PRECIOUS-Gold hits 4-month high on Fed stimulus hopes, Spain

Fri Aug 24, 2012 12:35am IST

* Report of Spain in euro zone talks for aid boosts gold
    * Fed minutes seen as clear indication of stimulus
    * Disappointment due to high hopes of stimulus could weigh
    * Coming up: U.S. durable goods Friday

 (Adds details, graphic link, updates quotes, market activity)
    By Frank Tang
    NEW YORK, Aug 23 (Reuters) - Gold rose 1 percent to a
four-month high above $1,670 an ounce on Thursday, bolstered by
hopes for a new round of U.S. monetary stimulus and news that
Spain is negotiating conditions for a possible aid package.
    Silver surged 2 percent and platinum group metals also
climbed on supply concerns due to labor unrest in South Africa.
    Precious metals received a boost after sources told Reuters
Spain is in talks with the euro zone over conditions for
international aid, even though the country has made no final
decision to request a bailout. 
    Bullion consolidated its breakout above a four-month trading
range and technical resistance at the 150-day and 200-day moving
averages. However, gold's relative strength index suggests the
market might be slightly overbought following its seventh
consecutive day of gains. (r.reuters.com/xub32t)
    The move higher came amid already-bullish market sentiment,
with Wednesday's minutes from the U.S. Federal Reserve's August
meeting showing policymakers were ready to deliver more stimulus
"fairly soon" unless the economy improves considerably. 
    "This is the first insight we've gotten in the marketplace
to think that the Fed is committed to this new stimulus program,
and that's the catalyst you need to break out of the range,"
said Jeffrey Sherman, commodities portfolio manager at
DoubleLine Capital LP, which has over $40 billion in assets
under management.
    Spot gold gained 0.9 percent to $1,668.70 an ounce by
2:25 p.m. EDT (1825 GMT), having risen 3.5 percent so far this
week. 
    That put gold on track to post its largest monthly rise
since January's 11 percent increase. 
    U.S. gold futures for December delivery settled up
$32.30 at $1,672.80 an ounce. Trading volume looked set to
challenge its highest in almost a month, preliminary Reuters
data showed.
    Silver rose 2.2 percent to $30.49 an ounce.
    Bullion broke ranks with U.S. equities, which fell after the
number of Americans filing new claims for jobless benefits
unexpectedly increased, and after St. Louis Federal Reserve
President James Bullard played down the odds of imminent easing.
    
    WEAKNESS SEEN IF FED DISAPPOINTS
    Bullion is now up nearly 7 percent year to date, still below
the 15 percent in January when the Fed signaled it might use
more stimulus and would keep interest rates near zero until at
least 2014.
    "Market expectations on monetary easing might be too high
and that could lead to pullbacks," said Nicolas Berge, a trader
at Geneva-based hedge fund Absolute Capital Group which invests
in commodities futures and currencies.
    Gold's breakout above its downward trend confirms the
potential start of a longer-term bull market, Berge said.
    Bullion held in top exchange-traded funds monitored by
Reuters hit a record by Wednesday's close, having risen by more
than 600,000 ounces this week so far, marking the largest weekly
rise since early February. 
    Gold investors also monitored news that Citi Private Bank
deciding it will withdraw up to $500 million from long-time gold
bull and prominent hedge fund manager John Paulson's flagship
Advantage funds, which held some gold investments.
    In platinum group metals (PGM), ETF Securities said that its
U.S. PGM exchange-traded products added nearly $50 million in
new assets in the last week due to supply worries following
deadly violence and work stoppage in South African mines.
    Platinum rose 0.4 percent to $1,536.75 an ounce and
palladium was up 3.5 percent at $650.75 an ounce.
 2:25 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1672.80  32.30   2.0  1654.50 1677.50  139,192
 US Silver SEP  30.456  0.900   3.0   29.760  30.790   61,482
 US Plat OCT   1554.90  28.40   1.9  1530.70 1563.60   12,303
 US Pall SEP    656.60  27.85   4.4   628.70  658.00    5,216
                                                               
 Gold          1668.70  15.31   0.9  1653.17 1674.80         
 Silver         30.490  0.650   2.2   29.830  30.810
 Platinum      1536.75   5.75   0.4  1534.00 1558.49
 Palladium      650.75  22.05   3.5   632.52  655.75
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        144,982   152,365   182,652      17.9    0.89
 US Silver       87,615    40,201    56,284      24.5    0.02
 US Platinum     12,828    13,702     9,620     22.95   -0.02
 US Palladium     7,626     5,904     4,588                  
                                                               
 
 (Additional reporting by Amanda Cooper in London; Editing by
Marguerita Choy)
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