* Dollar firms as markets await Fed talks on monetary easing
* China should boost gold reserves, says researcher
* Palladium hits highest since 2001 at $636.25/oz
(Updates prices)
By Jan Harvey
LONDON, Oct 27 (Reuters) - Gold fell 1.5 percent on
Wednesday as the dollar rose versus the euro after a report said
the Federal Reserve would likely adopt a gradual approach to
further U.S. monetary easing at a meeting next week.
Spot gold <XAU=> hit a low of $1,318.74 and was bid at
$1,320.25 an ounce at 1513 GMT, against $1,338.70 late in New
York on Tuesday. U.S. gold futures for December delivery <GCZ0>
fell $17.80 an ounce to $1,320.80.
All eyes will turn to U.S. growth data at the end of this
week, and the hotly awaited policy meeting of the Federal Open
Market Committee the following week, at which the prospect of
monetary easing is set to be discussed.
"The greenback is holding strong, and there is little other
news (for gold)," said Andrey Kryuchenkov, an analyst at VTB
Capital. U.S. GDP data on Friday will be key for the dollar, and
consequently for gold, he said, "but it is really down to the
FOMC on 2/3 November".
The dollar rose 0.7 percent against the euro after the Wall
Street Journal said the Fed was likely to unveil plans for
gradual Treasury purchases at its policy meeting, receiving a
further boost after data showed U.S. new home sales rose more
than expected in September. []
Gold typically falls when the dollar strengthens, and vice
versa, as a firmer U.S. unit curbs the metal's appeal as an
alternative asset. Like all dollar-priced commodities, it also
becomes more expensive for other currency holders.
Gold prices hit a record $1,387.10 an ounce earlier in
October as expectations that the Fed would pursue a second round
of quantitative easing pressured the dollar, but prices have
slipped as investors worry the impact of this has already been
too heavily priced into currencies and gold.
"I think the Fed won't go as big on QE2 as people have been
expecting, and I think the dollar (will) firm into year-end,"
said Simon Weeks, head of precious metals at the Bank of Nova
Scotia. "It's just a question of time before we are lower."
BARGAINS HUNTED
In India, bullion traders snapped up bargains to meet
festival demand as Dhanteras, one of the biggest gold-buying
occasions of the year, approached in November. []
India's October gold imports are forecast to rise by 14.6
percent from a year ago despite record high prices, as Hindu
festivals and the metal's investment performance attract buyers.
[]
Elsewhere, a newspaper run by China's Ministry of Commerce
said on Wednesday the country should significantly boost its
state gold reserves to a level equal to that held by the United
States, citing a local researcher. []
"While the implications of potential QE and its size have
monopolised market attention, the China report reminds us that
the current mood amongst central banks, particularly in Asia, is
to increase exposures to gold," said UBS in a note.
Palladium <XPD=> was at $619.55 an ounce against $620.63,
having earlier touched its highest since 2001 at $636.25 an
ounce. The autocatalyst metal is one of this year's
best-performing commodities.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the relative price performance of key
commodities this year: http://r.reuters.com/baf29p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Silver <XAG=> was bid at $23.39 an ounce against $23.82.
The U.S. Commodity Futures Trading Commission said there had
been attempts to influence silver prices, but did not provide
any detail on the status of a probe into price manipulation in
silver that started in 2008. []
The U.S. commodity futures regulator is looking into claims
by a trader in London that JPMorgan Chase & Co <JPM.N> was
involved in manipulative silver trading, the Wall Street Journal
said, citing a person close to the situation. []
Platinum <XPT=> was at $1,681.42 an ounce against $1,694.95.
(Editing by Sue Thomas)
