Gold jumps above $1,650; Fed minutes feed stimulus hopes

NEW YORK Wed Aug 22, 2012 4:04pm EDT

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh April 11, 2012. REUTERS/Ajay Verma

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh April 11, 2012.

Credit: Reuters/Ajay Verma

NEW YORK (Reuters) - Gold surged above $1,650 an ounce on Wednesday for the first time since early May, breaking above its recent trading range as minutes from the U.S. Federal Reserve convinced many bullion investors that another round of monetary stimulus is imminent.

Another precious metal, platinum, rallied for a fifth straight day, rising to a 3-1/2 month high on supply fears due to signs of spreading labor unrest in top producer South Africa.

Gold traded near unchanged for much of the session, then jumped 1 percent after the minutes from the U.S. central bank's August meeting showed policymakers were ready to deliver more stimulus "fairly soon" unless the economy improves considerably.

Bullion prices rallied for a sixth straight day, rising above technical resistance of the 150-day and 200-day moving averages. Gold pierced the top end of a near four-month trading range at $1,640 an ounce.

"Given the context of the FOMC minutes in which policymakers are looking to boost growth, whatever tools Bernanke will come up with are likely to be bullish for gold," said Axel Merk, chief investment officer of Merk Funds, which has $600 million in currency mutual-fund assets including gold.

Merk said Fed Chairman Ben Bernanke should explain his reasons for more stimulus from the U.S. central bank at the August 31 meeting of economists and central bankers at Jackson Hole, Wyoming.

Spot gold was up 1 percent on the day at $1,654.10 an ounce by 3:30 p.m. EDT after hitting a session high of $1,655.50, the highest price since May 2.

Before the Fed released its minutes, U.S. gold futures for December delivery settled down $2.40 at $1,640.50 an ounce.

Trading volume around 3:30 p.m. was around 130,000 lots, sharply below its 30-day and 250-day averages, preliminary Reuters data showed.

Year to date, gold is up around 6 percent. In early January, gold was up almost 15 percent after the Federal Reserve said it could unveil more stimulus and expected to keep interest rates near zero until at least late 2014.

Since May, bullion prices have traded in a broad range due to lack of concrete actions by the Fed and other central banks and signs of improvement in some U.S. economic data.

"The Fed minutes clearly supported the sentiment change for more monetary easing, allowing gold to consolidate its recent breakout. I expect gold to move higher in the next several sessions," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC.

PLATINUM RALLIES ON SUPPLY FEARS

Platinum rose 2.2 percent to $1,533.24 an ounce, and palladium climbed 1.7 percent to $630.47, while silver climbed 1.6 percent to $29.79 an ounce.

Platinum's rally has been fueled by investors betting that low wages, poor living conditions and income disparities could generate fresh violence in South Africa mines which have around 80 percent of the world's platinum reserves.

(Additional reporting by Jan Harvey and Amanda Cooper in London; Editing by David Gregorio and Marguerita Choy)

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