GLOBAL MARKETS-Gold and bonds fall, dollar inches up

* Gold sells off after sharp gains

* Bond prices also down; stocks see-saw

* Japanese stocks end down after Moody's downgrade

* Markets position for Bernanke speech (Updates prices, details)

By Caroline Valetkevitch

NEW YORK, Aug 24 (Reuters) - Gold futures on Wednesday were headed for their biggest one-day loss since March 2008, while the dollar rose on bets a speech by Fed chairman Ben Bernanke on Friday will not reveal any major initiatives.

Government bonds, another safe play, also sold off sharply, while world and U.S. stocks flipped between positive and negative territory.

Heightened uncertainty surrounding the speech to fellow central bankers by the head of the Federal Reserve kept stock gains in check, although gold-related exchange-traded funds and stocks dropped.

Markets have been in turmoil for the past month, weighing another possible U.S. recession and the impact of the euro zone debt crisis on the global economy. Benchmark stock indexes are on track for their worst month since the fall of 2008, after the collapse of Lehman Brothers investment bank.

Investors have been hoping for additional action from the U.S. central bank to help.

"The speech is a real wild card for markets so people are being cautious," said Kathy Lien, head of research at GFT Forex in New York.

For gold investors, analysts said it's time to take money off the table after a safe-haven rally extended too far, too fast in recent weeks. Bullion had been up by as much as $400 per ounce since July.

U.S. gold futures for December delivery were down $96.30 to $1,765.00 an ounce. Trading was hectic with volume set to be one of the busiest sessions of the year.

Spot gold , meanwhile, was down 3.9 percent to $1,758.49 an ounce, and appeared headed for its biggest two-day decline in almost three years.

"You have a commodity that retail investors, hedge funds and everybody were long, and the technical indicators showed it was overbought. It was just a matter of time before the market starts cracking," said Mihir Dange, COMEX gold options floor trader for Arbitrage LLC.

Exchange-traded funds tracking gold stocks and gold-mining stocks fell after the drop in bullion futures. The SPDR Gold XTrust Index declined 3.7 percent, while the Market Vectors Gold Miners Index fell 3.5 percent.

Among gold-related shares, Barrick Gold shares dropped 4.3 percent to $48.49, Goldcorp Inc shares fell 5.3 percent to $48.58 and Kinross Gold shares lost 3.4 percent to $16.48.

DOLLAR UP

The dollar edged up, but traders said there was little conviction behind the gain, as reflected by several back-and-forth moves inside fairly tight ranges.

The dollar <.DXY> was last up 0.2 percent against a basket of currencies.

Speculation is widespread in financial markets that the Fed's Bernanke will use his speech at an annual conference of central bankers in Jackson Hole, Wyoming, to signal a new monetary offensive to support the faltering U.S. economy.

However, many analysts think he is most likely to outline gradualist measures, which would disappoint those looking for a big bang approach such as a third round of Treasury bond buying or 'quantitative easing', dubbed QE3.

"I think some of the dollar buying is based on the idea that Bernanke won't be too aggressive just yet," Lien said.

BOND PRICE DROP

Bond losses accelerated in early afternoon trading despite a decent response to a $35 billion auction in five-year Treasury notes, part of this week's $99 billion in coupon-bearing supply.

The benchmark 10-year Treasury note was last down 28/32 in price and yielding 2.25 percent, up from 2.16 percent late on Tuesday.

Stock investors tried to build on positive sentiment after weeks of selling. Both world and U.S. stocks rallied on Tuesday, although the U.S. S&P 500 is still down 13 percent since July 22, roughly the start of the recent sell-off.

Data showing better-than-expected U.S. durable goods orders were supportive for stocks, as was a U.S. Congressional Budget Office prediction of a project decline in the deficit as a result of the government's recent debt-reduction agreement.

World stocks as measured by MSCI <.MIWD00000PUS> were last up 0.4 percent.

On Wall Street, the Dow Jones industrial average <.DJI> was up 32.93 points, or 0.29 percent, at 11,209.69. The Standard & Poor's 500 Index <.SPX> was up 3.70 points, or 0.32 percent, at 1,166.05. The Nasdaq Composite Index <.IXIC> was down 3.32 points, or 0.14 percent, at 2,442.74.

The FTSEurofirst 300 index <.FTEU3> of top European shares gained for a third straight session to end 1.4 percent stronger, while Japanese shares <.N225> sold off following Moody's Investors Service's downgrade of the country's sovereign debt. For more see: [ID:nL4E7JO17A].

Tokyo's Nikkei average closed down more than 1 percent. Overseas investors in particular reacted to the downgrade. (Additional reporting by Jan Harvey in London and Frank Tang, Ashley Lau and Steven Johnson in New York; Editing by James Dalgleish)