PRECIOUS-Gold climbs to near 5-week high on Fed stimulus hopes

Tue Oct 29, 2013 3:48am EDT

* Gold up for 4th day on bets Fed will keep stimulus
    * Prices climb close to 5-week high hit on Monday
    * Gold due for correction, physical demand could weigh
-analysts

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Oct 29 (Reuters) - Gold gained for a fourth
session on Tuesday, edging closer to a five-week high, as weak
U.S. economic data boosted expectations for the Federal Reserve
to maintain its stimulus measures, burnishing the metal's appeal
as an inflation hedge.
    The Fed begins a two-day policy meeting on Tuesday in which
it is widely expected to confirm it will continue buying bonds
at an $85 billion monthly pace. 
    Gold prices have fallen nearly 20 percent this year on fears
the Fed could begin tapering the stimulus, but a budget battle
in Washington and a string of weak economic data have raised
questions over whether it will scale back, giving bullion a
boost. 
    "In line with market expectations, we think the Fed will
continue with quantitative easing," said Songwut Apirakkhit,
managing director of Globlex Holding Management in Bangkok.
    "However, we think the expectations have already been priced
in and gold is due for a correction," he said. He still expects
gold to end the year around current levels.
    Spot gold had edged up 0.1 percent to $1,353.46 an
ounce by 0740 GMT. It has gained about 8 percent since marking a
three-month low on Oct. 15. 
    The metal earlier hit a session high of $1,360.06, not far
from its five-week peak of $1,361.60 touched on Monday.
    U.S. manufacturing output barely rose in September and
contracts to buy previously owned homes recorded their largest
drop in nearly 3-1/2 years, the latest signs the economy's
momentum ebbed as the third quarter ended. 
    Many economists believe the Fed could push tapering to early
next year. 
    Though a prolonged period of easy money could support gold,
physical demand could take a hit due to the higher prices.
Demand in Asia has been subdued for a while.  
    "We continue to view gold as precariously placed, while
physical demand for the metal remains soft," ANZ analysts said
in a note.
    "We viewed the metal as overbought above $1,340 on the back
of weak demand from China and continued ETF selling."
    Outflows from gold-backed exchange traded funds have
continued, weighing on investor sentiment. 
   
  Precious metals prices 0740 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1353.46    1.87   +0.14    -19.17
  Spot Silver        22.54    0.07   +0.31    -25.56
  Spot Platinum    1467.24   -2.76   -0.19     -4.41
  Spot Palladium    742.50   -1.00   -0.13      7.30
  COMEX GOLD DEC3  1353.70    1.50   +0.11    -19.22        20423
  COMEX SILVER DEC3  22.55    0.01   +0.05    -25.59         6278
  Euro/Dollar       1.3786
  Dollar/Yen         97.50
 
  COMEX gold and silver contracts show the most active months
 
 (Reporting by A. Ananthalakshmi; Editing by Clarence Fernandez)
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