* Fed announces $600 bln in easing measures, dollar drops
* Silver hits 30-year peak, palladium fresh 9-1/2 year high
* ECB opts to keep interest rates on hold; Trichet eyed
(Updates with comment, refreshes prices)
By Jan Harvey and Amanda Cooper
LONDON, Nov 4 (Reuters) - Gold was set for its biggest
one-day rise in nearly six months on Thursday after the U.S.
Federal Reserve's pledge to pump over half a trillion dollars
into the economy battered the dollar.
The Federal Reserve committed spend $600 billion to buy
government bonds late on Wednesday in a fresh effort to support
a struggling U.S. economy, undermining the U.S. currency and
stoking fears over longer-term inflation. []
Spot gold <XAU=> rose by nearly 2.5 percent to a session
high of $1,381.20 an ounce, leaving it within less than half a
percent of its recent record at $1,387.10. The spot price later
traded $1,378.10 an ounce at 1500 GMT, against $1,347.15 late in
New York on Wednesday. U.S. gold futures for December delivery
<GCZ0> rose $41.50 to $1,379.20.
The Fed's move sparked stripped almost 1 percent off the
value of the dollar against a basket of currencies <.DXY>, which
triggered a rally across the precious metals. Silver climbed 3
percent to its highest since 1980, palladium was up nearly 5
percent to a 9-1/2 year peak and platinum reaching its strongest
since May.
"The relationship between the dollar and gold remains a very
strong one and the recent move post-QE is a dollar-related move
more than anything else," said RBS commodities strategist Daniel
Major.
"It's pretty constructive on a near-term basis, provided the
market continues to trade gold very closely to moves in the
currency."
DOLLAR DOWN
The dollar fell 1 percent, down for a third successive
session, against a basket of currencies, bringing its losses so
far this week to 1.5 percent, as the market concluded that the
Fed's move spelled more dollar supply that would be likely to
weigh it down further. [] []
Weakness in the greenback tends to benefit dollar-priced
commodities as it cuts their cost for other currency holders,
but gold in particular, as it can be bought as an alternative
asset to the currency.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the relationship between QE2, interest
rates, gold and the dollar, click: http://r.reuters.com/dux73q
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"There is definitely going to be some more fallout from what
has been announced," said Credit Suisse analyst Tom Kendall.
"Clearly this is contributing to the bearishness on the U.S.
dollar, and that is bullish for all commodities, not just gold."
Currency analysts are waiting to see what the broader
implications of the Fed's move will be in what is still a heavy
news week on the macroeconomic front.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For Reuters report on the implications of quantitative
easing, click on: http://r.reuters.com/cyh73q
For text of NY Fed statement, click on: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The euro <EUR=> traded around 9-1/2 month high against the
dollar, after the European Central Bank kept interest rates
unchanged as expected, while ECB President Jean-Claude Trichet
said the bank will wait until December to decide whether or not
it can withdraw more crisis support measures. []
On the physical side of the gold market, Indian demand was
strong during the week of the Dhanteras festival, which
celebrates prosperity, and the Diwali festival of light. Scrap
sales also slowed to a trickle. []
Silver <XAG=> rose to a 30-year high at $25.58 an ounce,
tracking gains in gold, and was later at $25.49 against $24.80.
Palladium rallied to its strongest since May 2001, lifted by
strength in gold and expectations its underlying fundamentals
will improve as demand from automakers recovers and supply
struggles to keep pace.
"Tracking gold is part of the story, but there is talk in
the market that Russian state stocks are nearly depleted -- that
story has come back every year for 10 years now -- and there is
a lot of investment buying on back of that," said one European
PGMs trader.
Palladium <XPD=> peaked at $674 an ounce and was later at
$667.22 an ounce against $643.72 late on Wednesday. Platinum
<XPT=> rose to a near five-month high at $1,747.49 an ounce and
was later at $1,738.99 an ounce against $1,703.
(Editing by William Hardy)
