* Focus on Fed
* India shows strong appetite for physical silver
* Coming up: U.S. Fed chief Bernanke briefing; 1815 GMT
(Updates throughout with comment, prices)
By Amanda Cooper
LONDON, April 27 (Reuters) - Gold rose for a second day on
Wednesday, profiting from a weaker dollar, which came under
pressure ahead of a U.S. Federal Reserve interest rate decision,
while silver pared some of the previous day's slide.
The Fed is not expected to signal any rush to scale back its
multi-billion dollar support mechanisms for the economy, so
investors are waiting to hear more on the outlook for monetary
policy from chairman Ben Bernanke when he gives the central
bank's first post-decision news conference later in the day.
[]
With the dollar under pressure and its inverse link to gold
strengthening for the first time in a week, the bullion price
was set for a second day of gains, although a string of public
holidays in the United Kingdom restricted volumes.
Spot gold <XAU=> was last up 0.7 percent at $1,510.50 an
ounce by 1400 GMT, about 0.8 percent below Monday's record high
at $1,518.10. U.S. futures for June delivery <GCv1> were last up
0.5 percent at $1,510.90.
"It is definitely the main event that the market is looking
ahead to," said Credit Suisse analyst Tom Kendall.
"We've seen yet again the dollar under pressure ahead of
that statement and precious metals definitely benefitting and
base metals soggy," he said, adding he expected to see no change
in the Fed's stance on policy, although the key drivers for the
gold price remained in place.
"It is the dollar, it is sovereign debt, whether that is the
U.S. or the periphery of Europe. It is headline rates of
inflation in emerging markets and developed markets and it is a
bit of geopolitical uncertainty."
Gold could continue to draw strength from any weakness in
the dollar, particularly if the Fed maintains its accommodative
policy stance, in contrast with the European Central Bank, which
has raised rates as it attempts to curb inflation.
"The market is a bit mixed ahead of the Fed meeting, which
will influence the move of the dollar and precious metals," said
Peter Fung, head of dealing at Wing Fung Precious Metals based
in Hong Kong.
Silver steadied somewhat, following its largest one-day fall
in a month the previous day. The price is on track for a
21-percent gain this month and a 47-percent rise this year,
making it the top performing precious metal.
"(Silver) is definitely in a period of consolidation and I
think it would be healthy for the market to trade broadly
sideways for at least at few days and I suspect maybe we will
see the focus come back on gold in the short term," said Credit
Suisse's Kendall.
Dealers in Asia said strong physical demand was offering
some support to silver, although holdings of silver in the
world's largest exchange-traded funds staged their largest
one-day outflow in nearly two weeks by April 26. []
Spot silver <XAG=> was up 0.4 percent at $45.68 an ounce,
having recovered from a 3-percent drop on Tuesday, its largest
one-day slide in six weeks.
U.S. silver <SIcv1> was last up 1.4 percent at $45.62.
Implied volatility in silver options has been at its highest
this week since November last year as the spot price has swung
from lows around $43 to highs above $49 in the space of a week.
"The recent sharp increase in volatility is an indication of
the increasing nervousness of market players and could be a sign
that the rally in the silver price is approaching an end," said
Commerzbank in a note.
Platinum <XPT=> was last up 0.6 percent at $1,805.99 an
ounce, while palladium <XPD=> was up 0.4 percent at $752.97.
(Additional reporting by Rujun Shen in Singapore; editing by
Alison Birrane)
