* Dollar weakens as investors await direction on QE
* Indian buying picks up as prices fall, dealers say
* Platinum, palladium outperform gold, silver
(Updates prices, adds comment)
By Jan Harvey
LONDON, Oct 28 (Reuters) - Gold rose back above $1,330 an
ounce in Europe on Thursday as fresh dollar weakness reversed
the previous session's decline, but trading was cautious ahead
of Federal Reserve talks on U.S. monetary easing next week.
Spot gold <XAU=> was bid at $1,334.50 an ounce at 1329 GMT,
against $1,324.70 late in New York on Wednesday. U.S. gold
futures for December delivery <GCZ0> rose $12.00 to $1,334.60.
Spot prices have fallen 4.5 percent since hitting a record
high at $1,387.10 an ounce earlier this month, as concerns that
potential U.S. quantitative easing was too heavily priced into
the financial markets led to a bounce in the dollar.
Support came for gold on Thursday, however, as the dollar
fell, with U.S. Treasury yields retreating from a recent rise as
investors recalibrated expectations for monetary easing, with
many betting measures would be more modest and gradual than had
been expected. []
"Everything is dependent on the Fed meeting next Tuesday,"
said Deutsche Bank trader Michael Blumenroth. "But in general, I
would think we have seen a large part of the correction."
"In the medium term gold should trade higher because the
fundamentals are strong regardless of what the Fed will do," he
said. "This is a time of the year when physical demand is pretty
good, and at the end of the day we should trade higher again."
"It is just tracking the dollar now until next Wednesday,"
he added.
A Reuters poll showed Wall Street analysts expected the
Federal Reserve to buy $80-$100 billion worth of assets per
month under a new programme widely expected to be unveiled after
the Fed meeting on Nov. 2-3. []
The precious metal is likely to stick to a relatively narrow
range ahead of further information about the size and impact of
any further U.S. monetary easing, analysts said.
"Gold continues to trade defensively as quantitative easing
expectations are ratcheted back," said UBS in a note. "While
some investors take risk off the table, others are reluctant to
initiate fresh longs in advance of next week's key risk events."
INDIAN BUYING PICKS UP
Gold's recent price drop tempted buyers back to the market
in India, the world's biggest bullion consumer. Traders hunted
bargains to meet ongoing festival and wedding demand, aided by a
strong rupee, while scrap sellers in the region held back after
prices retreated from record levels. []
"There have been reports out of India that gold buying there
is increasing," said Commerzbank analyst Daniel Briesemann.
"The latest fall in prices is clearly being used to stock up
with gold in the run-up to religious festivals like Diwali,
which takes place next week. Gold scrap sales are relatively low
at the same time."
Among other precious metals, silver <XAG=> was bid at $23.76
an ounce against $23.53.
JPMorgan Chase & Co and HSBC Holdings Plc were hit with two
lawsuits on Wednesday by investors who accused them of
conspiring to drive down silver prices. []
The banks were accused of manipulating the market for COMEX
silver futures and options contracts from the first half of 2008
by amassing huge short positions in silver futures contracts
that are designed to profit when prices fall.
Platinum <XPT=> was at $1,683.42 an ounce against $1,672,
while palladium <XPD=> was at $628.05 versus $612.63. The metals
are currently well supported by fundamentals, analysts said.
"Platinum faces possible supply constraints in South Africa,
and reduced shipments from Russian State inventories may
constrain palladium supply in the coming years," said RBS Global
Banking & Markets in a note.
"The main end use for platinum group metals is in automotive
emission control catalyst," it added. "Demand from this sector
is underpinned by legislation."
(Reporting by Jan Harvey; editing by Jane Baird)
