* Gold up, other commods jump, after AIG bailout plan
* Fed to lend up to $85 billion to AIG
* Platinum up more than 5 pct, but market still fragile
(Adds fresh comments, updates prices, adds London dateline)
By Agnieszka Flak
LONDON, Sept 17 (Reuters) - Gold climbed on Wednesday, in
tandem with other commodities, as the U.S. Federal Reserve's
rescue of troubled insurer American International Group (AIG)
gave battered financial markets a bit of a respite.
"It's a breather, a temporary relief," said a commodities
analyst who preffered not to be named. "...It's just a matter of
time before things will start heating up again."
Bullion was lifted by hopes that more stable financial
markets might help revive interest in beaten-down commodities
and by the dollar's fall against the euro, even though a 1
percent slump in the yen suggested limited demand for safer
havens like gold. []
Other precious metals jumped broadly, with spot platinum
<XPT=> climbing more than 5 percent to as high as $1,110 per
ounce at one point after having dived 10 percent on Tuesday.
Spot gold <XAU=> rose 0.6 percent to $782.50 an ounce as of
1000 GMT from Tuesday's nominal close in New York, recovering
from the previous day's $3 fall as risk-averse investors rushed
to dump all commodities in a bid to reduce exposure to risk.
Gold has been whipsawed in recent weeks by rapidly shifting
investor perceptions over whether it remains a safe-haven asset
or whether it is part of a riskier commodities pool.
"Coupled with increasing upside potential for the greenback,
high hedging costs could weigh down the metal today," Standard
Bank analyst Manqoba Madinane said in a note to clients.
Madinane said increased risk and higher hedging costs were
putting pressure on investors.
"High hedging costs could direct safe-haven investment flows
into U.S. treasuries, which might mean a recovery for the
greenback after the Fed held rates steady yesterday -- this
would increase precious metals' downside risks," Madinane said.
The U.S. Federal Reserve said in a statement it would extend
AIG <AIG.N> $85 billion in exchange for a nearly 80 percent
stake to bail it out. []
The Fed's move helped ease fears about a financial system
crisis when Lehman Brothers <LEH.P> filed for bankruptcy
protection earlier in the week, traders said.
Deutsche Bank analyst Michael Blumenroth said the Fed's
decision could raise inflation pressures and make gold more
attractive to investors in the medium term.
"We might not see gold flying away in the next two to three
weeks, but then it will be higher because of inflation hedges
and safe-haven buying," he said.
PGMs UNDER PRESSURE
Platinum jumped more than 5 percent on short covering,
offsetting a near 10 percent plunge the previous day.
But sentiment remained gloomy as many believe that the
latest financial crisis in the United States could cause the
global economy to slow further, crimping demand for the white
metal, mainly used in autocatalysts, traders said.
Spot platinum <XPT=> was trading at $1,077.50/1,107.50 per
ounce, up 2.7 percent from Tuesday's close in New York. It
struck a record high of $2,290 an ounce in March.
Spot palladium <XPD=> was trading just under half a percent
higher at $222/228 an ounce, after tumbling more than 5 percent
the previous day.
Spot silver <XAG=> gained 1.4 percent at $10.59/10.65 from
Tuesday's close of $10.44.
(Additional reporting by Chikafumi Hodo in Tokyo; editing by
Michael Roddy)
