* Gold surges on flight-to-quality buying amid turmoil
* US stocks plunge after Wall St. bailout bill rejected
* Bundesbank: no plans to sell more gold next 12 months
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Sept 29 (Reuters) - Gold surged as much as
4.9 percent on Monday as mounting worries over the health of
the global financial sector and a rejection of a massive Wall
Street bailout sparked buying of safe-haven assets such as
bullion.
On Tuesday, U.S. lawmakers rejected a $700 billion bailout
plan for the financial industry in a shock vote that sent
global markets sliding as European authorities scrambled to
prop up a slew of banks. []
"You see commodities, copper and the industrial metals sell
off further. The flight-to-quality (play) is buying bonds and
gold, and that's what the trade is reflecting today," said
Zachary Oxman, senior trader, Wisdom Financial, Newport Beach,
California.
"People who have anything long are selling it and going to
cash. Gold and bonds right now ... are better than stocks and
commodities," Oxman said.
The gold contract for December delivery <GCZ8> settled up
$5.90 at $894.40 an ounce on the COMEX division of the New York
Mercantile Exchange. It surged above $930 in after-hours screen
trade.
"For the moment, it is breaking away from its slavish
attachment to the dollar," said Stephen Briggs, metals analyst
at RBS Global Banking & Markets.
"It doesn't look as though the financial problems are going
to pass quickly, so this is gold's moment in the sun," Briggs
said.
Spot gold <XAU=> was quoted at $905.95/911.95 an ounce at
3:05 p.m. EDT (1805 GMT), up 2.6 percent from gold's nominal
Friday close at $883.25.
Later, it surged near a two-month high as U.S. stocks
plummeted 7 percent on the bailout rejection news.
The falls prompted a flight to safety among investors. The
U.S. 30-year Treasury bond gained more than 4 full points in a
powerful safe haven rally. []
"A lot of people who would never have thought about gold
are seeing it as a safe asset right now," said Commerzbank
senior trader Michael Kempinski.
The other main external driver of gold, crude oil <CLc1>,
closed down $10.52 at $96.37 per barrel as traders worried the
turmoil in financial markets would affect demand. []
SUPPLY, DEMAND SUPPORT
Gold is also benefitting from positive supply and demand
news. Germany's Bundesbank said on Monday it does not plan to
sell any of its gold reserves over the next 12 months, aside
from a small sale already agreed. []
Central bank selling has been an important source of supply
in recent years. Germany holds the world's second-largest gold
reserves after the United States.
Meanwhile, demand from gold-backed exchange-traded funds is
firm. Holdings of the world's largest bullion-backed ETF, SPDR
Gold Trust <GLD>, are at 724.63 tonnes, close to record
levels.
London-based ETF Securities said its gold holdings also
rose last week. []
Among other precious metals, silver <XAG=> dropped to
$13.07/13.17 an ounce, down 2.3 percent from Friday's nominal
close of $13.39.
Platinum <XPT=> slid to $1,080.00/1,100.00 an ounce against
its Friday close of $1,108 an ounce, while palladium <XPD=>
fell more than 4 percent to $211.50/219.50 from $221 late on
Friday.
Zurich Cantonal Bank (ZKB) said the stock of metal it holds
to back its platinum exchange-traded fund <ZPLA.S> has risen 27
percent since July 23 to 83,000 ounces. []
(Editing by Jim Marshall)
