Gold extends rally to hit six-month high after Fed

NEW YORK Fri Sep 14, 2012 1:57pm EDT

Gold bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner

Gold bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011.

Credit: Reuters/Lisi Niesner

NEW YORK (Reuters) - Gold rose to a six-month high on Friday, extending the previous session's 2 percent rally after the U.S. Federal Reserve unleashed another round of aggressive stimulus.

Platinum group metals gained sharply on supply worries due to mining unrest in South Africa and a better demand outlook the day after the Fed pledged to pump $40 billion monthly into the U.S. economy until it saw a sustained upturn in the jobs market.

Investors looking to gold as a traditional inflation hedge in times of accommodative monetary policy put bullion on track to rise for a fourth straight week for the first time since January.

The European Central Bank has also unveiled an aggressive plan to tackle the three-year old debt crisis there, while China's Premier Wen Jiabao also said this week the government could utilize a massive fiscal stability fund to boost growth.

Spot gold was up 0.4 percent to $1,773.26 an ounce by 12:45 p.m. EDT (1645 GMT) after climbing to an intraday peak of $1,777.51, its highest since February 29.

U.S. COMEX gold futures for December delivery were up $3.70 at $1,775.80 an ounce, with trading volume set to be higher than average for a second straight day, preliminary Reuters data showed.

Analysts differed on whether gold could keep up the blistering rally.

"When multiple major central banks are coordinating their effort in printing more money and engaging in stimulus measures, that has to be overtly bullish for gold," said Adam Sarhan, chief executive of Sarhan Capital.

But Tom Kendall, an analyst at Credit Suisse, cautioned that after the rally in recent weeks, gold could be in for a period of consolidation.

And UBS gold strategist Edel Tully said that gold is due to encounter stiff resistance at an area between $1790 and 1,803, which were the metal's February and last year's November highs.

Gold's appeal as an inflation hedge got a boost when the U.S. Labor Department reported on Friday that consumer prices rose in August at the fastest pace in more than three years.

Reuters data shows asset performance has tended to diminish with each new round of quantitative easing, or QE, from the Fed, and that it sometimes takes as long as a year for the effects of Fed action to kick in.

(Asset reaction to QE: link.reuters.com/pym62t)

Gold investment demand showed no signs of abating. Holdings of SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, inched up 0.2 percent on the day to 1,292.432 metric tons (1,424.7 tons) by September 13.

Among other precious metals, silver was down 0.3 percent at $34.55 an ounce. Platinum gained 1.9 percent to $1,708.25, while palladium was up 2.1 percent at $698.22 an ounce.

Platinum is headed for a 8 percent rise on the week, its biggest weekly gain since last October, due to supply fears caused by mining labor unrest in South Africa, which is estimated to own 80 percent of the world's platinum reserves.

(Additional reporting by Eric Onstad, Rujun Shen in Singapore and Veronica Brown in London; Editing by David Gregorio)

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