Gold soars 4.2 pct after Fed's surprise on stimulus

NEW YORK/LONDON (19/9) - Reuters - Gold surged more than 4 percent to above $1,360 an ounce on Wednesday, its biggest one-day rally since June 2012, after the U.S. Federal Reserve's decision to continue buying bonds unleashed pent-up buying by investors who had braced for cuts. The move by the U.S. central bank to continue its $85 billion monthly buying pace due to worries about rising borrowing costs surprised financial markets that were broadly braced for a reduction in the central bank's monetary stimulus. Silver rallied around 7 percent, its biggest one-day gain since November 2008. Citing strains in the economy from tight fiscal policy and higher mortgage rates, the Fed decided against the tapering of asset purchases that investors had all but priced into asset markets across the board. The metal is a traditional hedge against inflation and economic uncertainty particularly those brought by central-bank actions. After the Fed announcement, gold's gains sharply outpaced other markets', with the S&P 500 equities index rallying 1.2 percent to a record high and the Thomson-Reuters CRB index up around 1 percent led by crude oil's gains. A one-percent drop in the dollar index also underpinned gold buying. Spot gold was up 4.2 percent to $1,364.01 an ounce by 3:46 p.m. EDT (1946 GMT), its biggest one-day percentage gain since June 1, 2012. It rebounded about $70, or 5.5 percent from a six-week low at $1,291.34 set earlier in the session. U.S. Comex gold futures for December settled down $1.80 an ounce at $1,307.60 prior to the Fed announcement. The pace of trading was hectic after the Fed announcement, with volume at 240,000 lots, already at 50 percent above its 30-day average, set to be the strongest daily turnover in two months, preliminary Reuters data showed. Gold now rose above its 100-day moving average at $1,350, but is still some $70 below a four-month high at $1,433 set on Aug. 28. http://www.reuters.com/article/2013/09/18/markets-precious-idUSL3N0HE1E220130918