PRECIOUS-Gold, silver tumble ahead of Fed announcement

                                
 * Heavy liquidation in U.S. gold, silver futures market
                                
 * Gold sales for Dhanteras seen up to 20 pct higher
                                
 * Coming up: FOMC statement on rates, policy, 1815 GMT
 (Recasts, updates with comments, market activity; changes
byline, moves dateline from LONDON)
                                
 By Frank Tang
                                
 NEW YORK, Nov 3 (Reuters) - Gold and silver prices fell
about 2 percent on Wednesday, hit by heavy liquidation in New
York metals futures, ahead of an expected announcement on
monetary policy from the Federal Reserve.
                                
 Both gold and silver were on track to post their biggest
one-day fall since Oct. 21.
                                
 Prices came under pressure from a firmer dollar in earlier
trade but held in a fairly narrow range as traders awaited news
about how much U.S. government debt the U.S. central bank will
buy under a second round of so-called quantitative easing since
the financial crisis began in 2008.
                                
 The bank's Federal Open Market Committee was due to make a
statement at around 2:15 p.m. EDT (1815 GMT), at the end of a
two-day policy meeting.
                                
 Gold futures on the COMEX division of the New York
Mercantile Exchange lost as much as 2 percent, while silver
futures fell more than 3 percent in earlier trade.
                                
 The metals slumped on "nervous liquidation prior to the
FOMC meeting results. That's all it is," said George Nickas, a
gold broker at FC Stone in New York. "There is no clear picture
(as to) what the market is going to look like by the end of the
day."
                                
 Spot gold <XAU=> slipped to a low of $1,327.80 an ounce and
was down 1.3 percent at $1,340.05 an ounce at 1 p.m. EDT (1700
GMT). U.S. gold futures for December delivery <GCZ0> eased
$23.60 an ounce to $1,333.30.
                                
 Silver <XAG=> fell 2.1 percent to $24.38 an ounce, having
hit a low of $23.93 in earlier trade.
                                
 "It is all about last-minute profit taking before QE2,"
said Saxo Bank analyst Ole Hansen. "Stops had been building up
below $1,350 over the last couple of days and, once that went,
it was all over.
                                
 "This move leaves the market in a much better position to
react to (bullish) gold news after the Fed," he added.
                                
 A Reuters poll found on Wednesday that most leading
economists expected the Fed to buy between $80 billion and $100
billion worth of assets per month under a new program to
bolster the struggling economy. [FED/R]
                                
 Estimates for how much the Fed would spend overall varied
from $250 billion to $2 trillion.
                                
  Macquarie analyst Hayden Atkins said the initial euphoria
over QE and its potential impact on gold had largely worn off,
and, while the metal may see some support if the policy meets
expectations, a major lift is unlikely.
                                
 "There may be some upside surprise but (markets) pretty
quickly priced out a Big Bang policy," he added. "It might be a
mild positive, but I think the reality of what could happen is
in most people's minds already."
                                
 PHYSICAL DEMAND STRONG
                                
 Elsewhere wholesale physical gold demand in India, the
world's biggest bullion consumer, was healthy as the country's
busiest gold-buying festival, Dhanteras, got under way, with
local demand helped by the strong rupee. [ID:nSGE6A20CJ]
                                
 Traders and retailers expected volume to rise up to 20
percent, despite near-record prices, as customers line up to
make the most of the festival. [ID:nSGE6A208G]
                                
 Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, slipped on Tuesday,
however, by around 1 tonne to 1,292.189 tonnes. ETFs issue
securities backed by physical stocks of metal. [GOL/SPDR]
                                
 On the supply side of the market, the Xinhua news agency
reported that China had found a 100-tonne gold deposit in Inner
Mongolia, worth about $5.25 billion. China is the world's
biggest gold miner, and its number two consumer.
[ID:nTOE6A203D]
                                
 Platinum <XPT=> traded down 0.9 percent at $1,692.74 an
ounce, while palladium <XPD=> lost 0.6 percent to $639.22 an
ounce.
Prices at 1:09 p.m. EDT (1709 GMT)                            
                                
                           LAST      NET    PCT     YTD
                                
                                     CHG    CHG     CHG
US gold         <GCZ0>     1341.60   -15.30  -1.1%   22.4%
US silver       <SIZ0>      24.480   -0.356  -1.4%   45.3%
US platinum     <PLF1>     1700.00   -19.10  -1.1%   15.6%
US palladium    <PAZ0>      643.55    -1.90  -0.3%   57.4%
Gold            <XAU=>     1342.65   -15.45  -1.1%   22.4%
Silver          <XAG=>       24.46    -0.45  -1.8%   45.2%
Platinum        <XPT=>     1693.74   -14.76  -0.9%   15.6%
Palladium       <XPD=>      639.50    -3.50  -0.5%   57.7%
Gold Fix        <XAUFIX=>  1345.50   -13.00  -1.0%   21.9%
Silver Fix      <XAGFIX=>    25.00    27.00   1.1%   47.1%
Platinum Fix    <XPTFIX=>  1709.00     4.00   0.2%   16.6%
Palladium Fix   <XPDFIX=>   638.00     3.00   0.5%   58.7%
 (Additional reporting by Barani Krishnan and John Parry in New
York, Jan Harvey in London; Editing by Walter Bagley)