CHICAGO, Oct. 20  -- Gold futures on the COMEX Division of the New York Mercantile Exchange on Tuesday suffered the largest drop since July, as China announced it will raise its benchmark interest rate, which helps add appeal of U.S. dollar. Silver also tumbled in the day.

The most active gold contract for December delivery shed 36.1 U. S. dollars, or 2.6 percent, to close at 1,336 dollars per ounce.

Traders noted that the market started out under pressure but the news of the Chinese benchmark rate hike seemed to add fuel to the selling fires.

China's central bank Tuesday surprisingly announced a rise of its benchmark one-year lending and deposit rate by 0.25 percentage points effective from Oct. 20, the first increase for both rates since 2007.

As a result, the greenback Tuesday jumped as much as 1.6 percent against a six-currency basket, which make gold more expensive for investors holding other currencies, and thus, reduces the attractiveness of gold.

A market analyst noted that China's steps taken in reining in inflation could hurt such inflation-hedge assets as gold. Besides, the tightening monetary policy in the world's second largest economy also shook market's confidence in U.S. additional quantitative easing policy and thus, underpinned the dollar.

Before Tuesday, gold has hiked 25 percent this year and touching a record 1,388.1 dollars on Oct. 14, as central banks around the world kept interest rates low to revive the global economy.

The silver and platinum also tumbled. December silver gained 63. 3 cents, or 2.6 percent, to 23.78 dollars. In contrast, January platinum closed at 1,677.6 dollars per ounce, shedding 20.7 dollars, or 1.2 percent from the prior trading day.