* 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 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
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
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
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
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
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
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