PRECIOUS-Gold soars 4.2 pct after Fed's surprise on stimulus

Wed Sep 18, 2013 4:57pm EDT

* Gold notches largest one-day rally since June 1, 2012
    * Fed cites strains in U.S. economy, high mortgage rates
    * Bullion's gains outsize S&P, commodities, dollar tumbles
    * Yellen front-runner for Fed chair nomination, seen bullish
    * Coming up: US weekly jobless claims data Thursday

 (Updates price information)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Sept 18 (Reuters) - Gold surged more than 4
percent to above $1,360 an ounce on Wednesday after the U.S.
Federal Reserve's unexpected decision to continue buying bonds
unleashed bullion's biggest one-day buying spree since June
2012.
    The move by the U.S. central bank to continue its $85
billion monthly buying pace due to worries about rising
borrowing costs surprised financial markets that were broadly
braced for a reduction in the central bank's monetary stimulus.
    Silver rallied around 6.5 percent, its biggest one-day gain
since November 2008.
    Citing strains in the economy from tight fiscal policy and
higher mortgage rates, the Fed decided against the tapering of
asset purchases that investors had all but priced into asset
markets across the board. 
    "There is no immediate visibility as to how much tapering
will be done and when, so devaluation of currencies marches on,"
said Jeffrey Sica, chief investment officer at New Jersey-based
Sica Wealth Management, which has over $1 billion in client
assets. "And as long as that happens, gold looks attractive."
    The metal is a traditional hedge against inflation and
economic uncertainties, particularly those brought about by
central-bank actions. 
    After the Fed announcement, gold's gains sharply outpaced
other markets', with the S&P 500 equities index rallying
1.2 percent to a record high and the Thomson-Reuters CRB index
 up around 1 percent led by crude oil's gains. A 1 percent
drop in the dollar index also underpinned gold
buying.  
    Spot gold was up 4.2 percent to $1,364.26 an ounce by
4:31 p.m. EDT (2031 GMT), its biggest one-day percentage gain
since June 1, 2012. It rebounded about $70, or 5.5 percent, from
a six-week low of $1,291.34 set earlier in the session. 
    U.S. Comex gold futures for December settled down
$1.80 an ounce at $1,307.60 prior to the Fed's news.
    The pace of trading was hectic after the Fed announcement,
with volume at 240,000 lots, already at 50 percent above its
30-day average, set to be the strongest daily turnover in two
months, preliminary Reuters data showed.
    Gold now rose above its 100-day moving average at $1,350,
but is still some $70 below a four-month high at $1,433 set on
Aug. 28.
    
    YELLEN NOMINATION BULLISH
    Before the Fed policy statement, bullion received a boost
when a White House official said current Federal Reserve Vice
Chair Janet Yellen is the leading candidate to replace Fed chief
Ben Bernanke when he steps down. 
    Traders said that gold should benefit as the nomination of
Yellen, a strong supporter of Bernanke's policies, should keep
U.S. interest rates low for an extended period of time.
    "The next expected Fed Chairman, Yellen, is also committed
to jobs creation and continued stimulus till there is improved
data, which plays into higher gold prices," said Thomas Capalbo,
a precious metals broker at New York futures brokerage Newedge. 
    Gold is down 18 percent year to date after the Fed earlier
this year signaled it would start reining in its massive bond
purchases.
    Among other precious metals, silver rose 6.4 percent
to $23.06 an ounce. Platinum was up 3 percent to $1,460
an ounce, while palladium rose 1.7 percent to $715.75 an
ounce.
    
 4:31 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1307.60  -1.80  -0.1  1291.50 1367.80  234,737
 US Silver DEC  21.564 -0.220  -1.0   21.225  23.250   66,024
 US Plat OCT   1425.20   2.80   0.2  1411.80 1467.20   14,844
 US Pall DEC    703.10  -3.85  -0.5   696.00  720.75    4,302
                                                               
 Gold          1364.26  55.22   4.2  1292.33 1367.16         
 Silver         23.060  1.380   6.4   21.230  23.210
 Platinum      1460.00  42.20   3.0  1415.00 1462.50
 Palladium      715.75  12.25   1.7   697.77  716.75
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        244,739   156,780   180,172     23.85   -0.34
 US Silver       70,919    67,656    57,792     37.07   -0.46
 US Platinum     17,546    11,224    12,339     20.74    0.33
 US Palladium     4,366     6,895     5,871                  
                                                               
    

 (Additional reporting by A. Ananthalakshmi in Singapore;
editing by William Hardy, James Jukwey, Marguerita Choy and
Andrew Hay)