* Gold briefly above $900 in flight to safety
* Central banks offer to pump billions into money markets
* SPDR Gold Trust reports 6 pct inflow in bullion holdings
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Sept 18 (Reuters) - Gold prices rose
sharply for a second straight day on Thursday, briefly trading
above $900 an ounce, as investors rushed to buy bullion as a
safe haven on fears of more trouble for the financial sector.
However, rising U.S. equities in volatile trade and central
banks' liquidity injection into the money market brought the
metal down from session highs,. although they did not severely
pressure gold.
Spot gold <XAU=> traded at $886.00/889.20 at 3:10 p.m. EDT
(1910 GMT), up 2.7 percent from $862.70 an ounce at the nominal
New York close on Tuesday.
Bullion hit a session high of $902.60, which marked the
strongest level since Aug. 4.
Frank Holmes, chief executive of U.S. Global Investors
<GROW.O>, which manages $5.1 billion of mutual fund assets,
said that gold should benefit from the pent-up weakness of the
dollar and more disappointing news out of the financial
sector.
Holmes said gold should be trading at $950 an ounce.
U.S. stocks jumped almost 4 percent late in the session on
a Treasury plan to resolve the financial crisis. U.S. Treasury
Secretary Henry Paulson is talking about a Resolution
Trust-type solution to the financial crisis, according to a
source. []
"What we are seeing right now is investors seeking safe
heaven in the gold market," Saxo Bank global products manager
Philip Carlsson said. "These market conditions make it
difficult to predict about where we are headed."
Gold recorded a very volatile session, trading within a
broad $50 range.
Central banks, including the U.S. Federal Reserve, the
European Central Bank and the Bank of Japan, announced measures
to boost liquidity in the money market. []
U.S. gold futures for December delivery <GCZ8> settled up
$46.50, or 5.5 percent, at $897 an ounce on the COMEX division
of the New York Mercantile Exchange.
CRISIS
The precious metal soared $90 an ounce on Wednesday, its
biggest one-day dollar rise in history.
Banks are now running scared of lending to each other,
analysts said, and risk aversion is rife.
"What is left for people to put their money in?" Afshin
Nabavi, head of trading at MKS Finance, asked. "They can't
trust the banks. They can't trust insurance companies. They
can't trust the stock markets."
Gold is one of the few trustworthy assets left, he said.
Investment demand picked up strongly, with the world's
largest gold-backed exchange-traded fund, the SPDR Gold Trust
<GLD>, reporting an inflow of 36.46 tonnes, or 6 percent, on
Wednesday. []
The move brought the trust's holdings to 650.81 tonnes, a
two-and-a-half-week high.
Among other precious metals, silver <XAG=> tracked gold
higher, rising 5 percent to a session high of $12.99, before
easing back to trade at $12.41/12.51, against $12.00 an ounce
at the nominal New York close on Wednesday.
Platinum and palladium failed to follow bullion's rise,
instead tracking losses in base metals as investors worried
about the outlook for demand.
Platinum <XPT=> was at $1,088.50/1,118.50, against its
Wednesday finish of $1,118.00, while palladium <XPD=> was at
$230.50/238.50, against $243.00.
(Editing by Walter Bagley)
