* Gold surges by nearly 2.5 pct to session high
* Physical demand picks up in Asia
* Coming up: FOMC August minutes; 1800 GMT
By Amanda Cooper
LONDON, Aug 30 (Reuters) - Gold burst higher on Tuesday, propelled by a Federal Reserve official who said he favoured some of the more aggressive policy tools at the central bank’s disposal, which boosted other safe havens such as Treasuries and dented stocks.
Chicago Fed President Charles Evans, a voter on this year’s policy-setting committee, told CNBC he favoured some of the most aggressive policy actions on the table now being considered to boost the economy and the Fed needed to clarify its intentions.
The Fed did not offer any indication at its annual meeting at Jackson Hole over the weekend that it would offer any additional policy measures, such as more quantitative easing to prop up the sputtering economy, so investors are keen to scour the minutes of the bank’s last meeting, due later on Tuesday.
Spot gold was up 2 percent at $1,823.35 an ounce by 1255 GMT, having earlier fallen by as much as 0.2 percent to a session low of $1,783.19. Gold fell by more than 1 percent last week, when investors stripped more than $200 off the price after it hit a record $1,911.76 on Aug 23.
“The market is certainly pretty nervy as are most markets right now, so in the context of what’s been happening in the last few days, I’m not surprised to see that kind of move as the U.S. has opened,” said Credit Suisse Tom Kendall.
One of the cornerstone’s for gold’s 48 percent rally over the last year has been the Fed’s ultra-loose monetary policy, which most recently included a pledge to leave rates near zero for the next two years and $600 billion worth of government bond purchases.
Tuesday’s Fed minutes, a planned speech next week by Fed Chairman Bernanke, and developments in the euro zone debt crisis will come under heightened scrutiny by investors who are losing faith in the ability of the global economy to stave off another slowdown.
“Certainly, there is very little confidence among the major macro-type investors about which way the global economy is going to go over the next three to six months,” Kendall said. “There is very little conviction one way or the other and that is very supportive of gold.”
The largest margin increase in over two years on COMEX gold futures last week resulted in a third weekly decline in speculative interest in the metal, yet analysts said the high level of uncertainty in financial markets right now would support the price.
“Given the ascendancy we’ve had, (price falls) shouldn’t be a surprise and I suppose any dips, or sell-offs of that sort are manna from heaven for people who haven’t yet bought into the story,” said Credit Agricole analyst Robin Bhar.
“You’d have to say ‘buy the dips’ because with all the uncertainty all still very present and far from being resolved, despite better data, you still want gold as an insurance.”
In the euro zone, data showed the economic climate was worse than expected in August, highlighting the prospect of a further slowdown in growth in the second half of the year.
The Fed releases the minutes from its August policy meeting later in the day. The central bank is split internally over what steps to take to bolster growth and markets reacted positively to Bernanke’s decision at Jackson Hole to let the next policy meeting run for two days, rather than one.
“For now, the Fed has managed to buy itself some time to gather more data and mull over what to do next. This is positive for gold, in our view,” wrote UBS strategist Edel Tully in a note.
“The market is likely to be volatile over the next few weeks, until there is clearer guidance from the Fed, which will likely come after the two-day FOMC meeting in September. That the scheduled meeting has been extended for an extra day suggests that deliberations on potential policy actions will be comprehensive.”
The Fed is caught between a struggling recovery and high unemployment on one side, and political pressures against more monetary easing on the other. It has already pushed interest rates close to zero and bought $2.3 trillion in bonds to try to lower longer-term borrowing costs.
Physical demand for gold is holding firm, and buying is expected to pick up in top consumer India, where the wedding season, traditionally the period of highest demand, gets underway in September.
Investment demand for gold in the form of exchange-traded funds has been more muted over the last couple of weeks, with global holdings of gold in ETFs set for their first monthly decline since May.
In other precious metals, silver rose 1.7 percent on the day to $41.46 an ounce.
Platinum was last up 0.9 percent at $1,833.20 an ounce, while palladium rose nearly 2 percent to $764.97 an ounce. (Additional reporting by Lewa Pardomuan in Singapore; Editing by Alison Birrane and Jason Neely)