* Dollar retreats ahead of Fed, lifting gold
* Silver breaks through $25/oz for first time since 1980
* Coming up: Federal Reserve policy meeting, Nov. 2/3
* Palladium rallies to fresh 9-1/2 year high above $650/oz
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 1 (Reuters) - Gold eased in Europe on Monday as
the dollar firmed, but remained supported after three
consecutive months of gains by expectations the Federal Reserve
will unveil further U.S. quantitative easing at a meeting on
Nov. 2-3.
Spot gold <XAU=> was bid at $1,352.70 an ounce at 1516 GMT,
against $1,357.05 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> eased $4.50 an ounce to $1,353.10.
Ahead of the Fed meeting starting on Tuesday, market
expectations have centred on an initial commitment to buy at
least $500 billion in Treasury debt over five months to spur
lending and support economic recovery. []
Expectations for further QE has hurt the dollar and lifted
gold in recent weeks.
"Some level of QE has been built into the gold price. If we
don't get QE then the market will pull back," said HSBC analyst
James Steel. "(A) more gradualist, modest approach will keep the
market steady, slightly higher."
Gold benefits from weakness in the dollar as it boosts the
metal's appeal as an alternative asset and makes dollar priced
commodities more expensive for other currency holders. A
recovery in the U.S. unit on Monday has therefore dented gains.
The dollar gained against the euro and yen and rose 0.1
percent against a basket of currencies after data showed
business activity in the U.S. manufacturing sector came in
stronger than expected in October. []
Signs of a firmer basis to the U.S. economic recovery could
dampen appetite for large-scale quantitative easing, analysts
said. If the easing measures are weaker than expected, the
dollar could recover and gold come under pressure.
"Our FX strategists... expect the market to be disappointed
with the size of the QE at the upcoming FOMC meeting this week,
which may also lead to USD strength in the short term," said
Barclays Capital in a note on Monday.
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, 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 $24.63 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 $655 an ounce and was
later at $646.85 an ounce against $643.
"Given that China's auto market is heavily weighted in
favour of palladium, we view today's China PMI manufacturing
Index data as bullish for palladium," Standard Bank said.
"On Wednesday, U.S. auto sales for October are due. While
October data may show a month on month decline in U.S. auto
sales, we expect auto sales to pick up (on seasonality) from
November through to March."
Among other precious metals, platinum <XPT=> was at
$1,709.99 an ounce against $1,698.50.
(Reporting by Jan Harvey; Editing by Alison Birrane)
