* Dollar slides against currency basket on debt buy report
* Indian gold demand rose as prices dipped, analysts say
* Platinum, palladium seen supported by firm fundamentals
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By Jan Harvey and Elizabeth Fullerton
LONDON, Oct 20 (Reuters) - Gold climbed on Wednesday as the
dollar fell sharply against the euro and yen after a report
suggested the U.S. Federal Reserve planned to boost growth by
purchasing $500 billion in U.S. Treasury debt over six months.
Spot gold <XAU=> was bid at $1,344.00 an ounce at 1625 GMT,
against $1,336.00 late in New York on Tuesday. U.S. gold futures
for December delivery <GCZ0> rose $8.30 an ounce to $1,344.30.
The precious metal fell 2.5 percent on Tuesday, its biggest
one-day loss since July 1, after China raised its benchmark
interest rates by 25 basis points, sparking a dollar recovery.
While fresh weakness in the U.S. currency helped prices to
rise back above $1,340 an ounce, its move has been relatively
muted after Tuesday's hefty losses.
"We're seeing a pretty big move in the dollar to the
downside and we're not seeing that reflected as much in the gold
market to upside," said Jeff Pritchard, an analyst at Altavest
Worldwide Trading.
"It looks like the market maybe got ahead of itself and that
correction yesterday put things back in perspective a little
bit. I definitely don't think the uptrend is over, but it might
be a little less fierce upside than we've seen recently."
Gold typically moves in a close inverse relationship with
the dollar, 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. []
Walter de Wet, an analyst at Standard Bank, said the gold
market was seeing more physical selling of gold, with scrap
coming to the market particularly from Asia, and that was also
keeping a cap on gold prices.
SUPPORT SEEN FROM PHYSICAL BUYERS
In the near term, gold was likely to be supported by the
forthcoming Federal Reserve meeting and the Indian festival of
Diwali, when demand for the metal is traditionally strong, de
Wet said.
Gold's dip from highs has met physical buying from
price-sensitive bullion markets like India, the world's biggest
consumer of gold, analysts said.
"The physical community were initially quite hesitant to buy
as gold was abseiling south (yesterday), but today we have seen
quite decent physical demand," UBS analyst Edel Tully said in a
conference call on Wednesday.
"There is quite a lot of pent-up demand out there."
She said that physical gold buyers seemed to have adjusted
the price at which they are comfortable to buy gold, after
purchases in India in particular dropped sharply in 2009 as
prices raced to highs.
Silver <XAG=> was at $23.80 an ounce against $23.32, having
also slipped by the most since July 1 on Tuesday with a 4.1
percent fall. It is still one of the biggest climbers of the
precious metals so far this year, up 41 percent.
Platinum <XPT=> was at $1,676.49 an ounce against $1,667.50,
while palladium <XPD=> was at $584.99 against $573.08.
The white metals also fell on Tuesday in gold's wake, but
analysts say their firm underlying fundamentals are expected to
lend support.
Demand for the autocatalyst metals is expected to improve
this year as the car industry continues its recovery, while mine
supply in South Africa is expected to be constrained.
"Demand (for platinum) from auto catalyst producers has been
rebounding this year," said Bank of America-Merrill Lynch in a
report. "We forecast a deficit for 2010 and 2011."
(Editing by William Hardy)
