* Gold up on inflationary data, Fed easy money policy
* Dollar key driver to strength in gold and silver
* Silver extends gains after Thursday's record high
* Coming Up: U.S. construction spending on Monday
(Recasts, adds comment, updates market activity)
By Frank Tang
NEW YORK, April 29 (Reuters) - Gold rose nearly 2 percent
to above $1,550 an ounce amid thin volume on Friday, set for
its biggest gain in five months, boosted by inflation worries,
a dollar drop and expectations the U.S. Federal Reserve will
maintain easy money policy.
Silver extended gains after it eclipsed the Hunt Brothers'
peak set in 1980 on Thursday. It was set for a 30 percent rise
in April, its biggest monthly gain since April 1987. Platinum
group metals also rose about 2 percent.
Option traders reported strong buying of call options and
call spreads, reflecting bullish market expectations. A gauge
of bullion market volatility also spiked in response to a sharp
price rally.
"Gold is showing a text-book bull market behavior, a steady
ascent without major spikes. It's the continuation of the same
theme, as the Fed's posture seems to be fairly dovish still,"
said James Dailey, portfolio manager of the TEAM Asset Strategy
Fund.
Spot gold <XAU=> was last up 1.7 percent at $1,560.40 an
ounce by 2:12 a.m. EDT (1812 GMT), on course for a 9 percent
monthly gain, its strongest since November. Bullion was also
set for its seventh consecutive weekly rise, its longest
winning streak since 2007.
U.S. June futures <GCM1> settled up 1.6 percent at
$1,556.40 an ounce, with trading volumes restricted by a public
holiday in London.
On the options front, heavy buying of outright call options
and bull call spreads of June 2012 calls with strikes $1,800
and $2,000, said COMEX gold options floor trader Jonathan
Jossen.
Bull call spread is an option play involving the buying of
calls at one strike price while selling them at a higher strike
with the same expiration date. Investors often expect prices to
rise moderately with the strategy.
Also, the CBOE gold volatility index <.GVX>, which measures
bullion investor anxiety, rose 6 percent and set to be one of
the biggest daily rise in 2011.
A slight drop in the dollar also contributed to bullion's
gains. Earlier in the week, expectations of further weakness in
the dollar powered gold and silver to record highs. []
Earlier in the session, precious metals gained after data
showed U.S. consumer spending rose in March as households
stretched to cover higher costs for food and gasoline, with
inflation posting its biggest year-on-year rise in 10 months.
[]
Investors look forward to next Friday's nonfarm payrolls
data for trading cues, after data this week painted a picture
of an economy with slower growth and higher inflation, and
after the Federal Reserve signaled it would not tighten
monetary policy any time soon.
SILVER HOLDS FIRM
Meanwhile silver <XAG=> hovered close to its record high,
having gained 4 percent this week, although analysts say its
robust performance against the other precious metals may not be
sustainable.
"If silver doesn't make a new high and sustain above that,
it may go through a more vicious correction here. So, gold in
the short term could go down in sympathy of that," Dailey
said.
Silver <XAG=> was last up 0.1 percent at $48.49 an ounce.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a 24-hour gold technical outlook:
http://graphics.thomsonreuters.com/WT1/20112904085247.jpg
For a graphic on silver as best-performing commodity:
http://r.reuters.com/duj88r
For SPDR, iShares holdings: []
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The CME Group Inc <CME.O>, parent of the Chicago Board of
Trade, said on Thursday it would raise maintenance margins for
COMEX 5000 Silver <0#SI:> futures by 13.2 percent, making it
more expensive for silver speculators to trade in.
[]
For platinum group metals, platinum <XPT=> echoed the
strength in gold and silver, rising 1.8 percent on the day to
$1,869 an ounce, while palladium <XPD=> rose 2.4 percent to
$790.
Prices at 2:12 p.m. EDT (1812 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCM1> 1556.40 25.20 1.6% 9.5%
US silver <SIK1> 48.584 1.064 0.0% 57.0%
US platinum <PLN1> 1865.50 25.60 1.4% 4.9%
US palladium <PAM1> 792.15 16.85 2.2% -1.4%
Gold <XAU=> 1560.40 25.45 1.7% 9.9%
Silver <XAG=> 48.49 0.08 0.1% 57.0%
Platinum <XPT=> 1869.00 33.90 1.8% 5.7%
Palladium <XPD=> 790.00 18.77 2.4% -1.2%
Gold Fix <XAUFIX=> 1535.50 4.50 0.3% 8.9%
Silver Fix <XAGFIX=> 48.70 340.00 7.5% 59.0%
Platinum Fix <XPTFIX=> 1835.00 15.00 0.8% 6.0%
Palladium Fix <XPDFIX=> 777.00 8.00 1.0% -1.8%
(Editing by Marguerita Choy)
