* Dollar weakens as investors await Fed easing steps
* Indian buying picks up as prices fall, dealers say
* Platinum, palladium outperform gold, silver
(Recasts, updates prices, market activity; new byline,
changes dateline, previously LONDON)
By Carole Vaporean
NEW YORK, Oct 28 (Reuters) - Gold rallied over 1.5 percent
on Thursday, boosted by a sinking dollar as some investors bet
the Federal Reserve's next round of monetary stimulus could be
much larger than previously thought.
Uncertainty over the scope and impact of the Fed's attempt
to stimulate U.S. economic growth knocked the dollar sharply
lower. The widely anticipated announcement is due at the end of
the Fed's next policy-setting meeting on Nov. 3.
The Fed has telegraphed its intent to boost the economy
through U.S. government bond purchases, or quantitative easing.
Investors have been trying to guess how much money the Fed will
pump in through the widely anticipated second round of
quantitative easing, dubbed "QE2" by Fed watchers.
"This is all just a run into the QE2 news that's coming up
on Nov. 3rd," said Fred Schoenstein, metals trader at Heraeus
Precious Metals Management in New York.
Spot gold <XAU=> touched a high of $1,345.50 an ounce and
was bid at $1,342.35 an ounce at 3:19 p.m. EDT (1919 GMT)
against $1,324.70 late in New York on Wednesday. U.S. gold
futures for December delivery <GCZ0> closed with gains of
$19.90, or 1.5 percent, at $1,342.50 an ounce.
Earlier this month, spot prices retreated after hitting a
record high at $1,387.10 an ounce, as investors worried that
markets had priced in too much Fed easing.
Gold "is just tracking the dollar now until next
Wednesday," said Deutsche Bank trader Michael Blumenroth.
"Everything is dependent on the Fed meeting... but in general,
I would think we have seen a large part of the correction.
The dollar fell in tandem with Treasury yields as investors
reassessed the potential extent of monetary stimulus. []
A New York Fed survey of dealers and investors on the size
of the stimulus program included scenarios of up to $1
trillion, more than recent estimates. []
A smaller amount than expected would likely send precious
metals prices a bit lower, though not significantly.
"It's probably going to come in around $500 billion, at
least. If we see somewhere around $700 (billion), like the last
round, or near $1 trillion, I think we'll have a significant
breakout to the upside," said Schoenstein.
He expects silver will test $25 and gold will push up
around $1,400 an ounce if the stimulus package comes in on the
high side of projections.
"In the medium term, gold should trade higher because the
fundamentals are strong regardless of what the Fed will do,"
said Blumenroth. "This is a time of the year when physical
demand is pretty good, and at the end of the day we should
trade higher again."
The manager of Pacific Investment Management Co.'s (Pimco)
$18.5 billion commodities fund said easier monetary policy from
the Fed should help the fund gain about 15 percent this year,
helping assets like gold. []
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. []
Among other precious metals, silver <XAG=> was bid at
$23.90 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. []
Platinum <XPT=> was at $1,692 an ounce against $1,672,
while palladium <XPD=> was at $629.45 versus $612.63. PGMs are
currently 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.
Prices at 3:26 p.m. EDT (1925 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1342.50 19.90 1.5% 22.5%
US silver <SIZ0> 23.875 0.471 0.0% 41.7%
US platinum <PLF1> 1692.00 13.90 0.8% 15.0%
US palladium <PAZ0> 629.45 10.30 1.7% 54.0%
Gold <XAU=> 1340.91 16.21 1.2% 22.3%
Silver <XAG=> 23.85 0.32 1.4% 41.6%
Platinum <XPT=> 1685.49 12.99 0.8% 15.0%
Palladium <XPD=> 626.55 13.92 2.3% 54.5%
Gold Fix <XAUFIX=> 1333.50 7.00 0.5% 20.8%
Silver Fix <XAGFIX=> 23.73 -4.00 -0.2% 39.7%
Platinum Fix <XPTFIX=> 1685.00 1.00 0.1% 14.9%
Palladium Fix <XPDFIX=> 626.00 1.00 0.2% 55.7%
(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
