* Dollar rises after WSJ suggests further QE will be steady
* China should boost gold reserves, says researcher
* Palladium hits highest since 2001 at $636.25/oz
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Oct 27 (Reuters) - Gold eased towards $1,330 an
ounce in Europe on Wednesday as the dollar rose versus a
currency basket after a report said the Federal Reserve would
likely adopt a gradual approach to further U.S. monetary easing.
Spot gold <XAU=> was bid at $1,332.45 an ounce at 0923 GMT,
against $1,338.70 late in New York on Tuesday. U.S. gold futures
for December delivery <GCZ0> fell $6.40 an ounce to $1,332.20.
The metal hit a record $1,387.10 an ounce earlier in October
as expectations that the Fed would pursue a second round of
quantitative easing pressured the dollar, but prices have
slipped as investors worried the impact of this has already been
too heavily priced into currencies and gold.
"I think the Fed won't go as big on QE2 as people have been
expecting, and i think the dollar (will) firm into year-end,"
said Simon Weeks, head of precious metals at the Bank of Nova
Scotia. "It's just a question of time before we are lower."
"The trend turned to the downside before the G20 and it
still has a long way to go before it is finished," he added. "I
suspect that we will eventually head to $1,271 which is 50
percent of the move from the lows in late July to the highs the
other day."
Gold typically falls when the dollar strengthens, and vice
versa, as a firmer U.S. unit curbs the metal's appeal as an
alternative asset. Like all dollar-price commodities, it also
becomes more expensive for other currency holders.
The dollar index, which measure's the unit's performance
against a basket of six other currencies, rose 0.5 percent on
Wednesday after the Wall Street Journal said the Federal Reserve
was likely to unveil plans for gradual Treasury purchases at its
policy meeting next week. []
The newspaper said the Fed is likely to reveal a programme
of U.S. Treasury bond purchases worth several hundred billion
dollars over several months. This compares to some investors'
expectations for QE to approach $1 trillion. []
BARGAINS HUNTED
In India, bullion traders snapped up bargains to meet
festival demand as Dhanteras, one of the biggest gold-buying
occasions of the year, approaches in November. []
Elsewhere a newspaper run by China's Ministry of Commerce
said on Wednesday the country should significantly boost its
state gold reserves to a level equal to that held by the United
States, citing a local researcher. []
"The researcher's comment doesn't constitute an official
statement from China, and the quantities mentioned at close to
three years' worth of global mine production are excessive,"
said UBS analyst Edel Tully in a note.
"This nonetheless supports the general market consensus that
China will add to its gold reserves. While the implications of
potential QE and its size have monopolised market attention, the
China report reminds us that the current mood amongst central
banks, particularly in Asia, is to increase exposures to gold."
Among other precious metals, palladium <XPD=> was at $619.38
an ounce against $620.63, having earlier touched its highest
since 2001 at $636.25 an ounce. The autocatalyst metal is one of
this year's best-performing commodities.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the relative price performance of key
commodities this year, click: http://r.reuters.com/baf29p
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Silver <XAG=> was bid at $23.67 an ounce against $23.82.
The U.S. Commodity Futures Trading Commission said that
there have been attempts to influence silver prices, but did not
provide any detail on the status of a probe into price
manipulation in silver that started in 2008. []
The U.S. commodity futures regulator is looking into claims
by a trader in London that JPMorgan Chase & Co <JPM.N> was
involved in manipulative silver trading, the Wall Street Journal
said, citing a person close to the situation. []
Meanwhile platinum <XPT=> was at $1,695.42 an ounce against
$1,694.95.
(Reporting by Jan Harvey; editing by Keiron Henderson)
