* Dollar eases, but heads for first weekly gain in six weeks
* Indian gold demand rises as prices slip from record highs
* Coming up: G20 meeting in South Korea
(Updates prices, adds comment)
By Jan Harvey
LONDON, Oct 22 (Reuters) - Gold prices steadied on Friday,
recovering losses that took them to 2-1/2 week lows earlier in
the session, as the dollar slipped lower against a currency
basket ahead of this weekend's G20 meeting in South Korea.
Investors are wary over whether any clear agreement to
tackle currency imbalances will be reached at the meeting.
Spot gold <XAU=> was bid at $1,324.99 an ounce at 1337 GMT,
against $1,323.60 late in New York on Thursday, having earlier
fallen as low as $1,315.09. U.S. gold futures for December
delivery <GCZ0> rose 30 cents an ounce to $1,325.90.
"The dollar's been a very important driver for sure," said
Standard Chartered analyst Daniel Smith. "I tend to think we
might see a bit more weakness in gold in the short term."
"There are a lot of bullish stories out there for gold, but
I think the price has run up too fast and we're just going
through a period of consolidation now."
Spot prices rallied sharply to a record $1,387.10 an ounce
late last week but have struggled to maintain traction as the
dollar rebounded from lows amid fears expected U.S. monetary
easing had been too heavily priced into the market.
The dollar eased 0.1 percent on Friday but is still on track
for its first weekly rise in six weeks versus a basket of major
currencies <.DXY>. []
Although significant action is not widely anticipated,
traders are awaiting the outcome of this weekend's G20 meeting
in South Korea for direction, and a forthcoming Fed policy
meeting that could result in further quantitative easing.
[]
The dollar's strength has led to a 3.1 percent drop this
week in gold, now heading for a decline roughly equivalent to
its last big fall in mid-July.
Good physical demand from traditional bullion-buying centres
such as India is strengthening as prices descend, he added,
which is likely to support the market above $1,300 an ounce.
"Physical demand is certainly a feature, but it isn't enough
yet to mop up that selling," said ANZ Bank analyst Peter
Hillyard.
"Investor selling is always going to beat physical demand,
but often what it (physical demand) does is herald where the
market is going to go next."
INDIAN BUYING PICKS UP
Dealers in India reported they were continuing to stock up
for forthcoming festivals as prices extended losses. "I have
many advanced orders at $1,319 or below," said one dealer with a
bullion dealing private bank. []
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD>, saw a further drop in its holdings
on Thursday, however. Gold held by the fund dropped 0.9 tonnes,
its 11th session of outflows in 15. []
On the supply side of the market, African Barrick Gold
<ABGL.L>, which was spun off from the top world gold miner
Barrick Gold <ABX.TO> earlier this year, reported
weaker-than-expected production for the third quarter.
[]
Among other precious metals, silver <XAG=> was bid at $23.17
an ounce against $23.18 and was heading for its biggest weekly
loss since early July as it followed gold prices lower.
"As usual silver has been underperforming during the
correction just like it has been outperforming during the recent
rally," said Saxo Bank senior manager Ole Hansen in a note on
Friday.
"Support can be found down towards $22.18 and $21.34 which
are Fibonacci retracement levels of the recent rally."
The ratio of gold to silver -- the number of ounces of
silver needed to buy an ounce of gold -- rebounded from its
lowest in more than two years to reach a 10-day high on Friday
as silver underperformed gold in a falling market.
Elsewhere platinum <XPT=> was at $1,672.19 an ounce against
$1,665.95, while palladium <XPD=> was at $585.50 versus $581.53.
(Additional reporting by Elizabeth Fullerton; editing by
Keiron Henderson and Alison Birrane)
