PRECIOUS-Gold rises 1.4 pct as Fed stimulus extension hopes

Thu Jul 11, 2013 2:40pm EDT

* Gold rises for 4th session, up over 5 pct this week
    * Bernanke re-affirms easy policy stance
    * One-month GOFO remains in negative territory, tightness
seen
    * Coming up: U.S. producer price index Friday

 (New throughout, updates prices, analyst comment, adds NEW YORK
dateline, second byline, table)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, July 11 (Reuters) - Gold rose 1.3 percent
to a near three-week high on Thursday, within striking distance
to $1,300 an ounce, as investors flocked to the bullion market
as a hedge after U.S. Federal Reserve Chairman Ben Bernanke
reasserted that monetary stimulus will stay for some time.
    Bullion extended its winning streak to a fourth straight day
after Bernanke on Wednesday told an economic conference in
Cambridge, Massachusetts that a "highly accommodative policy is
needed for the foreseeable future." 
    Bernanke's comment, which sparked a Wall Street rally and
losses in the dollar, came after minutes of the Fed's June
meeting showed many officials wanted more reassurance the job
market was on solid ground before withdrawing economic stimulus.
    "Investors prefer to focus on the probability that 
the Fed will remain easier for far longer," said Edward Meir,
metals analyst at INTL FCStone.
    Prior to Wednesday, economists had expected the U.S. central
bank might begin to scale back its $85 billion in monthly bond
purchases in September.
    Spot gold climbed as much as 2.7 percent to
$1,298.36, its highest since June 24. It was last traded up 1.4
percent to $1,281.40 an ounce by 2:00 p.m. EDT (1800 GMT). 
    U.S. Comex gold futures settled up $32.50 at
$1,279.90, with trading volume at 225,000 lots, above 10 percent
above its 30-day average, preliminary Reuters data showed. 
    Gold is still down 23 percent this year after taking a 
beating following Bernanke's comments in May and June that the
Fed could begin scaling down its bond purchases later this year.
    Copper jumped about 3 percent to a near one-month
highs, while U.S. crude futures retreated after the
previous day's rally but hovered near multi-month highs. 
    
    PHYSICAL SUPPLY TIGHTNESS
    The cost of borrowing gold stayed near its highest level
since January 2009, reflecting dwindling supplies from bullion
banks after heavy liquidation and resilient demand for physical
gold products.
    On Tuesday, the Gold Forward Offered Rates (GOFO), rates at
which bullion banks are prepared to lend gold on a swap against
U.S. dollars, remained in the negative territory at -0.05
percent, suggesting possible near-term supply tightness.
    However, investor sentiment remained guarded. Holdings of
the world's largest gold-backed exchange-traded fund, SPDR Gold
Trust, fell 0.1 percent to 30.192 million ounces on
Wednesday, hitting fresh lows since February 2009. 
 
    Gold's strength also pushed silver to a three-week
high of $20.26 an ounce. It was last up 3.6 percent at $20.02.
Platinum rose 2.3 percent to $1,403.24, while palladium
 edged up 0.3 percent to 714.97 an ounce, respectively.
    
 2:00 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1279.90  32.50   2.6  1262.10 1297.20  188,626
 US Silver SEP  19.956  0.791   4.1   19.430  20.250   48,390
 US Plat OCT   1407.60  39.50   2.9  1376.20 1413.50    9,604
 US Pall SEP    718.20   4.40   0.6   715.20  731.85    3,870
                                                               
 Gold          1281.40  17.76   1.4  1264.41 1298.36         
 Silver         20.020  0.690   3.6   19.430  20.260
 Platinum      1403.24  31.24   2.3  1381.00 1409.50
 Palladium      714.97   2.47   0.3   718.02  728.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        225,681   198,136   182,100     23.97   -1.21
 US Silver       53,493    66,706    56,312     33.08   -1.04
 US Platinum      9,900    16,566    13,039     26.16   -1.57
 US Palladium     3,888     4,512     5,526                  
                                                               
    

 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by Marguerita Choy)
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