* Gold prices jump after Fed says to buy gov't debt
* Gold to benefit from money-supply increase, low rates
* Platinum/gold ratio declines as yellow metal outperforms
* Coming up: U.S. federal budget due Wednesday
(Recasts, adds details on FOMC reaction)
By Frank Tang
NEW YORK, Aug 10 (Reuters) - Gold prices turned higher on
Tuesday as safe-haven demand increased after the U.S. Federal
Reserve said it would buy more government debt to boost a
sputtering economic recovery.
The significant policy shift by the central bank, combined
with record-low interest rates and stimulus spending, spurred
investors to buy bullion as a hedge against inflation.
"A higher monetary supply always leads to worries about
inflation longer term, and it tends to be good for hard assets
like gold," said James Steel, chief commodity analyst at HSBC.
"Quantitative easing keeps the yield curve steep, increases
money supply and keeps short-term interest rate low -- all of
those things are positive for gold prices."
Spot gold <XAU=> was at $1,204.15 an ounce at 3:43 p.m. EDT
(1943 GMT), up from $1,200 late in New York on Monday.
U.S. gold futures for December delivery <GCZ0> were up
$3.80 at $1,206.40 an ounce, after settling at $1,198 prior to
the FOMC statement.
Gold benefited from renewed economic uncertainty after the
Fed's decision to reinvest proceeds from more than $1.3
trillion mortgage debt it holds, representing a significant
policy shift. []
Just a few months ago, the U.S. central bank had been
avidly debating an exit strategy from the extraordinary
stimulus delivered during the financial crisis.
The Fed also left benchmark overnight interest rates steady
in a zero to 0.25 percent range as widely expected.
In earlier trade, gold cut losses after government data
showed that U.S. business productivity fell for the first time
in 1-1/2 years in the second quarter and labor costs hardly
rose. []
A stronger dollar, however, kept gold prices lower prior to
the Fed's statement.
INDIAN BUYING
Gold's retreat from last week's three-week highs resulted
in a slight improvement in Asian physical demand.
Traders bought more metal in India, the world's largest
gold consumer, as prices eased below $1,200 an ounce.
[]
Physical gold demand tends to rise in August as jewelers
stockpile inventory ahead of the start of India's wedding
season and the Hindu festival of Dhanteras, traditionally major
gold-buying events.
Among other precious metals, silver <XAG=> was at $18.35 an
ounce versus $18.29, platinum <XPT=> was at $1,537.50 an ounce
versus $1,540 and palladium <XPD=> was at $473.50 versus $475.
The platinum-gold ratio -- a measure of how many ounces of
gold are needed to buy an ounce of platinum -- eased to a 2-1/2
week low of 1.28, showing gold was becoming increasingly
expensive compared to platinum. (Graphic:
http://link.reuters.com/wek34n)
Prices at 3:47 p.m. EDT (1947 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1198.00 -4.60 -0.4% 9.3%
US silver <SIU0> 18.158 -0.084 0.0% 7.8%
US platinum <PLV0> 1537.00 -5.90 -0.4% 4.5%
US palladium <PAU0> 470.60 -9.05 -1.9% 15.1%
Gold <XAU=> 1204.45 4.45 0.4% 9.9%
Silver <XAG=> 18.35 0.06 0.3% 9.0%
Platinum <XPT=> 1537.50 -2.50 -0.2% 4.9%
Palladium <XPD=> 473.50 -1.50 -0.3% 16.8%
Gold Fix <XAUFIX=> 1192.50 -4.25 -0.4% 8.0%
Silver Fix <XAGFIX=> 18.09 -39.00 -2.1% 6.5%
Platinum Fix <XPTFIX=> 1539.00 3.00 0.2% 5.0%
Palladium Fix <XPDFIX=> 479.00 3.00 0.6% 19.2%
(Additional reporting/graphic by Jan Harvey and Amanda Cooper
in London; Editing by Lisa Shumaker)
