* Dollar weakens as investors await direction on QE
* Indian buying picks up as prices fall- dealers
* Platinum, palladium outperform gold, silver
(Updates prices)
By Jan Harvey
LONDON, Oct 28 (Reuters) - Gold rose back towards $1,330 an
ounce in Europe on Thursday as fresh dollar weakness reversed
the previous session's decline, but trading was cautious ahead
of Federal Reserve talks on monetary easing next week.
Spot gold <XAU=> was bid at $1,329.85 an ounce at 1125 GMT,
against $1,324.70 late in New York on Wednesday. U.S. gold
futures for December delivery <GCZ0> rose $7.40 to $1,330.00.
The metal has fallen 4.5 percent since hitting a record high
at $1,387.10 an ounce earlier this month, as concerns that
potential U.S. quantitative easing was too heavily priced into
the financial markets led to a bounce in the dollar.
A Reuters poll showed Wall Street analysts expect the
Federal Reserve to buy between $80-$100 billion worth of assets
per month under a new programme widely expected to be unveiled
after the Fed's meeting on Nov. 2-3. []
"Our colleagues on the FX side think the numbers that are
circling in the market on QE measures are far too high," said
Commerzbank analyst Daniel Briesemann.
"We expect some lower numbers, and that will probably help
the dollar. That could weigh on precious metals prices."
But support came for gold on Thursday as the dollar fell,
with U.S. Treasury yields retreating from a recent rise as
investors recalibrated expectations for monetary easing, with
many betting measures would be more modest and gradual than had
been expected. []
Gold is likely to stick to a relatively narrow range ahead
of this, analysts said.
"Gold continues to trade defensively as quantitative easing
expectations are ratcheted back," said UBS in a note. "While
some investors take risk off the table, others are reluctant to
initiate fresh longs in advance of next week's key risk events."
INDIAN BUYING PICKS UP
Gold's recent price drop tempted buyers back to the market
in India, the world's biggest bullion consumer. Traders hunted
bargains to meet ongoing festival and wedding demand, aided by a
strong rupee, while scrap sellers in the region held back after
prices retreated from record levels. []
"There have been reports out of India that gold buying there
is increasing," said Briesemann. "The latest fall in prices is
clearly being used to stock up with gold in the run up to
religious festivals like Diwali, which takes place next week."
"Gold scrap sales are relatively low at the same time."
Among other precious metals, silver <XAG=> was bid at $23.71
an ounce against $23.53.
JPMorgan Chase & Co and HSBC Holdings Plc were hit with two
lawsuits on Wednesday by investors who accused them of
conspiring to drive down silver prices. []
The banks were accused of manipulating the market for COMEX
silver futures and options contracts from the first half of 2008
by amassing huge short positions in silver futures contracts
that are designed to profit when prices fall.
Platinum <XPT=> was at $1,680.42 an ounce against $1,672,
while palladium <XPD=> was at $623 against $612.63.
While they have come under some pressure from recent
weakness in gold prices, the metals are currently outperforming
gold and silver as they are well supported by fundamentals,
analysts said.
"Platinum faces possible supply constraints in South Africa,
and reduced shipments from Russian State inventories may
constrain palladium supply in the coming years," said RBS Global
Banking & Markets in a note.
"The main end use for platinum group metals is in automotive
emission control catalyst," it added. "Demand from this sector
is underpinned by legislation."
(Reporting by Jan Harvey; editing by Keiron Henderson)
