* Gold, silver, platinum hit one-week highs
* Policy in focus
* Coming up: U.S. FOMC rate decision; 1915 GMT
(Updates throughout, previous SINGAPORE)
By Amanda Cooper
LONDON, Dec 14 (Reuters) - Gold rallied for a second day on
Tuesday to reach one-week highs above $1,400 an ounce, taking
advantage of a slide in the dollar ahead of a U.S. policy
meeting.
The Federal Reserve gathers for a one-day rate-setting
meeting on Tuesday at which policy makers are expected to assess
the central bank's $600 billion bond-buying plan but are not
forecast to signal any shift or change in the programme.
Spot gold <XAU=> rose to a one-week high of $1,406.65 an
ounce, before easing to $1,403.55 by 1023 GMT, up 0.8 percent
from the previous close. U.S. gold futures <GCG1> rose 0.5
percent to $1,404.60.
The dollar remained under pressure after having lost almost
1 percent against a basket of major currencies on Monday,
pushing the euro <EUR=> to three-week highs. []
While weakeness in the dollar usually acts as a catalyst for
bullion buying, soft investor demand, as evidenced by continued
outflows from some of the world's largest exchange-traded
precious metals funds, could temper price gains in gold.
"Gold is somwhat mixed at the moment. Some of the
fundamentals are supportive," said Dan Smith, an analyst at
Standard Chartered, who noted the slowing in IMF bullion sales
as being a positive for the market
"Some of the recent fundamental data has been mixed so the
inflows into the physical ETFS were quite poor through Q3 and
hve back in recent days," he said, adding: "It's difficult to be
super bullish at this point given the drivers really."
YIELD APPEAL
Gold has risen by over 1 percent so far this month, driven
largely by the gyrations in the dollar and by the concern over
the outlook for growth both in the United States and in the euro
zone, which continues to grapple with its deepening debt crisis.
Yet a near half-percentage point rise in Treasury yields
<US10YT=RR> this month presents a serious challenge to investors
in gold, which bears no interest and incurs a higher opportunity
cost as returns on other asset classes increase.
With the rally in the bullion price back above $1,400,
traders in Mumbai said Indian consumer demand has retreated,
thereby potentially removing another pillar of fundamental
support for gold. []
Traders cited buying from Chinese banks behind the strength
in the bullion, but said the volume was very light as most funds
and traders choose to avoid risks towards the year end.
"Between now and the end of the year fund activities will
diminish," said Ronald Leung, a physical dealer at Lee Cheong
Gold Dealers in Hong Kong.
In China, the central bank raised reserve ratio requirements
for banks for the third time in a month last week but refrained
from raising interest rates, a move seen to benefit commodities.
Spot silver <XAG=> rallied for a second straight day to a
one-week high of $29.90, before trading at $29.80, up 1.1
percent on the day.
It has been a major beneficiary of the investor push into
commodities this year and the price is now holding around
30-year highs, having almost doubled in 2010 and pushing the
ratio of silver to gold to multi-year lows.
But not all investors are as convinced that silver can
maintain this performance.
"It would seem as if investors are treating sliver as a
cyclically sensitive industrial metal during bullish periods and
as a "safe" precious metal during corrections," said asset
manager Tiberius in its monthly update.
"Thus, silver seems to be profiting in both scenarios.
Silver's fundamentals are poor, however, and we believe it will
tend to underperform both industrial as well as precious metals
in the months to come."
Platinum <XPT=> also rose to a one-week high of $1,713.49,
before easing to show a 0.7 percent gain on the day at
$1,706.74, while palladium <XPD=> rose 0.4 percent to $757.47.
(Additional reporting by Rujun Shen in Singapore; Editing by
William Hardy)
