Gold drifts higher as dollar eases over Catalan relief

By Eric Onstad

LONDON (Reuters) - Gold edged higher on Wednesday after Catalonia's leader baulked at making a formal declaration of independence from Spain,

sending the euro higher and the dollar down.

The dollar index fell to the lowest in over a week, making dollar-priced gold cheaper for buyers using other currencies.

"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.

Spot gold was up 0.2 percent at $1,289.50 an ounce by 1400 GMT while U.S. gold futures for December delivery eased 0.2 percent to $1,291.60 per ounce.

Spot gold hit the highest level in nearly two weeks on Tuesday on the third straight day of gains.

Before that, gold had been declining since early September after touching a 1-year high of $1,357.54.

Investors were awaiting minutes from the U.S. Federal Reserve's latest meeting, due to be released at 1800 GMT, for clues on the outlook for potential interest rate rises.

But there is scant chance they will have a major impact, Pedersen said, since they probably will merely support expectations that the U.S. central bank will raise rates in December, for the third time this year.

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.

The news about Catalonia together with more upbeat predictions for the global economy helped push world stocks to another record high. [MKTS/GLOB]

"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 0.3 percent to $17.13 an ounce, having hit a three-week high in the previous session.

"Silver regained the $17 per troy ounce mark yesterday but then failed to exceed the technically important 200-day moving average," Commerzbank said in a note.

"Silver has outperformed gold in October so far. The gold/silver ratio has fallen from just shy of 77 at the beginning of the month to a good 75 at present."

Platinum rose 0.4 percent to $932.90 an ounce after hitting a two-week high of $934.50 and palladium climbed 1.7 percent to $949.30 an ounce, the highest since Sept. 13.

(Additional reporting by Apeksha Nair in Bengaluru; Editing by Dale Hudson and Alexander Smith)