* Dollar slides after report says Fed to buy $500 bln debt
* Gold's rise muted against dollar drop, Tuesday's retreat
* Short-term peak seen on hyper-bullish sentiment - fund
* Coming up: Weekly U.S. jobless claims on Thursday.
(Recasts, adds comments, updates prices to market close)
By Frank Tang
NEW YORK, Oct 20 (Reuters) - Gold bounced on Wednesday as
the dollar retreated from a one-day recovery on the back of a
report that cemented market expectations that the Federal
Reserve will buy bonds to inject money into the U.S. economy.
Bullion's 0.7 percent rise was relatively muted after heavy
losses on Tuesday, even as the dollar index slid 1.4 percent
heading for its biggest one-day decline in nearly four months.
Wednesday's dollar retreat accelerated after a report from
influential consultancy Medley Global Advisors said the Fed
planned to launch a program to buy $500 billion of U.S.
Treasuries over six months and leave itself room for more
purchases. []
"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 the upside," said Jeff Pritchard, an analyst at
Altavest Worldwide Trading. "The (gold) market may have gotten
ahead of itself..."
Spot gold <XAU=> rose 0.7 percent to $1,345.90 an ounce by
3:10 p.m. EDT (1910 GMT). U.S. gold futures for December
delivery <GCZ0> settled up $8.20 an ounce to $1,344.20.
Gold looks heavily overbought following a near 20 percent
rally since mid-July, traders said.
The metal lost 2.5 percent on Tuesday, its biggest one-day
drop since July, after China unexpectedly raised interest
rates. China's move sent the dollar index, up nearly 2 percent
in the previous session. []
Money managers said gold will most likely be a beneficiary
of further U.S. easing, which will undermine the dollar's
strength and could lead to inflation.
"Fundamentally, we still think the dollar is likely to stay
relatively weak...and gold is being considered an alternative
currency among investors," said Mark Luschini, chief investment
strategist of Janney Montgomery Scott, which manages $50
billion client assets.
Another money manager, however, said gold could retreat in
the near term due to overbought conditions.
"On a short-term basis, we have seen a trading peak in
gold. Sentiment in the short term has reached hyper-bullish
levels. So we would not be surprised if we see some more
weakness..." said James Dailey, portfolio manager of the Team
Asset Strategy Fund. <TEAMX.O>
Meanwhile, gold is in a seasonal period of demand and is
exected to be supported by physical buying related to the Hindu
festival of Diwali, a major gold-buying event in top bullion
consumer India.
TECHNICALS IN FOCUS
Technical analysts said gold held above key chart support
at the bottom of its three-month rising channel near $1,320.
Yet, in the near term the metal could still be on the brink
of more losses after a bearish cross-over in the MACD technical
charts, analysts said. []
Silver <XAG=> rose 2.2 percent to $23.80 an ounce, having
also slipped by the most since July 1 on Tuesday, with a 4
percent decline. It is still one of the biggest gainers among
precious metals so far this year, gaining 41 percent.
Platinum <XPT=> traded up 0.8 percent at $1,681.49 an
ounce, while palladium <XPD=> rose 2.3 percent to $585.49.
Prices at 3:38 p.m. EDT (1938 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1344.20 8.20 0.6% 22.6%
US silver <SIZ0> 23.864 0.084 0.0% 41.7%
US platinum <PLF1> 1687.30 9.70 0.6% 14.7%
US palladium <PAZ0> 590.65 12.20 2.1% 44.5%
Gold <XAU=> 1343.70 7.70 0.6% 22.6%
Silver <XAG=> 23.81 0.49 2.1% 41.4%
Platinum <XPT=> 1680.49 12.99 0.8% 14.7%
Palladium <XPD=> 585.49 12.41 2.2% 44.4%
Gold Fix <XAUFIX=> 1339.00 -1.50 -0.1% 21.3%
Silver Fix <XAGFIX=> 23.71 -55.00 -2.3% 39.6%
Platinum Fix <XPTFIX=> 1670.00 4.00 0.2% 13.9%
Palladium Fix <XPDFIX=> 581.00 5.00 0.9% 44.5%
(Additional reporting by Jan Harvey and Elizabeth Fullerton in
London; Editing by Alden Bentley and Dale Hudson)
