PRECIOUS-Gold hovers above $1,300 on U.S. stimulus bet
* Gold near 1-1/2-week peak after best week since Aug * Fed stimulus tapering seen likely in Dec meeting * Coming up: U.S. existing home sales at 1400 GMT (Updates gold prices, adds silver) By Manolo Serapio Jr SINGAPORE, Oct 21 (Reuters) - Gold edged up to near one-and-a-half-week highs above $1,300 an ounce on Monday, supported by expectations the Federal Reserve would hold off curbing its economic stimulus while the United States eyes a more lasting fix to its budget problems. Gold posted its best weekly gain in two months last week as bets grew that the Fed would postpone tapering its bond-buying as focus turns to finding a more permanent solution to Washington's fiscal woes. The U.S. budget deal last week extends the U.S. government's borrowing authority through Feb. 7 and restores federal funding through Jan. 15, threatening a further crisis early next year. Spot gold was up 0.3 percent at $1,319.49 an ounce by 0624 GMT. The metal touched $1,325.21 on Friday, its highest since Oct. 8. It rose 3.4 percent last week. U.S. gold futures gained 0.4 percent to $1,319.60 an ounce. Silver outperformed gold, with spot up 1.4 percent at $22.18 an ounce and U.S. futures also rising 1.4 percent to $22.21. "Given the U.S. government shutdown and the risk that the U.S. economy is facing, expectations for tapering in October seem less strong than before," said Barnabas Gan, analyst at OCBC Bank. The Fed holds its next policy meeting on Oct. 29-30, and Gan said if the central bank decides to stick with its current pace of bond-buying, gold may rise further towards $1,350. The U.S. monetary stimulus which has burnished gold's appeal as a hedge against inflation had fueled gold's rally, pushing it to a record $1,920.30 in September 2011. But anticipation that the stimulus would be scaled back dragged bullion down to three-year lows below $1,200 in July, putting it on course for its first annual decline in 13 years. Gan said he still expects the Fed to decide to start cutting its stimulus at the December meeting, with the U.S. economic recovery story likely to continue. The sustained decline in holdings of exchange-traded funds as well as tepid physical demand may also limit bullion's gains going forward. Holdings of the largest gold-backed exchange-traded-fund, New York's SPDR Gold Trust are at the lowest since 2009 and demand from top consumer India has been curbed by policies aimed at restricting imports to tame its current account deficit. "In our view, gold is likely to struggle to build upon the rally in a sustained fashion unless physical demand shows signs of considerable improvement and investor sentiment turns more favourable," Barclays Capital said in a note. Precious metals prices 0624 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1319.49 3.74 +0.28 -21.20 Spot Silver 22.18 0.30 +1.37 -26.75 Spot Platinum 1438.00 6.90 +0.48 -6.32 Spot Palladium 742.72 4.22 +0.57 7.33 COMEX GOLD DEC3 1319.60 5.00 +0.38 -21.26 14476 COMEX SILVER DEC3 22.21 0.30 +1.36 -26.71 6383 Euro/Dollar 1.3679 Dollar/Yen 98.08 COMEX gold and silver contracts show the most active months (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)
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