* Gold up after Fed adopts numerical thresholds in surprise
* Interest rates near zero until unemployment drops-Fed
* Fed keeps to $85 bln pace of monthly purchases
* Coming up: U.S. producer prices, retail sales Thursday
(Recasts, adds market details, updates prices)
By Frank Tang
NEW YORK, Dec 12 Gold rose on Wednesday as its
inflation-hedge appeal received a boost after the U.S. Federal
Reserve took an unprecedented step to commit to near-zero
interest rates as long as unemployment remains high.
Bullion benefited after the Fed officials revised lower
their forecasts for economic growth and inflation next year. The
Fed also replaced a more-modest expiring stimulus program with a
fresh round of $45 billion Treasury debt monthly purchases on
top of the $40 billion per month in mortgage-backed bonds they
started buying in September.
In a surprise move, the Fed also adopted numerical
thresholds for policy, a step that had not been expected until
early next year. It said now it will keep rates near zero until
the U.S. unemployment rate falls to 6.5 percent.
Analysts said the move is bullish for gold because it
suggests that the U.S. central bank would keep creating new
money to stimulate the economy. Many investors buy gold as a
hedge against inflation and economic uncertainty as a result of
money printing by central banks.
"It takes a little while to sink in that the Federal Reserve
is focusing more and more on employment and less and less on
inflation," said Axel Merk, chief investment officer of Merk
Funds which has $650 million in assets.
Spot gold was up 0.2 percent at $1,713.69 an ounce by
3:09 p.m. (2009 GMT)
U.S. COMEX gold futures for February delivery settled
up $8.30 an ounce at $1,717.90, with trading volume about 20
percent below its 30-day average, preliminary Reuters data
The Fed also said it will hold its commitment to hold rates
steady until its new threshold as long as inflation was
projected to be no more than 2.5 percent one or two years ahead
and inflation expectations were contained.
However, traders said that the foremost concern for the Fed
right now is job creation rather than keeping inflation low.
Silver, which tends to be more volatile than gold,
rose 1.7 percent to $33.51 an ounce.
NOT ANY TIME SOON
Economists, however, do not expect a speedy job recovery for
unemployment to hit the Fed's new target of 6.5 percent. Last
Friday, the Labor Department said that unemployment rate fell to
a near four-year low of 7.7 percent as companies kept up their
slow but steady hiring pace in November.
"That's a bullish for gold for the Fed to say it will keep
interest rates low until unemployment rate drops to 6.5 percent
- it doesn't look that's going to happen anytime soon," said
Bill O'Neill, partner of commodities investment firm LOGIC
Among platinum group metals, platinum was up 0.1
percent at $1,634.74 an ounce, while palladium gained 0.9
percent to $695.47 an ounce.
Platinum and palladium have outperformed gold in recent
months, rising nearly 8 percent and 19 percent respectively
since late October, helped by tight supply and a brighter
economic outlook in China and the United States.
The planned launch of the Sprott Physical Platinum and
Palladium Trust also underpinned sentiment, traders said. The
trust could buy more than 107,000 ounces of platinum and 253,000
ounces of palladium, Reuters calculations showed.
3:09 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold FEB 1717.90 8.30 0.5 1708.50 1725.00 153,765
US Silver MAR 33.782 0.765 2.3 32.995 33.875 43,575
US Plat JAN 1646.40 6.40 0.4 1631.40 1647.50 13,180
US Pall MAR 701.15 4.35 0.6 693.20 702.00 2,753
Gold 1713.69 3.84 0.2 1708.35 1723.01
Silver 33.510 0.570 1.7 32.940 33.760
Platinum 1634.74 1.74 0.1 1585.00 1643.50
Palladium 695.47 5.97 0.9 695.02 698.50
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 158,002 187,563 174,292 13.85 -0.06
US Silver 46,223 59,526 52,676 21.84 0.60
US Platinum 15,078 8,605 8,858 17.33 0.07
US Palladium 2,772 6,180 4,774
(Editing by Bob Burgdorfer and Marguerita Choy)