PRECIOUS-Gold inches up as investors await outcome of Fed meet

Wed Dec 12, 2012 2:30am EST

* Fed expected to announce fresh bond buying
    * Gold sees strong support at $1,700/oz -analyst
    * Sprott platinum and palladium fund IPO eyed
    * Coming Up: FOMC policy statement; 1730 GMT

 (Adds details, comment; updates prices)
    By Rujun Shen
    SINGAPORE, Dec 12 (Reuters) - Gold crawled higher on
Wednesday ahead of the outcome of a U.S. Federal Reserve policy
meeting that investors hope will unveil more bond buying
measures, supporting bullion's appeal as a hedge against
inflation.
    Economists expect the Fed to announce monthly bond purchases
of $45 billion to replace its Operation Twist programme set to
expire at the end of the year, signalling the central bank will
continue to pump money into the economy in the new year in a bid
to bring down unemployment. 
    Central banks' easy monetary policy has helped gold rise
more than 9 percent this year in its twelfth straight year of
gains, as investors seek safety in hard assets amid fears that
stimulus measures will diminish the value of paper money.
    "The market will trade in a tight range, as investors
cautiously wait for the result of the Fed meeting," said Li
Ning, an analyst at Shanghai CIFCO Futures.
    "Gold is supported at the $1,700-level, under which bargain
hunters are waiting."
    Spot gold edged up 0.1 percent to $1,712.31 an ounce
by 0714 GMT. U.S. gold gained $1.60 to $1,711.20.
    Budget talks in Washington made some progress as the White
House and Republicans exchanged new proposals on how to avert
$600 billion worth of tax hikes and spending cuts in the new
year that threaten to tip the economy back into recession.
 
    The financial markets have been watching the prolonged and
complicated negotiations in Washington, with hopes that the two
sides will eventually compromise and reach an agreement as the
deadline nears.
    In Europe, surprisingly strong German business sentiment
data offset worries about Italy's political upheaval, supporting
the euro.  
    The dollar was on the backfoot as markets expect more
monetary stimulus from the Fed to be announced later in the day.
A weaker dollar boosts buying interest in dollar-priced
commodities from buyers holding other currencies. 
    Holdings of gold-backed exchange-traded funds edged up to
76.178 million ounces on Dec. 10, after slipping from a record
high of 76.187 million ounces in the previous session.
 
    
    PLATINUM GROUP METALS RESILIENT
    Spot platinum rose to $1,639 an ounce on Tuesday, its
highest level since mid-October, before easing to $1,633.24.
Spot palladium failed to break the September high of
$702.75, but held near $690.
    Platinum has risen more than 2.3 percent this month, and
palladium 1.6 percent, beating both gold and silver.
    A generally brighter economic outlook in China and the
United States has helped support these metals, used widely in
producing exhaust-reducing autocatalysts.
    The planned launch of a physical platinum and palladium fund
by Sprott also underpinned sentiment, traders said.
    Sprott, which already manages physical gold and silver ETFs,
plans to sell 35 million units, each worth $10, which will be
split into equal halves to buy physical platinum and palladium,
it said in a filing this month.  
    The trust could buy more than 107,000 ounces of platinum and
253,000 ounces of palladium, raising the amount of metals held
by ETFs by 7 and 14 percent respectively, Reuters calculations
showed.
    "Every time you see the introduction of a new ETF, you see
some support for prices," said a Singapore-based trader.
    
   Precious metals prices 0714 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1712.31    2.46   +0.14      9.50
  Spot Silver        33.06    0.12   +0.36     19.39
  Spot Platinum    1633.24    0.24   +0.01     17.25
  Spot Palladium    691.05    1.55   +0.22      5.91
  COMEX GOLD DEC2  1711.20    1.60   +0.09      9.22        12527
  COMEX SILVER MAR3  33.14    0.12   +0.37     18.72         2613
  Euro/Dollar       1.3006
  Dollar/Yen         82.73
  COMEX gold and silver contracts show the most active months   
    

 (Editing by Clarence Fernandez)
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