* Fed keeps rate unchanged, uncertainty seen to help gold
* Gold pressured as stocks rally as risk aversion ebbs
* SPDR Gold Trust ETF, iShares silver ETF at record
(Recasts, updates prices, market activity to New York close;
new byline, changes dateline, previously LONDON)
By Frank Tang
NEW YORK, Jan 28 (Reuters) - Gold settled lower on
Wednesday after the U.S. Federal Reserve kept interest rates
unchanged and signaled concern about deflation risks, while
stock prices surged amid a revival in risk appetite.
The Fed kept its target range for the federal funds rate at
0 to 1/4 percent. The Fed said it was prepared to buy long-term
U.S. government debt if that would help financial markets, and
signaled some concern about deflation risks. []
"It indicates that that the overall atmosphere is still
very troubled and there is a long way for recovery. For gold,
it shows that the credit crisis is still very severe, and it
will keep gold in people's eyes," said Bill O'Neill, managing
partner of LOGIC Advisors in Upper Saddle River, New Jersey.
"Certainly, the statement will not discourage the
flight-to-safety type of buying in gold," O'Neill said.
Spot gold <XAU=> was at $884.80 an ounce at 3:07 p.m, EST
(2007 GMT), down 1.4 percent from the last trade of $897.35
late on Tuesday.
U.S. gold futures for February delivery <GCG9> settled down
$11.30, or 1.3 percent, at $888.20 an ounce on the COMEX
division of the New York Mercantile Exchange.
Risk aversion appeared to ebb after safe-haven buying
helped send gold to a three-month high on Monday.
The dollar rose slightly versus the euro after the Fed
decision, and U.S. stocks rallied nearly 3 percent on optimism
the new Obama administration will move quickly to stabilize the
ailing banking sector. European shares also rose sharply. []
"In the last days the gold price was moving higher despite
the stronger dollar," said Eugen Weinberg, analyst at
Commerzbank, noting the "huge role" played by risk aversion.
"Right now, the European equity markets -- another
indicator of risk aversion -- are friendlier and are showing
some recovery. In this case, you are not looking for a safe
haven."
SPDR SOARS
The 7 percent rise in the SPDR Gold Trust's <GLD> bullion
holdings this year is widely attributed to safe haven buying.
The trust, an exchange-traded fund which issues securities
backed by physical stocks of bullion, has seen interest soar as
investors seek out physical gold.
However, jewelry demand remains depressed as prices hold
near $900 an ounce, particularly in key global centers such as
India, China and the Middle East. []
Among other precious metals, silver <XAG=> was at $11.98 an
ounce, down 0.3 percent from its previous close of $12.01.
The iShares Silver Trust <SLV.A>, the world's biggest
silver-backed ETF, said its bullion holdings rose more than 110
tonnes on Tuesday to a record 7,453.15 tonnes, and are up more
than 300 tonnes in the first two days of the week.
[]
Platinum and palladium firmed a touch. Spot platinum <XPT=>
was at $950.50 an ounce, up 0.6 percent from its last finish of
$945, while spot palladium <XPD=> was at $187.00 an ounce, down
0.8 percent from its previous close of $188.50.
Most of 56 analysts in a Reuters precious metals survey
said platinum prices should stay depressed this year as an
expected supply dip fails to balance falling demand from car
makers. []
(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
