* Gold holds gains after Fed cuts rates by 50 bps to 1 pct
* Silver jumps as stock gains boost industrial metals
* U.S. stock markets up more than 2 pct in late trade
(Recasts, updates prices, market activity to close; adds
second byline, dateline, previously LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 29 (Reuters) - Gold hit a one-week
high as the dollar weakened sharply on Wednesday, and the
precious metal stayed firm after the Federal Reserve cut U.S.
interest rates, as markets had expected.
Gold's rise came amid strength across the entire commodity
sector as global markets welcomed the Fed's recession-fighting
rate cut. Silver and palladium, sometimes seen as industrial
metals, also rallied as stocks kept rising.
The U.S. Federal Reserve lowered its target for overnight
bank lending rate by half a percentage point to 1 percent, the
lowest since June 2004.
"I think it has already been factored into the market,
honestly. That's why gold had these substantial rallies," Bruce
Dunn, vice president of trading at New Jersey-based Auramet
Trading.
Dunn, however, contended that a rate cut alone would do
little to boost the ailing U.S. economy.
"Nothing has changed in the last 48 hours. They cut rates,
so what? They have been cutting rates for a long time, and
things have progressively gotten worse," Dunn said.
Spot gold <XAU=> rallied to $773.40 an ounce and was at
$749.85 an ounce at 3:06 p.m. EDT (1906 GMT), against its
Tuesday close of $744.30.
U.S. gold futures for December delivery <GCZ8> settled up
$13.50, or 1.8 percent, at $754.00 an ounce on the COMEX
division of the New York Mercantile Exchange.
The Federal Open Market Committee said in a statement that
"The pace of economic activity appears to have slowed
markedly, owing importantly to a decline in consumer
expenditures."
The Fed said it expected inflation to moderate in coming
quarters due to declining prices for energy and other
commodities and prospects for weaker economic activity.
Gold has fallen about 20 percent since it hit a high of
$931 on Oct. 10 as financial market losses prompted investors
to liquidate commodities and other assets.
"Now with more interest rate cuts and more aggressive
action by central banks, the indiscriminate selling of
financial assets, including gold, has subsided," said Jeffrey
Nichols, managing director of American Precious Metals
Advisors.
The dollar fell against other major currencies, as rising
stock markets boosted risk appetite and traders factored in a
substantial Fed rate cut later in the day. []
Rises in other commodity markets help boost gold prices.
The broad-based Reuters/Jefferies CRB index <.CRB> jumped 6
percent.
Platinum <XPT=> fell to close at $789 an ounce from its
Tuesday close of $809.00, but rebounded smartly in late trade
from a session low of $755.50 an ounce.
Reports of production cutbacks and falling sales among car
manufacturers have erased 65 percent from platinum's value
since March. The automotive industry, which uses the metal in
catalytic converters, accounts for more than half of global
platinum demand.
Palladium <XPD=> was at $189.50, up from its Tuesday close
of $176, having surged more than 10 percent to a two-week high
of $195 on speculation the sell-off in the metal was overdone.
Spot silver <XAG=> was at $9.82 an ounce, after rising to a
one-week high of $10.02, against its previous finish of $9.16.
(Additional reporting by Humeyra Pamuk in London; Editing by
David Gregorio)
