* Strong U.S. data supports Sept rate rise expectations
* U.S. housing starts strongest since 2007
* Silver falls 4 pct on pressure from copper price
* COMING UP: Fed's July meeting minutes on Wednesday
(Adds comment, byline, NEW YORK dateline; updates prices)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Aug 18 (Reuters) - Gold fell on Tuesday, as
the dollar rebounded following upbeat U.S. housing data that
supported views of a looming interest rate increase by the
Federal Reserve, while silver tumbled on the heels of falling
copper prices.
U.S. housing starts rose to a near eight-year high in July
as builders ramped up construction of single-family homes,
suggesting that the economy was firing on almost all cylinders.
ID:nL1N10T0N1
"It looks like in the very short term the data this
afternoon has been reasonably positive, so the dollar has
appreciated on the back of that and gold is on a downtrend,"
Mitsubishi Corp strategist Jonathan Butler said.
Spot gold XAU= was down 0.1 percent at $1,116.73 an ounce
by 3:19 p.m. EDT (1919 GMT), after falling as much as 0.7
percent. U.S. gold for December delivery GCZ5 settled down 0.1
percent at $1,116.90 an ounce.
"It's been attracting odd lot physical trading," said James
Steel, chief metals analyst for HSBC Securities in New York,
referring to what lifted gold prices up from their lows.
Spot silver XAG= was the worst-performing precious metal,
dropping as much as 4 percent to $14.70 an ounce, its biggest
tumble since July 7. It was pressured by a six-year low in
copper prices CMCU3 as worries about weak demand growth from
top consumer China were reinforced by tumbling equity prices in
Shanghai. MET/L
Spot palladium XPD= fell by as much as 3.8 percent to
$588.75 an ounce, the lowest since Aug. 4.
The dollar traded up 0.2 percent against a basket of leading
currencies .DXY , while European shares were mixed and U.S.
stocks were lower, following a 6 percent slump in Chinese
markets. MKTS/GLOB
Solid jobs growth, rebounding retail sales and a housing
sector on the mend suggest the Federal Reserve could be on track
to raise interest rates this year, perhaps at its next policy
meeting in September.
Higher interest rates would put non-yield-bearing gold under
further pressure, increasing the opportunity cost of holding the
metal.
"Despite the recent market volatility caused by the RMB
(yuan) devaluation last week, (we) believe that the Fed will
look past international macro developments, focusing instead on
positive trends in U.S. labor data, and therefore continue to
see September Fed lift-off as the most likely scenario," Citi
said in a note. ID:nL3N10T2LZ
There should be more clues on the Fed's thinking regarding
interest rates when the minutes of the U.S. central bank's July
28-29 meeting are released on Wednesday at 2 p.m. EDT.
Platinum XPT= fell 0.5 percent to $989 an ounce.