* Gold hits 4th high in row as Fed inches nearer to action
* Dollar slips on Fed statement; euro rides to 6-week high
* Oil falls amid high inventories, Fed's economic outlook
* Stock gains fade, bonds jump as Fed nears more easing
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Sept 21 (Reuters) - Gold prices hit new highs on
Tuesday on inflation fears after the Federal Reserve inched
closer to boosting money supply to spur the struggling U.S.
economy, a potential move that led stocks' rise to fade.
The dollar fell sharply against the yen and euro after the
Fed suggested it stood ready to further stimulate the U.S.
economy, raising fears it may print more dollars to do so. For
details see: []
The yen shot through the 85 level for the first time since
Japan intervened to weaken the currency last week, while the
euro surged to a six-week high against the dollar to break
above its 200-day moving average for the first time since
January.
The December futures contract for Japan's Nikkei 225 stock
index <0#NK:>, which trades in Chicago, was down 140 points at
9,575.
Stocks initially popped higher but gave back their gains as
investors who had hoped that with recent improvements in
economic data, the Fed would issue a more upbeat outlook or
clarify the measures it would take to stimulate demand.
With the S&P 500 up about 9 percent this month, investors
are conflicted as to whether any move by the Fed would be
enough to put the economy on a more sustainable growth path.
"One interpretation would be that things are deteriorating
and therefore they need to do more. On the other hand, the
favorable aspect of it would be they're going to print more
money to boost asset prices," said Bucky Hellwig, senior vice
president at BB&T Wealth Management in Birmingham, Alabama.
World stocks, as measured by MSCI <.MIWD00000PUS>,
initially rebounded after the Fed statement but then fell 0.2
percent.
U.S. indexes were mixed, with the Dow edging higher.
The Dow Jones industrial average <> closed up 7.41
points, or 0.07 percent, at 10,761.03. The Standard & Poor's
500 Index <.SPX> was down 2.93 points, or 0.26 percent, at
1,139.78. The Nasdaq Composite Index <> was down 6.48
points, or 0.28 percent, at 2,349.35.
Crude oil prices fell for a fifth session in six days,
wilting amid high oil inventories and the Fed's continued
concern about a sluggish economic recovery. []
Crude futures extended losses on the Fed statement just
before the close of oil's open-outcry trading session in New
York.
The October U.S. crude contract, which expired on Tuesday,
helped keep pressure on other oil contracts.
U.S. crude contract for October <CLV0> delivery fell $1.34,
or 1.79 percent, to settle at $73.52 a barrel.
U.S. November crude <CLX0> fell $1.22, or 1.6 percent, to
settle at $74.97 a barrel.
In London, ICE Brent for November <LCOc1> fell 90 cents to
settle at $78.42.
U.S. Treasury prices rallied after the Fed signaled it was
open to more easing, driving the yield on two-year government
notes to a series of record lows on expectations short-term
rates will stay near zero longer than previously thought.
The price on two-year notes <US2YT=RR> traded up 3/32 in
price to yield a record low 0.424 percent.
Benchmark 10-year notes <US10YT=RR> rose more than a point
in price to yield 2.58 percent/
The euro <EUR=> was up 1.39 percent at $1.3246, after
climbing as high as 1.3281, its highest since Aug. 9, Reuters
data showed.
Against the yen, the dollar <JPY=> was down 0.72 percent at
85.06.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 1.10 percent at 80.443.
Gold rallied on the prospect of further Fed action to
prevent prices from falling. Investors were prompted to buy
bullion as a hedge against both economic uncertainty and
inflation.
Gold reversed early losses to rise to a record $1,290.70 an
ounce.
U.S. gold futures for December delivery <GCZ0> slipped
$6.50 during the trading session to settle at $1,274.30, but
jumped to a peak of $1,292.40 an ounce after the Fed
announcement.
(Reporting by Ryan Vlastelica, Chris Kelly, Richard Leong,
Nick Olivari and Robert Gibbons; Writing by Herbert Lash;
Editing by Kenneth Barry)
