* Dollar drives gold higher after Fed minutes
* ETF flows into palladium spur 2-pct price gain
* Coming up: Fed Chairman Ben Bernanke Q+A; 2010 GMT
(Updates prices, adds JPMorgan results)
By Amanda Cooper
LONDON, Oct 13 (Reuters) - Gold held at its highest in
nearly a week on Wednesday after the Federal Reserve signalled
the U.S. economy may need extra stimulus, which hit the dollar,
while evidence of strong investment demand lifted palladium.
Results from JPMorgan Chase <JPM.N>, the second largest U.S.
bank by assets, which has the largest commodities trading desk
on Wall Street, helped the dollar cut some of its losses and
nudged gold down from session highs.
Spot gold <XAU=> rose 0.6 percent to $1,357.80 an ounce by
1125 GMT, regaining ground lost in the previous session.
U.S. gold futures for December delivery <GCZ0> rose 0.9
percent to $1,359.10.
Adding to the bullish tone in gold was Goldman Sach's
decision earlier this week to raise its 12-month price forecast
for gold by about 20 percent to $1,650 an ounce. []
"We're still very bullish. In May, we outlined $1,600 was
our target. I guess that was quite aggressive at the time and
now we see everybody migrating towards that level," said
Deutsche Bank analyst Michael Lewis.
U.S. Federal Reserve officials believed in September the
struggling recovery might soon need more help and they discussed
several ways to provide support, including the possible adoption
price-level targeting, a policy in which the central bank would
temporarily tolerate even higher inflation. []
This put the dollar under broad pressure from the euro, the
Swiss franc and a basket of currencies. []
Gold's inverse relation to the U.S. dollar, which was at its
most pronounced in six months on a 30-day rolling basis in early
European trade, helping push bullion prices to their highest
since last Thursday, marking a session peak at $1,360.90.
Gold has risen by nearly 10 percent over the last month, in
line with a 7 percent fall in the dollar index <.DXY> amid
anticipation of a sustained period of low U.S. interest rates
which has battered the greenback and raised the appeal of gold,
which bears no yield.
"There's been a lot of positive sentiment run by the dollar
weakness fuelled by the possibility of QE (quantitative
easing)," said Mark Pervan, senior commodities analyst at ANZ,
adding that the accommodating stance in the U.S. monetary policy
would propel precious metals to new record highs.
"The markets are buying on a dip, and pushing things higher.
(For gold), $1,400 is probably on the radar for the next two to
three months. No problem."
JPMorgan, the second-largest U.S. bank by assets, said its
quarterly profit jumped, helped by lower loan losses in its
retail and credit card units. []
DEMAND UP
Physical demand remains strong, and scrap selling is scarce,
as market players bet on a further rally in prices, according to
Asian dealers.
Edel Tully, precious metals strategist at UBS, said the
bank's physical sales to India were above the year-to-date
average ahead of Diwali, a key period for Indian gold buying.
"Separately, scrap supply is certainly visible at the
refineries, but we don't believe it is at levels which can on
its own curtail gold rallies," she said in a note.
Meanwhile, spot palladium <XPD=> rose as much as 2.3 percent
to a one-week high of $593.50 an ounce, before easing to show a
1.8 percent gain on the day at $590.50, aided by the weaker
dollar and evidence that investors continue to buy into one of
the top performing commodities of 2010.
Outstanding shares in ETF Securities' U.S.-listed palladium
exchange-traded fund, the world's largest palladium-backed ETF,
staged their largest one-day rise in six months on Tuesday,
bringing shares to a new record, which indicated strong inflows
of metal.
With palladium up 45 percent so far this year and close to
its highest in over nine years, the platinum-palladium ratio, or
the number of ounces of palladium used to buy an ounce of
platinum, fell to 2.87, its lowest in more than six years.
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For a graphic on the ratio, click:
http://graphics.thomsonreuters.com/AS/0810/RS_20101310122335.jpg ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Platinum <XPT=> rose 1.4 percent to $1,698.00 an ounce. It
reached a five-month high of $1,725.5 last week.
Silver <XAG=> was last up 1.0 percent at $23.51 an ounce.
(Additional reporting by Rujun Shen in Singapore; editing by
Sue Thomas)
