* Dollar retreats ahead of Fed meeting, easing expected
* Physical demand for gold strong, providing support
* US Mint data shows silver sales up 20 pct to end-October
* Coming up: FOMC statement due 2:15 p.m. EDT on Wednesday
(Recasts, updates prices, market activity; adds second byline,
dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Nov 2 (Reuters) - Gold rose slightly on
Tuesday as a sharp dollar drop prompted bullion buying a day
before the Federal Reserve was expected to announce another
round of U.S. government bond purchases to boost the economy.
Strong physical bullion demand from leading consumers India
and Turkey ahead of major gold-buying events also buoyed
prices, analysts said.
The U.S. Federal Reserve opens a two-day meeting on Tuesday
that is expected to conclude with a decision to pump hundreds
of billions of dollars into the tepid economy.
Policymakers are hoping purchases of U.S. government bonds
will further lower borrowing costs and spur more spending,
which are bullish for assets such as gold. []
"As long as the monetary authorities are expanding their
balance sheets, the propensity for gold to move higher is...
rising," said Dennis Gartman, hedge fund manager and publisher
of the Gartman Letter.
Spot gold <XAU=> was at $1,350.69 an ounce at 12:38 p.m.
EDT (1638 GMT). U.S. gold futures for December delivery <GCZ0>
rose 60 cents to $1,351.20.
At the two-day meeting in Washington, the Fed will consider
the prospect of further government debt purchases, or
quantitative easing (QE). Markets are pricing in a commitment
to buy at least $500 billion in Treasury debt over the coming
months. []
"People are convinced that QE will be substantial. (They
are) buying the rumour," said VTB Capital analyst Andrey
Kryuchenkov. "The Fed does not want to disappoint the
market."
Under pressure from uncertainty about the Fed, the dollar
weakened 0.7 percent against a basket of currencies <.DXY>,
while the Australian dollar jumped after Australia's central
bank surprised with a rate hike. []
All eyes are on the U.S. central bank, with the scope and
timing of easing measures set to have a major impact on
financial markets. Gold has benefited from expectations fresh
easing may hurt the dollar and ultimately prove inflationary.
(Graphic: http://link.reuters.com/kyw48p )
If the Fed's purchase is smaller than $500 billion, the
dollar could stage a relief rally, which would put gold under
pressure, analysts said.
"Should the Fed disappoint markets in terms of the size of
asset purchases, we might see a pullback across the sector,"
said Credit Suisse in a note.
"(But) in our view, a potential correction is likely to be
short-lived and could be used to build fresh positions as the
fundamental backdrop remains supportive."
DHANTERAS, DIWALI APPROACH
Indian gold consumers kept buying ahead of the key
Dhanteras festival, which celebrates prosperity. It is swiftly
followed by the Diwali festival of light, another key
gold-buying occasion for the world's biggest bullion consumer.
Turkey's gold imports rose to 9.07 tonnes in October,
compared with 2.45 tonnes the previous month, the Istanbul Gold
Exchange said on Tuesday. Turkey is the world's third-biggest
gold consumer.
Silver <XAG=> traded up 0.4 percent at $24.70 an ounce, off
the previous session's 30-year high of $25.03 an ounce.
Data from the U.S. Mint showed its silver bullion coin
sales were up nearly 20 percent in the first 10 months of this
year from a year before, to 28.1 million ounces from 23.4
million. [] (Graphic:
http://r.reuters.com/vat43q)
According to The Silver Institute, based in Washington, the
Royal Canadian Mint reported 2010 sales of its Silver Maple
Leaf bullion coin are up 30 percent from 2009 figures to date.
Platinum <XPT=> was trading up 0.2 percent at $1,708.60 an
ounce, while palladium <XPD=> dropped 1.1 percent to $641.72.
Prices at 12:44 p.m. EDT (1644 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCZ0> 1352.10 1.50 0.1% 23.3%
US silver <SIZ0> 24.745 0.193 0.8% 46.9%
US platinum <PLF1> 1716.00 4.50 0.3% 16.7%
US palladium <PAZ0> 644.90 -3.80 -0.6% 57.7%
Gold <XAU=> 1351.97 1.72 0.1% 23.3%
Silver <XAG=> 24.73 0.13 0.5% 46.9%
Platinum <XPT=> 1709.99 3.99 0.2% 16.7%
Palladium <XPD=> 642.50 -6.50 -1.0% 58.4%
Gold Fix <XAUFIX=> 1351.00 -7.00 -0.5% 22.4%
Silver Fix <XAGFIX=> 24.73 -18.00 -0.7% 45.6%
Platinum Fix <XPTFIX=> 1718.00 4.00 0.2% 17.2%
Palladium Fix <XPDFIX=> 650.00 3.00 0.5% 61.7%
(Editing by David Gregorio)
