* Fears of Fed stimulus reduction trigger selling
* U.S. Oct manufacturing activity hits 2-1/2-yr high
* Dollar index rises to six-week highs
* Coming up: U.S. factory orders, durable goods Friday
NEW YORK/LONDON, Nov 1 (Reuters) - Gold fell about 1 percent on Friday, posting its biggest weekly loss in seven weeks, as renewed anxiety about the U.S. Federal Reserve could scale back its bond-buying stimulus prompted bullion investors to reduce positions. The precious metal was down 3 percent for the week, reversing two consecutive weekly gains. Richmond Fed President Jeffrey Lacker said on Friday that the U.S. labor market has recovered enough in the last 14 months to allow the central bank to reduce its bond-buying stimulus.
Any sign that the Fed will reduce its $85 billion monthly bond-buying program is likely to weigh heavily on gold prices. Funds and institutional investors have in recent years bought gold as a hedge against inflation and monetary actions by central banks. "Overall, investors have expected a reduction in monetary easing. So, even though there have been no changes effective this year, the market is selling off in anticipation of Fed tapering eventually," said Erica Rannestad, precious metals analyst at the CPM Group. Spot gold was down 0.9 percent at $1,311.50 an ounce slide. Spot gold has ended lower every day this week. U.S. Comex gold futures for December settled down $10.50 to $1,313.20 an ounce, with trading volume about 20 percent below its 30-day average, preliminary Reuters data showed. The dollar rose to a six-week high after U.S. data showed the country's manufacturing sector expanded at its fastest pace in 2-1/2 years last month, though a separate reading cast doubt on the strength of factory activity growth.
In addition, a sharp slowing in euro zone inflation, which left markets suddenly considering the chance of a cut in interest rates soon by the European Central Bank, weighed on the euro against the dollar. As a gauge of investor sentiment, the SPDR Gold Trust, the biggest gold-backed exchange-traded fund, reported an outflow of 34 tonnes in October, its biggest monthly drop since July. That brings its outflows for the year to 479 tonnes, or more than $20 billion this year. Holdings of the fund are near four-year lows of 872 tonnes. Spot silver was down 0.4 percent to $21.76 an ounce. It had fallen 3.5 percent on Thursday, its biggest one-day loss in a month. The biggest silver ETF, the iShares Silver Trust, also recorded a monthly outflow of 127.4 tonnes in October, its first since June. Among the platinum group, platinum inched down 26 cents to $1,448.24, while palladium edged up 0.2 percent to $736.51 an ounce.
2:57 PM EDT LAST/ NET PCT LOW HIGH CURRENT SETTLE CHNG CHNG VOL US Gold DEC 1313.20 -10.50 -0.8 1305.60 1327.30 124,579 US Silver DEC 21.837 -0.030 -0.1 21.705 21.995 34,206 US Plat JAN 1451.90 3.50 0.2 1445.80 1458.90 11,352 US Pall DEC 738.25 1.45 0.2 732.30 742.00 4,626 Gold 1311.50 -11.69 -0.9 1306.73 1327.25 Silver 21.760 -0.090 -0.4 21.720 21.970 Platinum 1448.24 -0.26 0.0 1449.00 1456.00 Palladium 736.51 1.51 0.2 735.50 739.50 TOTAL MARKET VOLUME 30-D ATM VOLATILITY CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 131,177 154,161 188,108 20.48 0.27 US Silver 38,263 42,028 55,755 29.2 0.02 US Platinum 11,878 13,427 12,888 17.66 0.00 US Palladium 5,824 4,073 5,653