PRECIOUS-Gold falls, Fed asset purchases in focus

* Weaker equities pressure gold
* Bullion could rebound if economy remains weak
* Coming up: U.S. consumer credit Tuesday

By Frank Tang
NEW YORK, Jan 7 (Reuters) - Gold dropped on Monday as
uncertainty about the duration of the Federal Reserve's economic
stimulus program decreased bullion's appeal as a hedge against
inflation.
The metal remained under pressure after two top Fed
officials on Friday suggested the U.S. central bank may halt its
bullion-friendly asset purchases by the end of 2013 due to a
better economic outlook.
"Any time there is any concern about Fed tightening, those
nervous gold investors leave the market very quickly," said
James Dailey, portfolio manager of TEAM Financial Asset
Management.
However, signs of disappointing U.S. economic growth suggest
the Fed will not change course any time soon, Dailey said.
Gold, used by investors as a hedge against inflation brought
about by central-bank stimulus, has been particularly sensitive
to any indications that the Fed might end its purchases of
Treasury securities and mortgage-backed securities.
Losses in U.S. stocks on speculation about weaker corporate
earnings also dragged gold prices lower, analysts said.
Spot gold was down 0.6 percent at $1,646 an ounce by
1:59 p.m. EST (1859 GMT)
U.S. gold contract for February delivery settled down
$2.60 at $1,646.30, with trading volume 20 percent below its
30-day average, preliminary Reuters data showed.
On Friday, bullion ended sharply off its 4-1/2 month low near
$1,625 after a Labor Department report showed the U.S. jobless
rate held steady at 7.8 percent in December.
The Fed is currently buying $40 billion in mortgage-backed
securities and $45 billion in Treasuries each month in a bid to
push down borrowing costs and spark faster growth. It has said
the program will continue until it sees a sustained upturn in
the jobs market.

FED IN FOCUS
Analysts said the price of gold could quickly rebound if
data suggests the pace of the U.S. economic recovery is too slow
to justify withdrawal of Fed stimulus.
"It's difficult to make assumptions ... whether the FOMC
minutes represent a material change of monetary policy from the
Fed, and we are well aware that an off-the-cuff remark by Fed
Chairman Bernanke could reverse the markets in an instant," TD
Bank strategists said in a note.
On Friday gold slid to its lowest level since late August
after minutes from the December meeting of the Federal Open
Market Committee showed several top officials favored slowing or
stopping the stimulus program "well before" the end of the year.
Among other precious metals, silver was down 0.5
percent to $30.07 an ounce. Platinum eased 0.2 percent to
$1,549.50 an ounce, and palladium dropped 2.2 percent to
$667.72 an ounce.
1:59 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold FEB 1646.30 -2.60 -0.2 1642.60 1663.00 124,686
US Silver MAR 30.082 0.136 0.5 29.860 30.475 31,994
US Plat JAN 1553.80 -1.40 -0.1 1549.20 1566.70 64
US Pall MAR 670.00 -18.50 -2.7 663.20 692.55 4,636

Gold 1646.00 -10.45 -0.6 1643.36 1662.10
Silver 30.070 -0.140 -0.5 29.860 30.440
Platinum 1549.50 -2.60 -0.2 1552.50 1566.25
Palladium 667.72 -15.08 -2.2 667.52 690.25

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 139,675 158,911 174,102 13.77 0.22
US Silver 35,625 49,861 52,968 23.9 2.03
US Platinum 7,492 13,915 10,461 16.8 -0.01
US Palladium 4,855 5,032 4,804