* Dollar gains against currency basket; Fed eyed
* U.S. consumer confidence rises slightly in October
* Palladium well supported after hitting highest since 2001
(Recasts, updates prices, adds detail/comment)
By Jan Harvey and Michael Taylor
LONDON, Oct 26 (Reuters) - Gold pared losses in Europe on
Tuesday as a report showed U.S. consumer confidence rose
slightly in October, while the dollar was broadly firm.
Although U.S. consumer confidence rose, it remained near
historically low levels as concerns about the labour market
persisted, according to a private sector report released on
Tuesday. []
"There was consumer confidence data ... it failed to weaken
the dollar," said analyst Eugen Weinberg of Commerzbank. "It is
maybe helping a little bit as well -- otherwise gold is
vulnerable to further profit taking."
"At current levels it is a bit over bought," he added.
Investors are awaiting clues from U.S. on the prospect of
further monetary easing in the United States.
The Federal Reserve will discuss at a meeting in Washington
next week whether to extend its quantitative easing policy to
accelerate growth. This could have significant implications for
the dollar and inflation, and consequently gold.
Spot gold <XAU=> was bid at $1,335.17 an ounce at 1542 GMT,
against $1,338.00 late in New York on Monday. U.S. gold futures
for December delivery <GCZ0> eased $3.70 an ounce to $1,335.20.
Prices hit a record $1,387.10 an ounce earlier this month as
the dollar slid amid expectations the Fed would vote in favour
of QE at its upcoming policy meeting, but retreated as investors
worried the prospect had become too heavily priced in.
"At the moment this (QE) is the most important factor," said
Weinberg. "By now, it should have been priced in to a greater
extent. At the moment the market is buying the rumour and I
wouldn't be surprised if it sells the fact when it comes."
The U.S. dollar gained against a basket of currencies with
investors wary of betting against it because of uncertainty over
the extent of quantitative easing measures the Fed may take.
[]
Gold typically falls as the dollar rises and vice versa,
with strength in the U.S. unit curbing gold's appeal as an
alternative asset and making dollar-priced commodities more
expensive for holders of other currencies.
Currency markets are looking ahead to key U.S. data later
this week, including a report on third-quarter gross domestic
product growth due on Friday.
PHYSICAL DEMAND EMERGES
Gold's recent price dip has attracted some physical interest
back to the market in key gold-buying centres like India, the
world's biggest bullion consumer. Buyers there are stocking up
ahead of festivals, dealers said. []
"The market is certainly getting cautious, but every retreat
is seen as an opportunity even though large scale buying is
absent," said VTB Capital analyst Andrey Kryuchenkov in a note.
Among other precious metals, palladium <XPD=> was at $613.38
an ounce against $606.20, not far from the nine-year high at
$617.50 an ounce it hit on Monday.
The ratio of platinum to palladium -- the number of ounces
of palladium needed to buy an ounce of platinum -- fell to its
lowest since mid-2004 in that session as palladium outpaced
platinum's gains.
"While investor and speculator activity is in part
responsible for palladium's recent gains, the metal's supply and
demand fundamentals remain supportive, and are likely to tighten
over the next 12 months," UBS said in a note on Tuesday.
"Our palladium-bullish thesis is grounded in rising emerging
market auto sales, tightening emission legislation in China,
little immediate threat from electric vehicles, low mine supply
growth, and limited Russian stockpile sales," it added.
"This last factor will most likely be the primary
determinant of whether palladium can rise to $1,000 over the
medium term, but for now remains a wild card." []
Platinum <XPT=> was at $1,695.25 an ounce versus $1,692.05,
and silver <XAG=> at $23.60 an ounce against $23.50.
(Reporting by Michael Taylor; editing by Keiron Henderson)
