PRECIOUS-Gold rises on dollar drop, Fed outlook eyed

Wed Aug 7, 2013 3:59pm EDT

* Dollar fall, lower Treasury yield, weak U.S. stocks help
    * Fed policymakers suggest U.S. central bank ready to cut
stimulus
    * Private gold investment seen steady in July
    * Coming up: U.S. weekly jobless claims on Thursday

 (Adds comment from analyst, Cleveland Fed, second byline,
dateline, updates prices)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Aug 7 (Reuters) - Gold rose on Wednesday to
snap a two-day losing streak, as the dollar fell on lingering
uncertainty about the scope and timing of the Federal Reserve's
eventual tapering of its bond-buying program.
    After having earlier hit a three-week low, the metal staged
a $13, or 1 percent, rebound on a combination of the drop in the
U.S. currency, lower U.S. Treasury bond yields and a weaker U.S.
equities market.   
    However, gold prices could resume falling on the Fed's
recent indication it would begin tapering its $85 billion
monthly bond purchases as early as September if the U.S.
economic recovery retained momentum, analysts said.
    "We anticipate improving economic data, especially from the
United States and Europe in coming months, may renew pressure on
gold prices," said Robert Haworth, senior investment strategist
at U.S. Bank Wealth Management.
    Earlier this week, encouraging data showing growth in the
U.S. services sector and booming businesses in the euro zone and
the United Kingdom dampened bullion's appeal as an investment
hedge.
    Spot gold was up 0.5 percent at $1,287.47 an ounce by
3:01 p.m. EDT (1901 GMT), having earlier hit its lowest level
since July 17 at $1,272.64 earlier in the session.
    U.S. gold futures for December delivery settled up
$2.80 at $1,285.30 an ounce, with trading volume about 45
percent below its 30-day average, preliminary Reuters data
showed.
    The U.S. central bank could soon begin reducing the pace of
its bond-buying stimulus if recent improvement in the U.S. job
market persists, the president of the Cleveland Fed, Sandra
Pianalto, said on Wednesday. 
    Other key Fed policy makers, including Chicago Fed President
Charles Evans and Dallas Fed President Richard Fisher said
earlier this week the U.S. central bank could cut stimulus as
early as September, depending on economic data. 
    Fed policymakers, who last week voted to continue the Fed's
bond-buying, next meet on Sept. 17 and 18 to discuss policy.
    
    RETAIL BUYING STEADY
    While Asian physical demand remains subdued during the
seasonally soft summer period, gold buying among private
investors has been stable, according to a survey by online
precious metals market BullionVault, which was released on
Tuesday.
    "The heavy selling of gold we saw since the beginning of the
price decline in April has stopped and begun to turn around as
BullionVault customers added to their net holdings for the month
of July," said Miguel Perez-Santalla, vice president at
BullionVault.
    On the gold options front, the greater popularity of bearish
bets over bullish ones suggests that the precious metal is more
likely headed for another tumble instead of a sharp rally,
option traders said. 
    Among other precious metals, silver was up 0.5
percent to $19.58 an ounce. Platinum rose 0.8 percent to
$1,435.99 an ounce and palladium fell 0.2 percent to $722
an ounce.
 3:01 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1285.30   2.80   0.2  1271.80 1289.00  111,144
 US Silver SEP  19.508 -0.015  -0.1   19.100  19.575   38,932
 US Plat OCT   1438.30  10.50   0.7  1417.00 1441.00    8,062
 US Pall SEP    723.15   0.35   0.0   712.00  725.85    3,330
                                                               
 Gold          1287.47   6.18   0.5  1272.64 1288.81         
 Silver         19.580  0.100   0.5   19.180  19.600
 Platinum      1435.99  11.49   0.8  1419.00 1438.50
 Palladium      722.00   1.50   0.2   715.27  723.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        120,807   215,508   187,958     23.44   -2.71
 US Silver       47,997    49,749    54,497     28.35    0.41
 US Platinum      8,259    11,922    12,453     21.23    0.00
 US Palladium     4,004     3,803     5,324                  
                                                               
 
 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by James Jukwey, Dale Hudson and Carol Bishopric)
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