* 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 to market close, changes dateline,
previously LONDON)
By Frank Tang
NEW YORK, Nov 2 (Reuters) - Gold rose 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 opened 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.
"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.
Analysts expectations range from $250 billion to $2
trillion of bond purchases by the Fed in a second round of
quantitative easing (QE2). Traders are bracing for a quick rise
in the dollar -- and commensurate fall in commodities -- if the
Fed takes a less aggressive approach.
Policymakers are hoping purchases of U.S. government bonds
will further reduce borrowing costs and spur more spending,
which would be bullish for assets such as gold.
[]
Spot gold <XAU=> rose 0.4 percent to $1,355.45 an ounce at
2:30 p.m. EDT (1830 GMT).
U.S. gold futures for December delivery <GCZ0> settled up
$6.30 at $1,356.90. Futures trading volume of 122,793 lots was
about two-thirds the 30-day average and was the lowest since
Oct. 11, preliminary Reuters data showed.
From the two-day meeting in Washington, 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 rumor 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.
"I suspect there could be a sell-the-news type of reaction"
because of a knee-jerk dollar rally, and the gold market looked
overextended, said James Dailey, portfolio manager of the TEAM
Asset Strategy Fund <TEAMX.O>.
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 0.3 percent at $24.86 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=> climbed 0.5 percent to $1,713.99 an ounce,
while palladium <XPD=> dropped 1 percent to $642.22.
Prices at 2:41 p.m. EDT (1841 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1356.90 6.30 0.5% 23.8%
US silver <SIZ0> 24.836 0.284 0.0% 47.4%
US platinum <PLF1> 1719.10 7.60 0.4% 16.9%
US palladium <PAZ0> 645.45 -3.25 -0.5% 57.9%
Gold <XAU=> 1355.30 5.05 0.4% 23.6%
Silver <XAG=> 24.84 0.24 1.0% 47.5%
Platinum <XPT=> 1713.74 7.74 0.5% 16.9%
Palladium <XPD=> 642.22 -6.78 -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%
(Additional reporting by Barani Krishnan and John Parry in New
York, Jan Harvey in London; Editing by David Gregorio)
