spot palladium XPD= fell 0.3 percent to $615.50 an ounce
after touching a two-week high on Thursday. Platinum XPT= was
down 0.4 percent at $987.74 an ounce.