PRECIOUS-Gold surges 3 pct in 'frantic' short covering after Fed

Thu Jun 19, 2014 4:23pm EDT

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(Adds analyst comments, updates prices)

By Frank Tang and Clara Denina

NEW YORK/LONDON, June 19 (Reuters) - Gold surged over 3 percent for its best day in eight months on Thursday as the Federal Reserve's lack of commitment to raise interest rates and continued tensions in the Middle East unleashed a wave of short covering.

Bullion hit its highest level in more than two months. Silver jumped as much as 5 percent, while platinum and palladium also climbed as new hurdles emerged to settling South Africa's mining strike.

"The Fed statement and geopolitical tensions sparked a frantic reversal in market sentiment. Investors are now bullish instead of bearish on gold," said Phillip Streible, senior commodities broker at Chicago-based RJ O'Brien.

Gold was higher during London hours as the U.S. dollar eased after the Fed signalled on Wednesday it will stick with a near-zero interest rate policy to support the economy, disappointing traders who had bet on hints of policy tightening.

Gains accelerated shortly before midday in New York, after prices pierced above $1,305 an ounce, triggering heavy stop-loss orders for traders who had previously expected lower bullion prices on hopes of a better U.S. economy.

Lower U.S. 2014 growth forecast by the Fed and lingering geopolitical tensions in Iraq and Ukraine rekindled investors' interest in gold, traders said.

Spot gold was up 3 percent at $1,315.90 an ounce by 3:52 p.m. EDT (1952 GMT), having earlier hit $1,321.70, a two-month high.

Technical buying also helped lift prices on Thursday as the rally sent gold above tough resistance at $1,285, near a key Fibonacci retracement as well as its 50- and 100-day moving averages, analysts said.

U.S. COMEX gold futures for August delivery settled up $41.40 at $1,314.10 an ounce.

Silver gained 4.1 percent to $20.68 an ounce, having earlier hit $20.91, a three-month high. It notched its biggest one-day gain in four months.

Platinum rose 1.6 percent to $1,467.70 an ounce and palladium was up by 1.5 percent to $835.05 an ounce. Both were trading near one-week highs as a mining strike in major producer South Africa looked set to drag on.

South African platinum union AMCU has made "unaffordable" new demands beyond a deal struck with producers last week, mining companies said on Wednesday, dashing hopes of an end to the country's longest and costliest mining strike. 3:52 PM EDT LAST/ NET PCT LOW HIGH CURRENT

SETTLE CHNG CHNG VOL US Gold AUG 1314.10 41.40 3.3 1276.20 1322.00 220,589 US Silver SEP 20.692 0.871 4.4 19.875 20.970 13,847 US Plat JUL 1474.50 23.70 1.6 1450.10 1475.00 14,227 US Pall SEP 838.60 15.95 1.9 824.50 839.00 4,850 Gold 1315.90 38.40 3.0 1276.20 1321.70 Silver 20.680 0.820 4.1 19.860 20.910 Platinum 1467.70 23.80 1.6 1451.30 1472.00 Palladium 835.05 12.35 1.5 826.60 837.30 TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 226,662 147,571 165,114 13.5 0.41 US Silver 109,742 49,807 55,340 18.42 0.70 US Platinum 18,620 14,585 12,336 17.34 -0.04 US Palladium 4,885 9,189 5,899 20.68 -0.33 (Additional reporting by A. Ananthalakshmi in Singapore; editing by Pravin Char, David Evans, Peter Galloway, Marguerita Choy and Matthew Lewis)

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