* Fed announces $600 bln in easing measures, dollar drops
* Silver hits 30-year peak, palladium fresh 9-1/2 year high
* ECB opts to keep interest rates on hold; Trichet eyed
(Updates prices, adds detail)
By Jan Harvey
LONDON, Nov 4 (Reuters) - Gold soared to within a whisker of
its record high on Thursday as the U.S. dollar plunged against a
currency basket after the Federal Reserve said it would pump
$600 billion into financial markets to boost the U.S. economy.
The Federal Reserve committed to buy billions of dollars'
worth of government bonds late on Wednesday in a fresh effort to
support a struggling U.S. economy, undermining the U.S. currency
and stoking fears over longer-term inflation. []
Spot gold <XAU=> hit a high of $1,381.20 an ounce, up 2
percent and close to its record $1,387.10, and was bid at
$1,376.90 an ounce at 1314 GMT, against $1,347.15 late in New
York on Wednesday. U.S. gold futures for December delivery
<GCZ0> rose $40.00 to $1,377.60.
The Fed's move sparked a rally across the precious metals,
with silver climbing 3 percent to its highest since 1980,
palladium up nearly 5 percent to a 9-1/2 year peak and platinum
reaching its strongest since May.
"There is definitely going to be some more fallout from what
has been announced," said Credit Suisse analyst Tom Kendall.
"Clearly this is contributing to the bearishness on the U.S.
dollar, and that is bullish for all commodities, not just gold."
The dollar fell sharply on Thursday, sliding 1 percent
against a basket of currencies, as the market concluded that the
Fed's move spelled more dollar supply that would be likely to
weigh it down further. [] []
Weakness in the U.S. unit tends to benefit dollar-priced
commodities in general as it makes them cheaper for other
currency holders, but gold in particular, as it can be bought as
an alternative asset to the currency.
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For a graphic showing the relationship between QE2, interest
rates, gold and the dollar, click: http://r.reuters.com/dux73q
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Currency analysts are waiting to see what the broader
implications of the Fed's move will be in what is still a heavy
news week on the macroeconomic front.
"As a result of last night's decision, the risk of tensions
within emerging market economies has risen as officials from
Brazil, South Korea and China pledged to take steps to curb
capital inflows," said CMC Markets analysts in a note.
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For Reuters report on the implications of quantitative
easing, click on: http://r.reuters.com/cyh73q
For text of NY Fed statement, click on: []
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ECB STATEMENT EYED
The euro <EUR=> maintained gains and held near a 9-1/2 month
high against the dollar after the European Central Bank opted to
keep interest rates unchanged as expected. []
The currency markets are now closely watching a statement by
ECB chairman Jean-Claude Trichet for an early hint on whether
the bank will phase out more crisis support measures in January.
On the physical side of the gold market, Indian demand was
strong during the week of the Dhanteras festival, which
celebrates prosperity, and the Diwali festival of light. Scrap
sales also slowed to a trickle. []
Among other precious metals, silver <XAG=> rose to a 30-year
high at $25.58 an ounce, tracking gains in gold, and was later
at $25.49 against $24.80.
Palladium meanwhile rallied to its strongest since May 2001,
lifted by strength in gold and expectations its underlying
fundamentals will improve as demand from automakers recovers and
supply struggles to keep pace.
"Tracking gold is part of the story, but there is talk in
the market that Russian state stocks are nearly depleted -- that
story has come back every year for 10 years now -- and there is
a lot of investment buying on back of that," said one European
PGMs trader.
Palladium <XPD=> peaked at $674 an ounce and was later at
$667.22 an ounce against $643.72 late on Wednesday. Platinum
<XPT=> rose to a near five-month high at $1,747.99 an ounce and
was later at $1,738.99 an ounce against $1,703.
(Editing by James Jukwey)
