* Gold rallies to fourth successive record high after Fed
* Fed says ready to act, if needed, to step up inflation
(Recasts, updates prices, market activity; adds graphic; adds
second byline)
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 taking new
steps to stimulate the U.S. economy and expressed concerns
about low inflation.
The prospect of further Fed action to prevent prices from
falling prompted investors to buy bullion as a hedge against
both economic uncertainty and inflation. This reversed a dip
early in the session that was spurred by signs of stability in
U.S. housing data. []
As expected, the U.S. central bank did not move to extend
the purchases of government debt, or quantitative easing, that
helped fuel gold's 17 percent gain this year. 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 <XAU=>, which had hit five record highs in the
past six days, reversed early losses and rose to a new record
of $1,290.70 an ounce by 3:56 p.m. EDT (1956 GMT) from around
$1,272 prior to the Fed announcement.
U.S. gold futures for December delivery <GCZ0> slipped
$6.50 during the trading session to settle at $1,274.30, but
after the Fed announcement the price jumped to a peak at
$1,292.40 an ounce.
Total COMEX gold trading volume was 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 slipped 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. This 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)
Further quantitative easing would probably be accompanied
by continuing low interest rates, which could undermine the
U.S. dollar. (Graphic: http://link.reuters.com/zav74p )
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
David Gregorio)
