LONDON (Reuters) - Gold prices rose a touch on Friday as the dollar crept lower ahead of a key Federal Reserve meeting next week, at which the central bank is expected to discuss further U.S. monetary easing.
Depending on its scope, a fresh round of quantitative easing could have a major impact on the dollar and inflation outlook, both potentially significant for gold, analysts said.
Spot gold was bid at $1,346.61 an ounce at 1413 GMT, against $1,343.35 late in New York on Thursday. U.S. gold futures for December delivery rose $4.40 to $1,346.90.
“Next week will be a big one news-wise — the FOMC, the mid-term elections, as well as non-farm payrolls,” said Afshin Nabavi, head of trading at MKS Finance in Geneva.
“I think the market was intraday short and saw some stop-loss buying, which took the market toward $1,353.”
The dollar index edged down 0.1 percent, drifting between positive and negative territory after U.S. data showed gross domestic product expanded at a 2.0 percent annual rate as expected in the third quarter.
The data did nothing to reduce expectations the Federal Reserve will commit to a new round of monetary stimulus next week, analysts said.
All eyes are now on the Federal Open Market Committee meeting on November 2-3, at which the Fed is expected to announce more quantitative easing, in which it adds cash to the market to improve liquidity and boost economic growth.
“The Fed meeting next week has been dominating the markets,” said Standard Bank analyst Walter de Wet. “Ahead of that, people have positioned themselves, and from an investment perspective they are not going to add too much more gold.
“We think the gold market has priced in around a $500 billion QE exercise by the Fed,” he added. “If the Fed comes out with a higher figure, we think gold will move higher. If it’s lower, it is going to be bearish for gold.”
The International Monetary Fund sold 1.04 million ounces (32.3 tons) of gold in September, well above the amount sold in August, an IMF spokesman said on Friday. This included the sale of 10 tons of gold to Bangladesh on September 7.
Indian gold buying retreated on Friday after a 1.4 percent rise in spot prices in the previous session as most traders waited for a dip to stock up in the run-up to Dhanteras and Diwali next week, dealers said.
Traders say the physical market has been a good support for prices in recent weeks following gold’s correction from record highs at $1,387.10 an ounce, with buying in India in particular relatively healthy after a sharp drop last year.
Meanwhile, Hong Kong trade data showed the flow of gold from Hong Kong to China in the first eight months of 2010 was nearly double that for the whole of 2009, suggesting that appetite for jewelry and investment purposes is rocketing.
On the investment side, holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, dipped by just over 5 tons on Thursday, bringing its total outflows in October so far to 11.7 tons.
Elsewhere, palladium rose to a peak of $640.05 an ounce, its highest since May 2001. Spot palladium was later at $637.75 against $622.99.
“Already palladium is in deficit; it will be in deficit next year,” said de Wet. “China auto sales are very strong, and certainly we think there is buying in anticipation of a seasonal upturn in auto sales, typically from now until March.
“Swiss customs data for the past five or six months has shown metal has flowed out of Zurich vaults, which shows you there is still demand even at these prices,” he added
Spot platinum was at $1,697 an ounce against $1,688, while silver was at $24.17 against $23.97.
Reporting by Jan Harvey; editing by Jane Baird