* Dollar firms as markets await Fed on monetary easing
* Gold holds above $1,319/oz support at 3-month trendline
* China should boost gold reserves, researcher says
* Coming up: U.S. GDP data on Friday
(Recasts, adds comments, graphic, updates prices to market
close, changes dateline, previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, Oct 27 (Reuters) - Gold fell more than 1 percent
on Wednesday as the dollar rose on heightened investor concern
that the Federal Reserve could buy much less government debt
than first thought to stimulate economic growth.
Silver and platinum group metals dropped with other
commodities, as the dollar index turned higher for the year to
date on worries the greenback had sunk too far based on overly
optimistic expectations on the extent of any Fed easing.
"The expectation of a more gradualist approach on
quantitative easing by the Fed has led to this pullback," said
James Steel, chief commodity analyst at HSBC.
Technical selling triggered price weakness after the metal
broke below its Tuesday lows around $1,325 an ounce, but
bullion found support at $1,319 from a rising trendline dating
to late July, analysts said. (Graphic:
http://link.reuters.com/kat52q )
The Fed will likely next week unveil a program of purchases
worth a few hundred billion dollars over several months, the
Wall Street Journal said. Investors' base-case scenario was for
an initial commitment to buy at least $500 billion.
[]
Spot gold <XAU=> hit a low of $1,318.74 and traded down 1.1
percent at $1,323.65 an ounce at 3:16 p.m. EDT (1916 GMT). U.S.
gold futures for December delivery <GCZ0> settled down $16, or
1.2 percent, at $1,322.60 an ounce.
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, 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".
The dollar hit a one-week high against the euro and a
two-week peak against the yen due to uncertainty about the U.S.
central bank's plans. It extended gains after data showed U.S.
new home sales rose more than expected in September.
[]
Chart support could be found at $1,319, around spot gold's
three-month rising trendline, said Rick Bensignor, chief market
analyst at Execution Noble. Prices are further supported around
$1,313-14, at the bottom of the Bollinger Band, he said.
Gold set 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 such a policy shift
has been too heavily priced into currencies and gold.
PRICE DECLINE SPURS PHYSICAL BUYING
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 gold
import forecast also rose 15 percent for this month.
[] []
Earlier, bullion received a boost after a newspaper run by
China's Ministry of Commerce said the country should
significantly boost 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
monopolized market attention, the China report reminds us that
the current mood amongst central banks, particularly in Asia,
is to increase exposures to gold," UBS said in a note.
Silver <XAG=> fell 1.3 percent to $23.54 an ounce, and
platinum <XPT=> dropped 1.2 percent to $1,674.50 an ounce.
Analysts cited metals weakness related to concerns among
U.S. regulators about market manipulation. The U.S. Commodity
Futures Trading Commission said there had been attempts to
influence silver prices, but gave no detail on the status of a
probe into price manipulation in silver that started in 2008.
[]
Palladium <XPD=> slipped 1 percent to $614.50 an ounce,
having touched its highest since 2001 at $636.25. The
autocatalyst metal is one of this year's best-performing
commodities. (Graphic: http://r.reuters.com/baf29p )
Prices at 3:35 p.m. EDT (1935 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1322.60 -16.00 -1.2% 20.7%
US silver <SIZ0> 23.404 -0.426 0.0% 38.9%
US platinum <PLF1> 1678.10 -25.90 -1.5% 14.1%
US palladium <PAZ0> 619.15 -6.30 -1.0% 51.4%
Gold <XAU=> 1325.06 -13.64 -1.0% 20.9%
Silver <XAG=> 23.54 -0.28 -1.2% 39.8%
Platinum <XPT=> 1677.42 -17.53 -1.0% 14.5%
Palladium <XPD=> 615.30 -5.33 -0.9% 51.7%
Gold Fix <XAUFIX=> 1324.50 -7.75 -0.6% 20.0%
Silver Fix <XAGFIX=> 23.77 29.00 1.2% 39.9%
Platinum Fix <XPTFIX=> 1695.00 3.00 0.2% 15.6%
Palladium Fix <XPDFIX=> 622.00 2.00 0.3% 54.7%
(Additional reporting by Jan Harvey in London; Editing by Dale
Hudson)
