* Gold up 0.5 pct to fourth successive record high on Fed
* Fed says ready to act, if needed, to step up inflation
(Recasts with Fed meeting, reaction)
By Frank Tang and Chris Kelly
NEW YORK, Sept 21 (Reuters) - Gold prices climbed to a
fourth consecutive record high near $1,300 an ounce on Tuesday
after the U.S. Federal Reserve inched nearer to fresh measures
to spur the U.S. economy and to stoke uncomfortably low
inflation.
The prospect of further Fed action to prevent prices from
falling renewed buying of bullion as a hedge against both
economic uncertainty and inflation, reversing an earlier dip
spurred by signs of stability in U.S. housing data.
[]
As expected, the U.S. central bank didn't move to extend
its quantitative easing policy that has underpinned gold's 17
percent gain this year, and helped it hit five record highs in
the past six days, but its renewed attention on the risk of
deflation was sufficient to put gold into the black.
"The committee will continue to monitor the economic
outlook and financial developments and is prepared to provide
additional accommodation if needed to support the economic
recovery and to return inflation, over time, to levels
consistent with its mandate," the Fed said in a statement.
Spot gold reversed early losses to rise 0.5 percent or
$6.30 an ounce to $1285.55 an ounce by 2:36 p.m. EDT (1836
GMT), up from around $1,272 prior to the Fed announcement. It
touched a record high of $1,288.50 an ounce.
U.S. gold futures for December delivery <GCZ0> climbed
$6.70 to $1,287.50, with total COMEX gold trading volume about
a quarter higher than the past 30-day average at around 133,000
lots.
"I think the gold bulls really got what they wanted from
this Fed policy statement," said Bill O'Neill, partner at LOGIC
Advisors in Upper Saddle River, New Jersey.
"Even though there's no fear of inflation, they actually
showed a fear for deflation, which is also bullish for gold as
it creates uncertainties. It looks like we are onward and
upward to $1,300."
Earlier in the day, gold eased after data showed that
groundbreaking for new U.S. homes jumped in August to a
four-month high, a bigger than expected rise that hinted at
some stability in the housing market after steep declined,
briefly diminished safe-haven demand for gold. []
The possibility of Fed stimulus has kept many traders
bullish about gold, which remained sharply below its
inflation-adjusted all-time high above $2,200 an ounce.
(Graphic: http://link.reuters.com/gup24p)
Any further round of quantitative easing would reflect
concern over the outlook for U.S. growth. Interest rates
probably would also remain lower longer, which could undermine
the U.S. dollar, and ultimately prove inflationary.
A weaker dollar often boosts gold. Although that inverse
relation has been shaky this year, the correlation has
strengthened in the last five days to a negative 0.5.
(Additional reporting by Jan Harvey in London; Editing by
Marguerita Choy)
