PRECIOUS-Gold hovers near 5-week high as Fed policy meeting looms

Mon Oct 28, 2013 2:40am EDT

* Price steady near $1,350 ahead of Fed meeting
    * Gains seen likely if Fed delays stimulus tapering
    * SPDR holdings fall 4.5 tonnes 

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Oct 28 (Reuters) - Gold was hovering near
five-week highs on Monday as traders bet the U.S. Federal
Reserve would stick with its bullion-friendly stimulus measures
at a policy meeting later this week. 
    Bullion has fallen nearly 20 percent this year as investors
dumped gold holdings for better-performing stock markets and on
fears that the end of easy money from the U.S. central bank
would dim the metal's inflation-hedge appeal. 
    In the past two weeks, however, gold has gained about 6
percent as weak U.S. data and budget battles in Washington
looked set to deter the Fed from scaling back asset purchases.
    "We believe the tapering will definitely be delayed and
that's positive for precious metals," said Brian Lan, managing
director of GoldSilver Central Pte Ltd. "Gold prices will close
above $1,400 by the end of the year." 
    Spot gold was down 0.2 percent at $1,349.96 an ounce
by 0628 GMT. On Friday, the metal hit $1,355.20 - its highest
since Sept. 20.
    Platinum gained as much as 0.7 percent on fears that
strikes in South Africa could curb supply. 
    The Fed's policy-setting committee will release a statement
on its decision on Wednesday at the end of a two-day meeting.
    The central bank is unlikely to make any shift in monetary
policy this week and will continue to buy back bonds at an $85
billion monthly rate as it waits for more evidence of how badly
Washington's budget battle has hurt the economy. 
    Traders are also closely monitoring physical demand in Asia,
the biggest consumer of gold, where demand has become subdued
following a big rush earlier this year.
    "Physical demand is quiet because of higher prices. The only
market that is buying is India," said Lan.
    Premiums in India jumped to a record high of $130 an ounce
last week as government restrictions on gold imports squeezed
supply during the peak holiday season. 
    India, where gold is considered auspicious and is bought
during weddings and festivals, celebrates Diwali and Dhanteras
festivals in early November. 
    In China, premiums on the Shanghai Gold Exchange
 fell into negative territory on Monday although
they recovered later to about $1 an ounce. Premiums were as high
as $30 in April-May.
    A dealer in Hong Kong said higher prices were prompting some
consumers to sell.     
  Precious metals prices 0628 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1349.96   -2.32   -0.17    -19.38
  Spot Silver        22.56    0.06   +0.27    -25.50
  Spot Platinum    1449.49    4.59   +0.32     -5.57
  Spot Palladium    738.97   -1.00   -0.14      6.79
  COMEX GOLD DEC3  1350.20   -2.30   -0.17    -19.43        15651
  COMEX SILVER DEC3  22.58   -0.06   -0.26    -25.49         5859
  Euro/Dollar       1.3802
  Dollar/Yen         97.58
 
  COMEX gold and silver contracts show the most active months
 
 
 (Reporting by A. Ananthalakshmi; Editing by Alan Raybould and
Richard Pullin)
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