PRECIOUS-Gold rebounds above $1,700/oz on economic optimism

* Better economic sentiment boosts inflation-hedge buying
* Eyes on next week's Bank of Japan policy meeting
* Dealers track seasonal Indian demand before Diwali
* Coming up: U.S. GDP data, consumer sentiment Friday

By Frank Tang
NEW YORK, Oct 25 (Reuters) - Gold rose above $1,700 an ounce
o n T hursday, a day after it fell under that threshhold, boosted
by encouraging United Kingdom GDP growth data and expectations
the Bank of Japan will further loosen its monetary policy.
Bullion, a traditional inflation hedge, climbed after data
showed Britain posted its strongest quarterly economic growth in
five years, although temporary effects may have masked a weaker
underlying picture.
"The nice U.K. report suggested that the global economy is
rebounding slowly, and the fund liquidation we saw earlier this
week seems to have dried up," said Bill O'Neill, partner of
commodity investment firm LOGIC Advisors.
Gold rebounded from a seven-week low hit on Wednesday after
the U.S. Federal Reserve stuck to its plan to keep stimulating
growth until the job market improves but offered few positive
surprises.
Spot gold was up 0.6 percent at $1,712.39 an ounce by
3:11 p.m. EDT (1911 GMT), rebounding from Wednesday's low of
$1,698.39.
U.S. COMEX gold futures for December delivery settled
up $11.40 an ounce at $1,713, with trading volume about 20
percent below its 30-day average, preliminary Reuters data
showed.
Bullion rallied to an 11-month peak above $1,795 an ounce in
early October after the Fed's latest program of purchasing
mortgage-backed debt stirred inflation worries.
Momentum has since stalled, leaving prices vulnerable to
swings in wider markets, with weak global economic data helping
send prices below $1,700.
Also, speculation that the Bank of Japan will unveil further
monetary stimulus boosted gold. Sources told Reuters the Bank of
Japan is expected to ease monetary policy next week by expanding
asset purchases.
Silver climbed 1.5 percent at $32.13 an ounce.

INDIAN BUYING EYED
The lower prices were also drawing in new buyers, with
dealers anticipating a pickup in demand from India before the
Hindu festive season peaks next month with Diwali, which marks
the start of the wedding season, a major gold-buying event.
Gold's outlook also hinges on uncertainty related to the
Nov. 6 U.S. election and the so-called "fiscal cliff," a series
of automatic spending cuts and tax increases in 2012 if Congress
fails to reach a deficit reduction deal by the end of the year.

In official-sector activity, IMF data showed Venezuela and
Russia cut holdings, taking advantage of the historically high
price of gold.
Platinum group metals also rebounded after they suffered
heavy losses earlier this week as economic worries hit demand.
Platinum was up 0.4 percent at $1,560.75 an ounce,
while palladium gained 1.9 percent to $600.60 an ounce.
3:11 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1713.00 11.40 0.7 1702.30 1718.90 116,949
US Silver DEC 32.078 0.458 1.4 31.735 32.260 33,031
US Plat JAN 1568.80 6.10 0.4 1563.50 1587.80 7,092
US Pall DEC 604.50 11.75 2.0 595.65 609.85 3,835

Gold 1712.39 10.46 0.6 1702.01 1717.60
Silver 32.130 0.470 1.5 31.740 32.220
Platinum 1560.75 6.25 0.4 1563.50 1581.00
Palladium 600.60 11.20 1.9 597.00 607.50

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 138,896 163,984 173,674 15.31 -0.58
US Silver 38,925 48,070 56,211 25 0.00
US Platinum 7,312 14,760 9,806 20.1 -0.07
US Palladium 4,013 3,980 4,814