PRECIOUS-Gold turns higher as dollar wilts after U.S. data

                                
 * Dollar turns lower, FX market eyes Fed meeting next week
                                
 * U.S. economy grew at 2 pct as expected in Q3-Commerce Dept
                                
 * Palladium rallies to highest since May 2001
                                
 
                                
 (Updates prices, adds comment)
                                
 By Jan Harvey
                                
 LONDON, Oct 29 (Reuters) - Gold swung higher on Friday to
move briefly back above $1,350 an ounce as the dollar pared its
earlier gains, moving into negative territory after data showed
the U.S. economy grew at 2.0 percent in the third quarter.
                                
 Gold's move was muted, however, ahead of a Federal Reserve
meeting next week. The Fed is expected to discuss further U.S.
monetary easing, which could have a major impact on the dollar
and inflation outlook, both potentially significant for gold.
                                
 Spot gold <XAU=> was bid at $1,348.75 an ounce at 1301 GMT,
against $1,343.35 late in New York on Thursday. U.S. gold
futures for December delivery <GCZ0> rose $7.00 to $1,349.50.
                                
 "Next week will be a big one news-wise -- the FOMC, the
mid-term elections, as well as non-farm payrolls," said Afshin
Nabavi, head of trading at MKS Finance in Geneva.
                                
 "I think the market was intraday short and saw some
stop-loss buying, which took the market towards $1,353. We have
to wait and see where the stock markets open... but I think
having broken above $1,350 we ought to try a bit higher --
$1,345-1,385 I'd say would be the new range."
                                
 The dollar turned negative versus the euro after the release
of U.S. third-quarter economic growth data, which showed gross
domestic product expanded at a 2.0 percent annual rate as
expected in the third quarter. [ID:nN28207235] [FRX/]
                                
 All eyes are now on the Federal Open Market Committee
meeting on Nov. 2/3, at which the Fed is expected to announce
more quantitative easing, in which it adds cash to the market to
improve liquidity and boost economic growth.
                                
 "The Fed meeting next week has been dominating the markets,"
said Standard Bank analyst Walter de Wet. "Ahead of that, people
have positioned themselves, and from an investment perspective
they are not going to add too much more gold.
                                
 "We think the gold market has priced in around a $500
billion QE exercise by the Fed," he added. "If the Fed comes out
with a higher figure, we think gold will move higher. If it's
lower, it is going to be bearish for gold."
                                
   
                                
 INDIAN BUYERS TURN COY
                                
 Indian gold buying retreated on Friday after a 1.4 percent
rise in spot prices in the previous session as most traders
waited for a dip to stock up in the run-up to Dhanteras and
Diwali next week, dealers said. [ID:nSGE69S0B3]
                                
 Traders say the physical market has been a good support for
prices in recent weeks following gold's correction from record
highs at $1,387.10 an ounce, with buying in India in particular
relatively healthy after a sharp drop last year.
                                
 "Physical demand continues to provide a cushion for gold
prices but beyond the seasonally strong period for consumption,
we would not rule out prices softening further," said Barclays
Capital in a note.
                                
 Meanwhile, Hong Kong trade data showed the flow of gold from
Hong Kong to China in the first eight months of 2010 was nearly
double that for the whole of 2009, suggesting that appetite for
jewellery and investment purposes is rocketing. [ID:nSGE69S07I]
                                
 On the investment side, holdings of the world's largest
gold-backed exchange-traded fund, New York's SPDR Gold Trust
<GLD>, dipped by just over 5 tonnes on Thursday, bringing its
total outflows in October so far to 11.7 tonnes. [GOL/SPDR]
                                
 Elsewhere, palladium <XPD=> rose to a peak of $640.05 an
ounce, its highest since May 2001. Spot palladium was later at
$637.50 against $622.99.
                                
 "Already palladium is in deficit; it will be in deficit next
year," said de Wet. "China auto sales are very strong, and
certainly we think there is buying in anticipation of a seasonal
upturn in auto sales, typically from now until March.
                                
 "Swiss customs data for the past five or six months has
shown metal has flowed out of Zurich vaults, which shows you
there is still demand even at these prices," he added
                                
 Spot platinum <XPT=> was at $1,697.19 an ounce against
$1,688, while silver <XAG=> was at $24.13 against $23.97.
                                
 (Reporting by Jan Harvey; editing by Alison Birrane)