* Gold on track for its biggest daily pct loss since mid-Aug
* China eases policy on concerns spat with U.S. could hurt growth
* Speculators cut net short position in COMEX gold in Oct. 2 week (Adds comments, details; updates prices)
By Swati Verma
BENGALURU, Oct 8 (Reuters) - Gold fell to its lowest level in a week on Monday as investors sought safety in the U.S. dollar on concerns about a selloff in global stocks worsened by worries over economic growth in China.
Spot gold XAU= dipped 1.4 percent to $1,185.81 an ounce by 1355 p.m. EDT (1755 GMT), on track for its biggest one-day percentage loss since Aug. 15. The yellow metal earlier touched its lowest since Sept. 28 at $1,183.19.
U.S. gold futures for December GCcv1 settled down $17, or 1.41 percent, at $1,188.6.
"We are seeing some strength in the dollar index and some weakness in the equity market and it doesn't appear that investors are going for safety in the gold markets at all," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
"So they might be looking at Treasuries or other interest bearing products."
Investor concern over higher U.S. interest rates, growth concerns in China due to the trade dispute with the United States, emerging market weakness and an Italian budget row all combined to send equities sharply into the red. MKTS/GLOB
The nervous mood was aggravated by China's central bank on Sunday cutting the level of cash that banks must hold as reserves, aimed at lowering financing costs. dollar .DXY continued its recent march higher on upbeat domestic economic data and safe-haven demand amid geopolitical concerns. USD/
"The strong U.S. dollar and expectations of more interest rate hikes are pushing gold down and scaring gold investors. Even the Italian risk and a weakness in equities is not pushing investors to buy gold," said Carlo Alberto De Casa, chief analyst at ActivTrades.
"Investors are not sure about buying gold as it is unable to break above $1,210, a strong resistance."
Despite the losses, gold has held in a $34 range for the last 1-1/2 months, which some analysts say suggests resilience. Worries over the damage to emerging market economies from higher U.S. interest rates has spurred safe-haven bidding.
"Weakness in emerging markets might bring in small bids for gold," said Nicholas Cawley, an analyst at DailyFX.com, adding that the "overriding factor is higher U.S. interest rates and bond yields."
Meanwhile, speculators cut their net short position in COMEX gold by 4,186 contracts to 73,128 in the week to Oct. 2. CFTC/
Palladium XPD= was up 0.4 percent at $1,073.35.
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