* Fed seen cutting rates by at least 50 bps
* Dollar softer vs euro but lifts from lows on risk aversion
* Oil climbs on hopes of U.S., Japanese rate cuts
(Recasts, adds comment and updates prices)
By Jan Harvey
LONDON, Oct 29 (Reuters) - Gold jumped more than 3 percent
in Europe on Wednesday, as a weak dollar and oil's climb boosted
bullion ahead of the U.S. Federal Reserve's key decision on
interest rates, due later in the day.
Gold's rally boosted silver more than 5 percent and helped
platinum to bounce after a sharp fall due to demand worries,
while palladium also gained 5 percent on bargain-hunting.
Spot gold <XAU=> rallied to $767.00 an ounce and was quoted
at $760.10/762.60 an ounce at 1255 GMT, up more than 2 percent
from $744.30 in late New York trade on Tuesday.
Mitsubishi precious metals strategist Tom Kendall said the
rise was partly because of weaker dollar and also due to rising
commodity and equity markets across the board.
"We see buying coming back in across a lot of asset classes.
I think the selling from last week proved to be a little bit of
overdone," he said.
Kendall added the anticipation of a rate cut from the Fed
was another element that boosted the prices.
The dollar fell against other major currencies, as markets
expected the U.S. Federal Reserve to deliver a substantial
interest rate cut later in the day. []
A reduction in rates is widely expected, but the scope of
the cut is uncertain.
"After a 66 percent probability of a 50 basis point rate cut
yesterday, interest rate futures now pencil in 62 percent -
which demonstrates the uncertainty of financial market
participants," said Standard Bank analyst Manqoba Madinane.
China cut interest rates on Wednesday for the third time in
six weeks to help the world's fourth-largest economy ride out
the reverberations of the global financial crisis.
Rises in other commodity markets help boost gold prices.
Copper surged nearly 8 percent and lifted other industrial
metals higher while oil gained above $65 a barrel, boosted by a
surge in global stock markets. European shares were up nearly 5
percent.
Firmer crude typically benefits gold, which is often bought
as a hedge against oil-led inflation. Rising oil prices also
tend to boost interest in commodities as a whole.
"The recent movements in both the equity and currency
markets suggest some risk appetite is beginning the return,"
said James Moore, an analyst at TheBullionDesk.com.
"This, coupled with the fact gold is considerably lower than
at the start of the year and investors may look to further
diversify their asset holdings, given recent events, may allow
gold to begin recouping some of its losses."
Platinum <XPT=> was up at $810 an ounce, bouncing from an
earlier session low of $755.50 an ounce, versus $809.00 on
Tuesday.
Buying of the metal for use in catalytic converters accounts
for more than half of global platinum demand, and reports of
production cutbacks and falling sales among car manufacturers
have wiped 65 percent from the metal's value since March.
However, analysts said the fall may have been overdone.
"There is little downside risk left in the platinum group
metals sector since PGM metal prices are sufficiently low that
supply is likely to be removed from the market," investment bank
Nomura said in a research note.
"Fears of a steep decline in global auto sales and hence
autocatalyst demand, in view of a global recession, are already
priced in to the extreme."
Palladium <XPD=> was at $185.50/195.50 from $176, having
touched a high of $186 on speculation the sell-off in the metal
was overdone. Spot silver <XAG=> was at $9.63/9.73 after rising
as high as $9.72 and against $9.16.
(Additional reporting by Humeyra Pamuk; editing by Karen
Foster)
