* Dollar retreats ahead of Fed, lifting gold
* Coming up: Federal Reserve policy meeting, Nov. 2/3
* Palladium rallies to fresh 9-1/2 year high above $650/oz
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Nov 1 (Reuters) - Gold rose above $1,360 an ounce in
Europe on Monday, building on three consecutive months of gains,
as expectations the Federal Reserve will unveil further U.S.
monetary easing at a meeting on Nov. 2/3 pressured the dollar.
Spot gold <XAU=> was bid at $1,362.40 an ounce at 1006 GMT,
against $1,357.05 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> rose $5.20 an ounce to $1,362.80.
Gold is benefiting from weakness in the dollar, which boosts
the metal's appeal as an alternative asset, and makes dollar
priced commodities more expensive for other currency holders.
"The dollar continues to be under pressure," said Afshin
Nabavi, head of trading at MKS Finance.
"This week is going to be a big week as far as news is
concerned. We have got the mid-term elections tomorrow, we have
got the FOMC on Wednesday and non-farm payrolls on Friday, so I
think probably the market is positioning ahead of that."
The dollar fell against a basket of currencies <.DXY> as the
market geared up for the Fed to step up money printing after its
meeting starting on Tuesday, with uncertainty surrounding the
scope and pace of potential bond purchases by the bank. []
Market expectations have centred on an initial commitment to
buy at least $500 billion in Treasury debt over five months in
an effort to spur lending and support an economic recovery that
is too weak to tame high unemployment. []
A larger-than-expected round of QE could further undermine
the dollar, boosting gold, but if the measures are softer than
expected, the dollar is expected to revive and gold to ease. In
the longer term, however, the precious metal is well supported.
"While the decision on further monetary easing has the
potential to disappoint given the strong market performance over
the past several weeks, we think the longer-term threat of
uncertainty and inflation could limit price declines (in
precious metals)," said Morgan Stanley in a note.
INDIAN DEMAND FIRM
Reports indicated gold buying in major bullion consumer
India had been firm in recent months. The president of the
Bombay Bullion Association said India's October gold imports
rose to 43 tonnes, above a Reuters poll forecast of 41.5 tonnes.
[]
"The Diwali religious festival takes place in India on
Friday, and physical demand for gold should remain high in the
run-up to this holiday," said Commerzbank in a note.
On the supply side of the market, top 10 gold producer
Harmony Gold <HARJ.J> cut its guidance for full-year output to
around 1.64 million ounces from 1.7 million ounces.
[]
Silver prices rose to their highest in 30 years, tracking
gains in gold to break through $25 an ounce for the first time
since 1980, peaking at $25.03 an ounce. The metal was later bid
at $24.87 an ounce against $24.64.
Holdings of the world's largest silver-backed
exchange-traded fund, the iShares Silver Trust <SLV>, fell
nearly 40 tonnes on Friday, data from the fund showed, to
10,141.92 tonnes. []
Palladium <XPD=> extended the previous month's 15 percent
gains to hit a near 9-1/2 year high at $654.50 an ounce, and was
later at $651.22 an ounce against $643.
The metal is one of this year's best performers among
commodities, up more than 60 percent in 2010 to date, boosted by
expectations supply will fail to keep up with burgeoning demand
for the autocatalyst metal.
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Graphic showing relative price performance of major
commodities:
http://graphics.thomsonreuters.com/F/10/CMD_PF.html
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"A slowdown in palladium supply from potentially exhausted
Russian state stocks creates a more constructive fundamental
base longer term," said Barclays Capital in a note.
Among other precious metals, platinum <XPT=> was at
$1,715.50 an ounce against $1,698.50.
(Reporting by Jan Harvey; Editing by Sue Thomas)
