PRECIOUS-Gold posts biggest fall in month as Goldman warns

* Gold falls with crude after latest Goldman warning

* Gold/oil correlation tightens, near strongest since Jan.

* Rallying U.S. Treasuries bond prices weigh on bullion

* Coming up: U.S. March retail sales Wednesday (updates market activity)

By Frank Tang

NEW YORK, April 12 (Reuters) - Gold dropped 1 percent on Tuesday for its biggest fall in a month, as a sharp drop in crude oil on a bearish forecast from Goldman Sachs dragged the metal further from record highs.

Rallying prices of U.S. government debt also took some safe-haven bids away from gold, which fell for a second straight day, after Japan raised the severity level of the crisis at its quake-stricken nuclear plant. [US/]

Bullion has risen 11 percent since late January as rallies in oil and grains stoked inflation worries. After hitting 31-year highs on Monday, silver also fell but less than gold despite the white metal's higher price volatility.

"That (Goldman report) has given enough reasons for investors to trim their positions, in particular for those markets that have gone parabolic. That's enough to cool enthusiasm for commodities at the moment," said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott with $53 billion of assets under management.

But he added: "I don't think this is the end of the commodity bull market."

Spot gold dropped to $1,451.73 an ounce by 3:44 p.m. EDT (1944 GMT), having earlier hit a one-week low of $1,443.49. On Monday, gold hit a record at $1,476.21.

U.S. gold futures for June settled down $14.5 at $1,453.60 an ounce, with trading volume rebounding after slower-than-normal activity in the last several sessions.

SILVER OUTPERFORMING GOLD

U.S. silver trade was also heavy for a second straight day to top 130,000 lots, preliminary Reuters data showed, one of the busiest days of 2011.

Silver reversed earlier gains to trade down 0.5 percent at $39.96 an ounce, and was about 5 percent below Monday's 31-year high at $41.93.

The spread between gold and silver -- showing the relative strength between the two metals -- has nearly halved since last August.

Luschini cited strong demand from retail investors and silver exchange traded funds for the metal's outperforming gold.

"It's a higher beta for silver, which outperforms on the upside and tends to come back harder on the downside," said Luschini, referring to a high correlation between the return from silver to that of the commodities market.

BULLION FALLS AS GOLDMAN WARNS

Goldman Sachs called a near $20 fall in the price of Brent crude in the coming months, saying speculators have pushed prices ahead of fundamentals. [ID:nN12168871]

It was the second warning of a steep market reversal from the firm, which has been a long-term commodity bull, in as many days.

In December, Goldman forecast gold prices to peak near $1,750 an ounce in 2012 on rising U.S. real interest rates, even as the metal's rally is expected to continue in 2011 due to loose monetary policies. [ID:nN01207723]

Gold is used as a safe haven particularly in times of financial and geopolitical uncertainty. It's rise to record highs during Japan's crisis coincided with historic rallies in many commodities, most of which fell on Tuesday as investors shed riskier assets and opted for the U.S. Treasury bonds.

The correlation between gold and oil tightened to 0.7 on Tuesday, approaching its strongest level in nearly three months, as recent crude rallies have increased gold's inflation-hedge appeal.

(Graphic: http://link.reuters.com/pyd98r)

Poor investor sentiment more than offset weakness in the dollar, which fell to a 15-month low against the euro. [FRX/]

Among platinum group metals, platinum lost 0.8 percent at $1,765.46 an ounce, while palladium fell 2.9 percent to $759. Prices at 3:44 p.m. EDT (1944 GMT)

LAST/ NET PCT YTD

CLOSE CHG CHG CHG US gold 1453.60 -14.50 -1.0% 2.3% US silver 40.066 -0.546 0.0% 29.5% US platinum 1774.30 -18.50 -1.0% -0.2% US palladium 770.10 -18.15 -2.3% -4.1% Gold 1451.73 -15.02 -1.0% 2.3% Silver 39.96 -0.21 -0.5% 29.5% Platinum 1765.46 -14.84 -0.8% -0.1% Palladium 759.00 -22.35 -2.9% -5.1% Gold Fix 1450.50 -10.75 -0.7% 2.9% Silver Fix 40.44 -93.00 -2.2% 32.0% Platinum Fix 1785.00 5.00 0.3% 3.1% Palladium Fix 783.00 2.00 0.3% -1.0% (Additional reporting by Amanda Cooper in London and Lewa Pardomuan in Singapore; Editing by Alden Bentley)