PRECIOUS-Gold extends gains after latest Fed meeting minutes

    * Dollar index falls to lowest in over a week
    * Fed September policy meeting minutes showed inflation

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, Oct 11 (Reuters) - Gold extended gains
after September minutes from the U.S. Federal Reserve showed
policymakers debated the prospects of a pickup in inflation and
the path of future interest rate rises if it did not.
    The U.S. central bank should gradually increase interest
rates over the next two years, bringing the federal funds rate
to 2.5 percent, said San Francisco Fed President John Williams,
separately at an event in Utah.             
    Spot gold        was up 0.4 percent at $1,292.88 per ounce
by 3:43 p.m. EDT (1943 GMT), while U.S. gold futures        
futures for December delivery settled down $4.90, or 0.4
percent, at $1,288.90 per ounce, prior to the release of the
    "The Fed minutes seemed to be stressing that low inflation
may not be transitory and emphasized data dependency," said Bart
Melek, head of commodity strategy at TD Securities in Toronto.
    "This is somewhat positive for gold relative to where we
were positioned just ahead."
     Gold could reach $1,300 per ounce by week's end, Melek
    Gold is highly sensitive to rising interest rates, as these
increase the opportunity cost of holding non-yielding bullion
while boosting the dollar, in which the metal is priced. 
    Spot gold hit the highest level in nearly two weeks on
Tuesday, and on Wednesday, made its fourth straight day of
    Before that, gold had been declining since early September
after touching a 1-year high of $1,357.54. 
    The dollar index        fell to the lowest in nearly two
weeks, making dollar-priced gold cheaper for buyers using other
    "These concerns about the ramifications of the Catalan
independence referendum are fading, giving some support to the
euro and weakening the dollar," said Jens Pedersen, senior
analyst at Danske Bank in Copenhagen.
    Catalonia's leader, who baulked earlier at making a formal
declaration of independence, together with more upbeat
predictions for the global economy, helped push world stocks to
another record high.            
    "With equities at all-time highs, gold also looks attractive
as a hedge, especially given the correlation between the two
assets has remained in negative territory this year," Joni
Teves, strategist at UBS in London, said in a note.
    In other precious metals, silver        rose 0.8 percent to
$17.22 per ounce, having hit a three-week high in the previous
    Platinum        rose 0.02 percent to $929.20 per ounce,
hitting a two-week high of $934.50 and palladium       
increased 2.8 percent at $959.75, a one-month high.

 (Additional reporting by Apeksha Nair in Bengaluru; editing by
Alexander Smith and Diane Craft)