* Cotton posts biggest monthly loss since May 2012
* Prices reverse day's gains to set fresh 9-month low
* Fiber continues slump seen on harvest pressure, investor selling
NEW YORK, Oct 31 (Reuters) - Cotton futures edged down on Thursday, marking their 10 down session, bringing their monthly decline to 11.5 percent under pressure from harvests and investor liquidation.
The most-active December cotton contract on ICE Futures U.S. closed down 0.66 cent, or 0.8 percent, to settle at 77.18 cents a lb after setting a nine-month low of 77.11 cents a lb.
The spot contract finished October with its biggest monthly decline since May 2012. For the day, cotton gave back all the gains seen earlier in the session after a U.S. government export report exceeded expectations.
Worries have grown over excess supplies as harvests gather pace in key growing regions and exchange inventories climb.
"We've seen speculator liquidation the whole way down. There's buying at this level, but not enough to keep us from drifting back down," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
Trading volumes have increased and spot prices fallen under added pressure as index funds began to roll out of the December contract in recent sessions.
Worries over excess supplies outweighed U.S. government export data that showed exports of over 612,000 bales in the three weeks ending Oct. 24 that beat expectations that sinking prices had stirred demand.
"The number was good, and we had a knee-jerk reaction," said a U.s. broker.
"But on a 7 cent decline, you should be selling cotton."
The return of U.S. government data after a partial shutdown earlier this month has shown speculators dialed back their bullish bet on cotton, while the crop in the world's top exporter is faring better than expected after delays and weather threats earlier in the season.
No 2 producer India is expected to harvest a bumper crop in the crop year through end-July, and global inventories are expected to grow.
ICE inventories climbed to 146,349 bales on Wednesday, the most since July and up from fewer than 12,000 bales at the start of the month, exchange data compiled by Reuters show.
The sudden injection of exchange stocks threw the market into a contango for the first time in months as it erased traders' concern over tight nearby supplies.
The spot contract's discount to the second-month widened to 2.02 cents a lb, compared with 1.99 cents previously and a slight premium at the start of the month. (Reporting by Chris Prentice; Editing by David Gregorio)
