PRECIOUS-Gold up 1.5 pct on China stimulus talk, euro fears

Thu Sep 27, 2012 3:31pm EDT

* Gold posts biggest one-day rally in two weeks
    * Spain's new austerity measures increase safe-haven bids
    * Talk of additional China stimulus supportive
    * Coming up: U.S. August personal income Friday

 (Adds details, updates comment, market activity)
    By Frank Tang
    NEW YORK, Sept 27 (Reuters) - Gold rose 1.5 percent on
T hursday, its biggest daily gain in two weeks, on hopes for
additional monetary stimulus from China and fresh austerity
steps in Spain, which renewed fears about the euro zone.
    Bullion extended early gains after Spain announced a
detailed timetable for economic reforms and a tough 2013 budget
based mostly on spending cuts in what many see as an effort to
pre-empt the likely conditions of an international bailout.
 
    Gold priced in euro terms surged over 1 percent to a record,
underscoring the metal's traditional safe-haven appeal
especially among Europeans in times of economic uncertainty.
    "Gold buyers are responding to stimulus possibilities," said
George Gero, vice president of RBC Capital Markets.
    Lingering economic weakness in the euro zone highlighted by
Spain's new austere budget, and slow growth in China and United
States provided reasons for the central banks to take more
actions to boost growth, Gero said.
    Spot gold rose 1.4 percent to $1,776.34 an ounce by
2:59 p.m. EDT (1859 GMT), snapping three consecutive days of
losses. Gold is within striking distance of this year's high at
$1,790.30, set on Feb. 29.
    U.S. gold futures for December delivery settled up
$26.90 an ounce at $1,780.50, with volume about 10 percent above
its 30-day average, preliminary Reuters data showed.
    There was active buying of bull call spreads and other
bullish option plays as some investors bet gold could rise
sharply by the year-end, said independent COMEX gold option
floor trader Jonathan Jossen.
    
    EUROPE, CHINA IN FOCUS
    The outlook for Europe's economy darkened with euro zone
business confidence falling to a three-year low and a range of
economic indicators across the continent pointing toward
recession. Meanwhile, U.S. data also pointed to a sharp slowdown
in manufacturing activity.  
    "There is speculation that China will engage in additional
stimulus measures," said Bill O'Neill, partner at commodity
investment firm LOGIC Advisors. 
    The metal gained further after news that China's central
bank had injected a record amount of cash this week, fuelling
talk that China may take steps to boost the country's weak stock
market, sparking a global equities rally. 
 
    Gold is on track to end September with its largest quarterly
gain in more than two years, of 11 percent, after the U.S.
Federal Reserve unveiled a third round of bullion-friendly
monetary stimulus this month.
    Silver rallied 2 percent to $34.61 an ounce.
    Among platinum group metals, platinum traded up 1
percent at $1,644.70 an ounce, and spot palladium added
0.8 percent at $630.30 an ounce.
    Platinum prices are set to end the quarter up around 13
percent, while palladium is heading for an 8 percent gain.
Platinum group metal prices have been lifted by unrest in South
Africa's mining sector, where violence at a mine operated by
No.3 producer Lonmin killed 45 people.
 2:59 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT 
               SETTLE   CHNG  CHNG                       VOL 
 US Gold DEC   1780.50  26.90   1.5  1753.20 1782.90  158,306 
 US Silver DEC  34.666  0.726   2.1   33.905  34.815   43,277 
 US Plat OCT   1645.90  11.50   0.7  1627.90 1657.80    4,697 
 US Pall DEC    635.40   9.55   1.5   626.30  637.95    2,479 
                                                               
 Gold          1776.34  24.75   1.4  1751.80 1780.20         
 Silver         34.610  0.680   2.0   33.880  34.730 
 Platinum      1644.70  16.80   1.0  1631.25 1655.20 
 Palladium      630.30   4.80   0.8   629.15  635.00 
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY 
               CURRENT   30D AVG  250D AVG   CURRENT     CHG 
 US Gold        169,893   155,688   184,198     16.21   -0.44 
 US Silver       44,942    60,023    52,774        35    7.00 
 US Platinum     15,737    19,414     9,520     22.76    0.01 
 US Palladium     2,526     7,996     4,651                  
                                                               
    

 (Additional reporting by Jan Harvey and Amanda Cooper in
London; Editing by Dale Hudson)
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