Gold, oil bonds up; Wall Street rises in choppy trade

A man looks at a stock quotation board outside a brokerage in Tokyo, August 30, 2011.

NEW YORK (Reuters) - Gold, oil and bonds surged on Tuesday while Wall Street rebounded in choppy trade after the latest Federal Reserve minutes boosted expectations policymakers will act again to try to stimulate the economy.

U.S. stocks fell as much as 1 percent on a weak consumer confidence reading before clawing back their losses and closing higher. Gold and oil prices each jumped 2 percent, while Treasuries rallied as investors piled into safe-havens on worries about the economy.

"The Fed has recognized that economic conditions may warrant more aggressive actions, which gives hope to the prospect that something will be forthcoming at the next meeting that will provide more to goose risk assets," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia

Consumer confidence in the United States hit a two-year low in August and prices of single-family homes dipped in June from May as the housing market continued to crawl along at depressed levels, data showed on Tuesday.

Minutes from a Federal Reserve meeting this month, also released on Tuesday, showed the central bank had considered a range of actions to help a struggling economy, including the unprecedented step of tying interest rate policy outlook to a specific unemployment level.

The Fed minutes helped Wall Street end up for a third straight session. The market closed up nearly 3 percent on Monday, its strongest gain in a week, but for the month-to-date, the S&P index is down 6.14 percent.

"It looks like we're having some follow-through to yesterday's move, which is an indication things have gotten overdone in the past month. People are reassessing and seeing some value," said John Derrick, director of research with U.S. Global Investors in San The Fed initiative help Antonio, Texas.

The Dow Jones industrial average .DJI closed up 20.70 points, or 0.18 percent, at 11,559.95. The Standard & Poor's 500 Index .SPX rose 2.84 points, or 0.23 percent, at 1,212.92. The Nasdaq Composite Index .IXIC ended up 14.00 points, or 0.55 percent, at 2,576.11.

Thin volume helped to exaggerate the moves.

OIL, GOLD SHINE WITH BONDS; EURO DOWN

Benchmark 10-year Treasury notes touched a session high of 99-21/32, up 28/32 from late Monday, after the consumer confidence data. Late in the day, the 10-year note was up 23/32, its yield at 2.1828 percent.

Spot gold, which tracks trading in bullion, was up 2 percent, reaching nearly $1,833 an ounce.

"The market is certainly pretty nervy as are most markets right now, so in the context of what's been happening in the last few days, I'm not surprised to see that kind of move," said Credit Suisse precious metals analyst Tom Kendall.

Bullion is up nearly 30 percent on the year. One of the cornerstones of its rally over the last eight months has been the Fed's ultra-loose monetary policy, which included a pledge to leave rates near zero until 2012 after a $600 billion bond-buying program that expired in June. <GOL/>

In oil trading, London's Brent crude ended up 2 percent at a four-week high above $114 a barrel as traders tracked newly formed Tropical Storm Katia in the eastern Atlantic and ahead of hopes for more economic stimulus by the Fed.

Investors are anticipating a planned speech next week by Fed Chairman Ben Bernanke that could hint at any monetary expansion.

Markets will also be watching euro zone debt issues for signs the region's troubles do not worsen. Reuters on Monday reported detailed proposals put forward by Finland regarding its demand for collateral in return for providing more aid to Greece.

Helsinki's demands for collateral have sparked requests from other countries, including Austria, the Netherlands, Slovenia and Slovakia, for similar treatment and could jeopardize euro zone attempts to save Athens from default.

The euro was down 0.4 percent at $1.44485, retreating from Monday's two-month high of $1.4550. (Additional reporting by Amanda Cooper, Anirban Nag, Atul Prakash and Naomi Tajitsu in London; editing by Dan Grebler and Andrew Hay)