* Liquidation of U.S. gold, silver futures knock spot prices
* Coming up: FOMC statement on rates, policy, 1815 GMT
* Gold sales for Dhanteras festival seen up to 20 pct higher
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 3 (Reuters) - Gold slid more than 2 percent on
Wednesday and silver tumbled as spot prices were knocked by
heavy liquidation of New York metals futures ahead of an
announcement on monetary policy from the Federal Reserve.
Spot gold <XAU=> slipped to a low of $1,327.80 an ounce and
was bid at $1,333.95 an ounce at 1542 GMT, against $1,357.00
late in New York on Tuesday. U.S. gold futures for December
delivery <GCZ0> eased $23.60 an ounce to $1,333.30.
Prices came under pressure from a firmer dollar in earlier
trade but held in a fairly narrow range as traders awaited news
on the scope and timing of the Fed's expected quantitative
easing programme. They slid sharply as support levels gave way.
"It is all about last-minute profit taking before QE2," said
Saxo Bank analyst Ole Hansen. "Stops had been building up below
$1,350 over the last couple of days and once that went, it was
all over.
"This move leaves the market in a much better position to
react to gold (bullish) news after the Fed," he added.
A Reuters poll found on Wednesday that most leading
economists expect the Fed to buy between $80 billion and $100
billion worth of assets per month under a new programme to
bolster the struggling economy. []
Estimates for how long the Fed will print money and how much
it will spend overall varied from $250 billion to $2 trillion.
Macquarie analyst Hayden Atkins said the initial euphoria
over QE and its potential impact on gold had largely worn off,
and that while the metal may see some support if the policy
meets expectations, a major lift is unlikely.
"There may be some upside surprise but (markets) pretty
quickly priced out a Big Bang policy," he added. "It might be a
mild positive, but I think the reality of what could happen is
in most people's minds already."
FOCUS CHANGE
"It is good to actually get this out of the way, so we can
start to focus on other global events that mean more to
different markets," he added.
"There has been a lot of talk about what has to happen with
exchange rates globally, but that has probably been ignored
because of the big moves in currency markets on QE expectations.
Maybe we will start to focus more broadly now, and that will
drive the market going forward."
Elsewhere wholesale physical gold demand in the world's
biggest bullion consumer India was healthy as the country's
busiest gold-buying festival, Dhanteras, got under way, with
local demand helped by the strong rupee. []
Traders and retailers expect volume to rise up to 20 percent
despite near-record prices as customers line up to make the most
of the auspicious festival. []
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, slipped on Tuesday,
however, by around 1 tonne to 1,292.189 tonnes. ETFs issue
securities backed by physical stocks of metal. []
On the supply side of the market, the Xinhua news agency
reported that China had found a 100-tonne gold deposit in Inner
Mongolia, worth about $5.25 billion. China is the world's
biggest gold miner, and its number two consumer. []
Silver <XAG=> also fell to $24.15 an ounce against $24.91,
tracking gold. Holdings of the world's number one silver ETF,
the iShares Silver Trust <SLV> eased further from the record
high they hit last month on Tuesday. []
Platinum <XPT=> was at $1,697.25 an ounce against $1,708.50,
while palladium <XPD=> was at $638.47 against $643.
(Editing by James Jukwey)
