* Gold rallies on weak dollar, UPS package scare
* US economy grew as expected in Q3; easing view unchanged
* IMF increases gold sales in September from August level
* Coming up: US FOMC meeting announcement on Wednesday
(Recasts, updates prices, market activity to close, changes
byline/dateline, previously LONDON)
By Frank Tang
NEW YORK, Oct 29 (Reuters) - Gold rose 1 percent on Friday,
setting a 10-day high as a lower dollar prompted investors to
buy ahead of next week's Federal Reserve meeting, at which the
central bank is expected to discuss further monetary stimulus.
Jitters about suspicious packages in Britain and Dubai
after U.S. and British security officials searched United
Parcel Service <UPS.N> cargo flights also prompted buying of
gold. []
"It appears these suspicious packages found on the
U.S.-bound cargo planes were responsible for the gold rally,"
said Bruce Dunn, vice president of trading at bullion dealer
Auramet.
Investors often turn to gold as a safe haven in times of
geopolitical and economic uncertainty.
Spot gold <XAU=> was up 1 percent at $1,356.26 an ounce at
2:53 p.m. EDT (1853 GMT). U.S. gold futures for December
delivery <GCZ0> settled up $15.10 at $1,357.60.
Dunn said technical buying emerged after prices broke above
$1,350 an ounce, a level where gold ran into resistance this
week. U.S. mid-term election and the Federal Reserve meeting
next week also triggered short-covering, he said.
Bullion was up nearly 2 percent on the week, resuming its
rise after last week's decline snapped 11 straight weeks of
gains.
U.S. data on Friday showed third-quarter economic growth
edged up as expected, but not enough to reduce unemployment.
Investors still believe the Fed will resume government debt
purchases in a second round of quantitative easing, called QE2
by Fed watchers, to boost the sluggish economy. Many believe
this could lift gold. []
"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.
Gold got a boost as the dollar slumped on uncertainty about
U.S. monetary easing. [] All eyes are on the Federal Open
Market Committee meeting on Nov. 2-3. Most leading economists
believe the Fed will buy $80 billion to $100 billion per month
worth of assets, and some forecasters expect easing will
eventually total as much as $2 trillion.
"The Fed meeting next week has been dominating the
markets," said Standard Bank analyst Walter de Wet.
"We think the gold market has priced in around a $500
billion QE exercise by the Fed," de Wet 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."
IMF UPS GOLD SALES IN SEPTEMBER
The International Monetary Fund sold 1.04 million ounces
(32.3 tons) of gold in September, nearly a third of it to
Bangladesh, an IMF spokesman said on Friday. []
Traders say the physical market has supported prices in
recent weeks following gold's correction from record highs at
$1,387.10 an ounce. Buying in India has been relatively healthy
ahead of Hindu festivals and major gold-buying events of
Dhanteras and Diwali next week.
Hong Kong trade data showed the flow of gold from Hong Kong
to China in the first eight months of 2010 nearly double that
for the whole of 2009, suggesting surging appetite for jewelry
and investments. []
Spot silver <XAG=> rose 2.5 percent to $24.58, tracking
gold. COEMX futures trading volume was about 22 percent higher
than their 30-day average, after alleged silver conspiracy
lawsuits filed this week against two major banks created
additional buzz in the white metal. []
Palladium <XPD=> rose to a peak of $644 an ounce, its
highest since May 2001. Spot palladium rose 3.1 percent to
$642.47.
"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.
Spot platinum <XPT=> climbed 0.6 percent to $1,697.74 an
ounce.
(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
Prices at 3:07 p.m. EDT (1907 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1357.60 15.10 1.1% 23.8%
US silver <SIZ0> 24.564 0.689 0.0% 45.8%
US platinum <PLF1> 1707.10 15.10 0.9% 16.1%
US palladium <PAZ0> 645.10 15.65 2.5% 57.8%
Gold <XAU=> 1356.69 13.34 1.0% 23.7%
Silver <XAG=> 24.58 0.61 2.5% 46.0%
Platinum <XPT=> 1697.74 9.74 0.6% 15.8%
Palladium <XPD=> 642.47 19.48 3.1% 58.4%
Gold Fix <XAUFIX=> 1346.75 10.00 0.7% 22.0%
Silver Fix <XAGFIX=> 23.96 23.00 1.0% 41.0%
Platinum Fix <XPTFIX=> 1700.00 17.00 1.0% 16.0%
Palladium Fix <XPDFIX=> 640.00 11.00 1.7% 59.2%
