PRECIOUS-Gold rises on technicals, short-covering after Fed move

Thu Sep 19, 2013 4:42pm EDT

* Hopes of low U.S. interest rates, no Fed taper boost gold
    * Short-covering helps drive gold's rally after Fed
    * Gold seen bottoming on charts
    * Coming up: CFTC Commitments of Traders report Friday

 (Adds trader comment, technical analysis, second byline,
dateline)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Sept 19 (Reuters) - Gold rose to one-week
highs on Thursday, extending the previous session's 4.2 percent
rally, lifted by technical buying and short-covering a day after
the U.S. Federal Reserve's unexpected decision to continue
buying bonds.
    On Wednesday, Fed Chairman Ben Bernanke did not commit to
reducing the bond purchases this year, and instead went out of
his way to stress the program was "not on a preset course." In
June he had said the Fed expected to cut back before year end.
 
    "The expectation of no Fed tapering and low interest rates
for the rest of the year is a big plus for gold," said Bill
O'Neill, partner of commodities investment firm LOGIC Advisors. 
  
    Spot gold hit its highest level since Sept. 10 at
$1,374.54. It last traded at $1,368.46 an ounce, up 0.3 percent
by 3:41 p.m. EDT (1941 GMT).
    U.S. gold futures for December delivery settled up
$61.70 at $1,369.30, with trading volume at about 15 percent
above its 30-day average, preliminary Reuters data showed.
    Total open interest in Comex gold futures fell 701 to
383,891 lots on Wednesday, suggesting the post-Fed rally was
driven by investors who bought back previously bearish bets,
analysts said.
    Gold, often seen as an inflation hedge and safe-haven
investment, has outperformed U.S. equities and other assets
since the Fed announcement. Many economists expected a $10
billion reduction in the central bank's $85 billion monthly bond
purchases.
    Gold has lost some 18 percent of its value this year after
the Fed signalled it would start reining in its monetary
stimulus, which could indicate the end to ultra-loose monetary
policy.

    TECHNICAL OUTLOOK IMPROVING
    On charts, gold's rally left it some $20 above its 100-day
moving average, a key technical support.
    Gold could rally to its 200-day moving average near $1,475
an ounce, as Wednesday's rise signalled a bullish trend reversal
after bullion broke below a upward trendline connecting its lows
on June 28 and Aug. 7, said Rick Bensignor, head of trading
strategy at Wells Fargo.
    Another analyst said bullion could be near its lows after
Wednesday's rally.
    "The shorter-term moving averages have started rising,
suggesting gold is in the process of bottoming," said Adam
Sarhan, chief executive of Sarhan Capital.
    Analysts say they are watching for signs that the Fed's
announcement is boosting inflows into gold-backed
exchange-traded funds, as such moves will signal rekindled fund
interest in gold as a hedge.  
    Among other precious metals, silver rose 1.2 percent
to $23.15 an ounce, having rallied around 6.5 percent on
Wednesday, its biggest one-day gain since November 2008.
    Platinum was down 0.3 percent at $1,458.80, while
palladium rose 1.9 percent to $730.59 an ounce. 

 3:41 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1369.30  61.70   4.7  1358.50 1375.40  168,045
 US Silver DEC  23.292  1.728   8.0   22.855  23.445   49,890
 US Plat OCT   1473.00  47.80   3.4  1461.20 1483.40   17,068
 US Pall DEC    738.20  35.10   5.0   717.55  738.95    5,526
                                                               
 Gold          1368.46   3.92   0.3  1359.33 1374.54         
 Silver         23.150  0.280   1.2   22.860  23.390
 Platinum      1458.80  -3.70  -0.3  1465.50 1478.00
 Palladium      730.59  13.85   1.9   719.23  735.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        175,721   156,780   180,172     21.14   -2.71
 US Silver       52,989    67,656    57,792      38.2    1.13
 US Platinum     22,090    11,369    12,362     20.93    0.19
 US Palladium     5,619     6,895     5,871                  
                                                               
 
 (Additional reporting by Jan Harvey in London. Editing by Andre
Grenon)
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