* Gold holds gains despite Fed statement, stocks rally
* U.S. Rep. Frank conditionally supports IMF gold sale
* U.S. economy contracted by more than expected in Q1
(Recasts, updates prices, market activity; new byline, changes
dateline, previously LONDON)
By Frank Tang
NEW YORK, April 29 (Reuters) - Gold prices rose in volatile
trade on Wednesday, unhindered by a global equities rally and a
late Federal Reserve statement that the U.S. recession appeared
to be easing.
Gold traders took in stride U.S. Rep. Barney Frank's
comments supporting Congressional authorization of planned gold
sales by the International Monetary Fund on conditions that the
proceeds go to loans for poor countries.
Spot gold <XAU=> was at $898.55 an ounce at 4:19 p.m. EDT
(2019 GMT), up 1.0 percent from its late Tuesday quote of
$891.10 in New York.
U.S. gold futures for June delivery <GCM9> settled up $6.90
at $900.50 an ounce on the COMEX division of the New York
Mercantile Exchange.
"Information received since the Federal Open Market
Committee met in March indicates that the economy has
continued to contract, though the pace of contraction appears
to be somewhat slower," the Fed said in a statement following
the conclusion of a two-day meeting on monetary policy.
The U.S. central bank also kept its target Fed Funds Rate
in the 0-0.25 percent range, saying low rates would help ensure
recovery.
Wall Street stocks rose more than 2 percent, holding most
gains after the Fed statement.
"Going forward, it would be a negative for gold if the
equities market holds onto these gains," said James Steel,
chief commodities analyst at HSBC.
Gold futures initially turned negative as the dollar
sharply pared its losses after the Fed's policy statement said
inflation would remain subdued. But gold moved higher and held
its gains even after Frank's comment opened the possibility of
IMF gold sales approved by the U.S. Congress.
"I am for gold sales only if it allows $4 billion for poor
countries," Frank, chairman of the House Financial Services
Committee, told Reuters. "I will not support it if it doesn't
say that." He said the U.S. Treasury Department also supported
this condition.
The IMF plans to sell about 403 tonnes of gold reserves to
finance administrative expenses and give financial aid to poor
countries. But the U.S. Congress must authorize the sales.
"It's first indication that we have a senior member appear
to be favorable toward the idea. I don't know if the IMF will
meet his conditions or not as his support appeared to be
conditional," Steel said.
Earlier, the U.S. Commerce Department said U.S. gross
domestic product fell 6.1 percent, against expectations for a
4.9 percent drop. []
EPIDEMIC RESPONSE MUTED
Traders remained cautious about the swine flu outbreak,
which knocked commodities lower early in the week, but safe
haven demand in the gold market remained unseen. []
Indian gold buyers continued to trickle in ahead of the
wedding season, with a dip in prices encouraging purchases.
Silver prices, which had also slipped on Tuesday, rose in
line with gold. Spot silver <XAG=> was at $12.77 an ounce, up
2.6 percent against $12.45 late on Tuesday.
Among other precious metals, spot platinum <XPT=> was at
$1,094.50 an ounce against its previous finish of $1,087.50,
while spot palladium <XPD=> was at $218.50 an ounce against
$213 late in New York on Tuesday.
However, London-based ETF Securities said it saw a small
inflow into its platinum ETF <PHPT.L> on Tuesday. The fund's
holdings rose just over 3,500 ounces or 1 percent.
(Additional reporting by Jan Harvey in London and Susan
Cornwell in Washington; Editing by David Gregorio)
