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PRECIOUS-Gold soars to five-month high on Fed stimulus hopes


* Gold fell before rebounding $45, best monthly rise since
    * Bullion looks set to resume bull run and to test 2012
    * Some contend conditions do not warrant new Fed stimulus
    * Coming up: U.S. ISM manufacturing index Tuesday

 (Recasts, adds details, graphic link, updates market activity)
    By Frank Tang
    NEW YORK, Aug 31 (Reuters) - Gold surged 2 percent in heavy
trading on Friday to a five-month high, and looked set to resume
its years-long rally after Federal Reserve Chairman Ben
Bernanke's key speech raised hopes of a new round of monetary
stimulus for the U.S. economy.
    After trading in a range for four months, gold raced toward
the $1,700 an ounce level last seen in March. It looked poised
to test this year's high on improved investor sentiment and
technical buying. (Graphic:
    Gold posted its biggest daily gain in two months, sharply
outperforming U.S. equities which edged up in late trade. 
The metal posted a 4.5 percent gain in August, its third
straight monthly rise and its biggest since January. 
    In a speech to central bankers in Jackson Hole, Wyoming,
Bernanke spoke of "grave concern" about a stagnant labor market,
and said the economy faced "daunting" challenges. He stopped
short of saying the Fed was ready to buy government bonds in
another round of quantitative easing, or QE. 
    "The main catalyst for the reversal in gold has been that
Bernanke used the words 'grave concern' and the interpretation
is that there's going to be more QE if he's using such a dire
projection for the economy," said Jeffrey Sica, chief investment
officer of SICA Wealth Management, which has over $1 billion in
    Gold fell immediately following the release of Bernanke's
speech, then quickly rebounded $45 per ounce, or almost 3
percent from its session low, as investors digested his comments
and concluded they were stimulus friendly.
    Spot gold rose 1.8 percent at $1,685.89 an ounce by
3:15 p.m. EDT (1915 GMT) for its biggest one-day gain in two
months. It rebounded from a low of $1,646.73 an ounce.
    It climbed to a session high of $1,691.80 an ounce, the
highest since March 27.
    U.S. COMEX gold futures for December delivery settled
up $30.50 an ounce at $1,687.60, with the highest trading volume
in a month, preliminary Reuters data showed.
    Year to date, gold is up 8 percent -- still off the 15
percent gain it notched in January when the Fed indicated it
might unveil new monetary stimulus and said it would keep
interest rates near zero until at least late 2014.
    Since then, Bernanke's failure to hint at more easing had
prompted gold investors to reduce bullish bets and threatened to
end the metal's 11 consecutive years of bull rally.
    Silver rose 3.5 percent to $31.46 an ounce.

    Other analysts contend the Fed may stand pat due to data
this week showing improved consumer confidence, consumer
spending and the Fed's Beige Book report showing a pickup in
retail activity.
    In the absence of truly dire U.S. economic indicators, it is
unlikely that the Fed will launch any new easing before the U.S.
federal election, said Frank McGhee, head precious metals trader
of Integrated Brokerage Services LLC.
    Other traders said the Fed could wait for next week's
nonfarm payroll report before reaching a decision on stimulus at
its September policy meeting on Sept. 12-13.
    In the physical gold market, August sales of the U.S. Mint's
American Eagle gold coins are on track to be the weakest for the
month since 2007. Coin dealers, however, said business has
picked up late in the month. 
    Among platinum group metals, platinum was up 2
percent at $1,530.99 an ounce, while palladium rose 1.8
percent at $625.75 an ounce. 
 3:15 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1687.60  30.50   1.8  1647.10 1691.80  168,862
 US Silver SEP   31.37  1.003   3.3   30.255  31.495      838
 US Plat OCT   1537.30  33.60   2.2  1498.20 1541.10    8,818
 US Pall SEP    627.95  13.05   2.1   617.00  629.00      423
 Gold          1685.89  30.35   1.8  1647.73 1689.11         
 Silver         31.460  1.060   3.5   30.280  31.530
 Platinum      1530.99  29.89   2.0  1501.50 1537.50
 Palladium      625.75  10.95   1.8   609.75  627.25
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        177,280   145,320   183,664     17.09   -0.02
 US Silver       53,652    49,147    52,958     27.05   -0.43
 US Platinum      9,467    14,622     9,172      23.5    0.36
 US Palladium     4,281     7,167     4,633                  
 (Additional reporting by Jan Harvey in London; Editing by
Marguerita Choy, Sofina Mirza-Reid and David Gregorio)

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