Gold edges up as investors await Fed stimulus statement

By Clara Denina

LONDON (Reuters) - Gold edged higher on Wednesday as investors bet the U.S. Federal Reserve would signal plans later in the day to keep its stimulus intact for several more months.

The Federal Open Market Committee (FOMC) is widely expected to keep its massive bond-buying programme unchanged when it announces its decision at 1800 GMT and to signal that it is unlikely to begin scaling back the stimulus programme until 2014.

"My feeling is that the overall tone (of the Fed statement) will be somewhat dovish, it will acknowledge the uncertainty generated by the government shutdown and weak data and will emphasise a cautious response going forward," Mitsubishi analyst Jonathan Butler said.

"All those things should be supportive of gold but I think they could be by then priced in and we may see some choppy trading around the time of the announcement."

Spot gold rose 0.4 percent to $1,349.14 an ounce at 1112 GMT. The metal hit a five-week high of $1,361.60 on Monday, before retreating. A break above 2013 resistance line of $1,359.52 will confirm that another up leg is being made, Commerzbank technical analysts said.

U.S. gold futures for December delivery rose by $4.00 an ounce to $1,349.40.

Gold prices slipped 0.6 percent on Tuesday, the biggest daily drop in a week, as traders took profits after the dollar slightly strengthened, confirming analysts' view that a delay to Fed tapering, probably until at least March, has been already priced into markets.

The dollar was little changed against a basket of currencies, while U.S. Treasury yields fell below 2.5 percent.

Returns from U.S. bonds are closely watched by the gold market because the metal pays no interest, and a fall in returns is seen as positive for the metal.

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Gold has gained about 7 percent from a three-month low hit on October 15 after weak U.S. data and the repercussions of budget battles in Washington raised hopes the Fed would delay the winding-down of its $85 billion monthly bond purchases well into early 2014.

As the market continues to be sensitive to U.S. data, investors will monitor a report on private sector jobs growth in the United States for October due out later, which could add weight to the view that this month's political showdown in Washington has caused a setback in the nascent recovery.

Chinese gold prices recovered slightly on Wednesday after ending at a discount to global prices in the previous session for the first time this year. Fears of a credit tightening had prompted Chinese investors to sell bullion for cash.

"If this trend were to continue for any length of time, this could also lead to weaker Chinese gold imports," Commerzbank said.

Indian premiums stayed near record highs due to a supply crunch.

Spot silver rose 0.8 percent to $22.69 an ounce.

Spot platinum was up 0.6 percent at $1,466.24 an ounce, having risen to an high of $1,471.50 earlier on prospects that strikes in South Africa could curb supply. Spot palladium gained 0.2 percent at $745.50 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jane Baird)