* Dollar firms amid caution ahead of next week's Fed meet
* Coming up: U.S. third-quarter GDP data at 1230 GMT
* Palladium bucks precious metals' trend lower to rise
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Oct 29 (Reuters) - Gold eased in Europe on Friday as
the dollar rose against a currency basket ahead of U.S. growth
data later in the session, but traders remained cautious ahead
of a hotly anticipated Federal Reserve policy meeting next week.
The Fed is expected to discuss the prospect of further U.S.
monetary easing at the meeting starting Tuesday, which could
have a major impact on the dollar and inflation expectations,
both of which are likely to prove significant for gold.
Spot gold <XAU=> was bid at $1,337.20 an ounce at 0933 GMT,
against $1,343.35 late in New York on Thursday. U.S. gold
futures for December delivery <GCZ0> fell $5.00 to $1,337.50.
"The Fed meeting next week has been dominating the markets,"
said Standard Bank analyst Walter de Wet. "Ahead of that, people
have positioned themselves, and from an investment perspective
they are not going to add too much more gold.
"We think the gold market has priced in around a $500
billion QE exercise by the Fed," he said. "If the Fed comes out
with a higher figure, we think gold will move higher, if it's
lower, it is going to be bearish for gold."
The dollar rose 0.5 percent against a basket of currencies
<.DXY> and 0.8 percent against the euro in early European trade,
as traders looked ahead to the Fed and U.S. third-quarter GDP
data due at 1230 GMT. []
The GDP report is expected to show the world's biggest
economy grew 2.0 percent in the third quarter.
"If the figure comes in considerably better than 2 percent
we could well see a dollar bounce on expectations of a reduced
stimulus package next week," said CMC Markets in a note.
"A poor figure, then expect the dollar to fall quite
quickly, especially against the yen."
INDIAN BUYERS TURN COY
Indian gold buying retreated on Friday after a 1.4 percent
rise in spot prices rose in the previous session, as most
traders waited for a dip to stock up in the run-up to Dhanteras
and Diwali next week, dealers said. []
"There are many jewellers who are enquiring and waiting to
book," said one dealer with a private gold-importing bank. "I
have advanced orders below $1,340."
Traders say the physical market has been a good support for
prices in recent weeks after gold's correction from record highs
at $1,387.10 an ounce, with buying in India in particular
relatively healthy after last year's sharp drop in buying.
Elsewhere, official Hong Kong trade data showed the flow of
gold from Hong Kong to China in the first eight months of 2010
was nearly double that for the whole of 2009, suggesting
appetite in the mainland for jewellery and investment purposes
is rocketing. []
On the investment side, holdings of the world's largest
gold-backed exchange-traded fund, New York's SPDR Gold Trust
<GLD>, dipped by just over 5 tonnes on Thursday, bringing its
total outflows in October so far to 11.7 tonnes. []
"The World Gold Council reported a fall in investment demand
virtually across the board in the third quarter," Commerzbank
said in a note. "This is probably due to the high gold prices in
this period, which have evidently had an impact on investors."
Among other precious metals, palladium <XPD=> bucked the
wider downward trend to rise, climbing back towards this week's
peak of $636.25 an ounce, a more than 9-year high. Spot
palladium was at $626.80 against $622.99.
Spot platinum <XPT=> was at $1,683.67 an ounce against
$1,688, while silver <XAG=> was at $23.80 against $23.97.
(Reporting by Jan Harvey; editing by Keiron Henderson)
