* Dollar steadies after slide but more losses seen
* Largest gold ETF records inflow, Indian buying picks up
* Coming up: Fed chair Bernanke speaks in Boston, 1215 GMT
(Updates prices)
By Jan Harvey
LONDON, Oct 15 (Reuters) - Gold held steady near $1,380 an
ounce in Europe on Friday, with the precious metal's sharp run
higher losing momentum as the dollar steadied, but lingering
doubts over the currency continued to support prices.
The precious metal was on track to post its biggest weekly
gain since mid June as the dollar continued its decline for a
fifth consecutive week against a basket of six major currencies.
Spot gold <XAU=> was bid at $1,377.65 an ounce at 1111 GMT,
against $1,376.75 late in New York on Thursday. U.S. gold
futures for December delivery <GCZ0> rose $1.10 to $1,378.70.
The dollar steadied on Friday after a turbulent previous
session in which it hit a 10-month low, as investors trimmed
heavily-extended short positions, but players said it was
premature to think there had been any sea change. []
Forex traders are eagerly awaiting a speech from Federal
Reserve Chairman Ben Bernanke in Boston, Massachusetts, later in
the session for any further indicators that the Fed is prepared
to extend quantitative easing.
"A barrage of key economic data, including a most-awaited
speech from Federal Reserve Chairman Ben Bernanke, is due today,
and markets seems to be bracing for any cues on the proposed
QE2," said Pradeep Unni, senior analyst at Richcomm Global
Services.
"The bullish momentum is very much intact, and $1,400 isn't
tough to be breached in the current economic conditions."
Gold has rallied more than 25 percent so far this year as
the prospect of instability in the financial markets linked to
quantitative easing prompted investors to buy the precious metal
as a safe store of value.
QUANTITATIVE EASING
U.S. quantitative easing would likely undermine the dollar
and would also indicate that the U.S. authorities are likely to
keep interest rates near historic lows, analysts said.
Gold benefits from low interest rates, which cut the
opportunity cost of holding non-interest bearing assets. Goldman
Sachs, which recently lifted its 12-month price view on gold to
$1,650 an ounce, said the metal is still a good buy in the
current environment.
"We expect gold prices to continue to rise from current
levels as real interest rates should remain low on a
continuation of accommodative U.S. monetary policy," the bank
said in a note.
In the options markets, investors are betting heavily on the
gold price continuing to rise. The bulk of open interest for
December gold options centres on call options at $1,400 an
ounce, which give holders the right, though not the obligation,
to buy gold at that price. []
Open interest amounts to well over 17,000 contracts,
equivalent to 1.7 million ounces of gold, compared with the bulk
of open interest on December puts of 250 contracts at a strike
price of $1,360 an ounce.
Investment in gold exchange-traded funds picked up, with
holdings of the world's largest, New York's SPDR Gold Trust
<GLD>, edging higher on Thursday after falling by almost 20
tonnes in early October. []
In India, the world's biggest gold consumer, wholesale gold
buying rose on Friday afternoon after the rupee strengthened to
its highest level in 25 months, making the dollar-quoted yellow
metal cheaper for local buyers, dealers said. []
Among other precious metals, silver <XAG=> was at $24.40 an
ounce against $24.61, platinum <XPT=> was at $1,699.50 an ounce
against $1,704.15 and palladium <XPD=> at $595.50 against
$597.45.
(Editing by Keiron Henderson)
