December gold rose $13.50, or 1.8%, to close at $755 an ounce on the Comex division of the New York Mercantile Exchange. It surged as high as $775.30 earlier.

After regular floor trading ended, the Federal Reserve cut its key interest rate by half a percentage point. Gold moved higher in electronic trading.

"Some are beginning to extrapolate the medium- to long-term consequences of central-bank monetary creation," said Jeffrey Nichols, managing director at American Precious Metals Advisors. "The flashing lights that they are seeing ahead are the lights of inflation and currency depreciation," which could push gold higher.

Metals Advisors. "The flashing lights that they are seeing ahead are the lights of inflation and currency depreciation," which could push gold higher.

In currencies trading, the dollar moved lower against the euro and the British pound. The dollar index, which tracks the value of the greenback against other major currencies, lost 1%. See Currencies.

A weaker dollar tends to increase investors’ demand for gold as an alternative investment

Gold’s gains coincided with broad rallies in other commodities, including crude oil’s surge of more than 7%. , a benchmark gauging the prices of major commodities, jumped 5.9%.

Also in metals, the benchmark silver contract jumped 12%. Copper, a metal seen as an economic barometer, also surged 12%, rebounding for a third day from its three-year low.

"Recent movements in both the equity and currency markets suggest some risk appetite is beginning to return," said TheBullionDesk.com analyst James Moore in a note to clients

"This, coupled with the fact gold is considerably lower than at the start of the year and investors may look to further diversify their asset holdings, may allow gold to begin recouping some of its losses," he wrote.

Stock-market rallies

Also boosting commodities, stocks rallied around the world. Following a sharp rise in U.S. stocks Tuesday, markets made major gains in Asia and Europe on Wednesday. U.S. stocks finished mainly lower.

In gold spot trading, the London gold-fixing price — used as a benchmark for gold for immediate delivery — stood at $764 an ounce Wednesday afternoon local time, up $33.50 from Tuesday afternoon.

In exchange-traded funds, gold in the SPDR Gold Trust, the largest gold ETF, stood at 749.21 tons Tuesday, unchanged from Friday, according to the latest data from the fund. Gold held by the fund hit a record high of 770.64 tons on Oct. 10.

Gold futures have come under heavy selling pressure in recent weeks, with the benchmark contract falling in 10 of the past 14 sessions since closing above $900 an ounce on Oct. 8. It is now $84, or 10%, lower than it was at the beginning of this year.

In other trading, December copper closed at $2.088 a pound, while December silver ended at $9.805 an ounce. December palladium rose 7.3% to $197.10 an ounce, with January platinum ahead 1% to $816.60 an ounce.

NEW YORK/LONDON, Oct 28 (Reuters) - Gold prices ended higher on Tuesday as a sharp recovery by global stock markets and a dollar pullback triggered fresh buying ahead of a key interest rate decision by the U.S. Federal Reserve.
“It’s going to be an unknown how we will work out this financial crisis, but gold’s value relative to other assets is going to get a higher premium because gold is not part of the ‘tainted’ financial system,” said Robert Lutts, president of Cabot Money Management, which oversees $400 million of client assets.
Spot gold was at $737.50 an ounce at 2:24 p.m. EDT (1824 GMT), up 1.1 percent from Monday’s close of $729.60.
U.S. gold futures for December delivery settled down $2.40 at $740.50 an ounce on the COMEX division of the New York Mercantile Exchange.
Gold has fallen 20 percent since it hit a high of $931 on Oct. 10 as investors liquidated commodities and other assets to cover losses in the stock markets.
The dollar and the yen retreated from early highs as a 800-point rally in the Dow Jones industrial average led investors to lock in recent steep gains in carry trades involving the two currencies.
Lower gold output as a result of higher production costs and difficulties in finding new reserves should also support gold prices, gold mining executives said.
Rene Marion, chief executive of Gammon Gold, a Canada-based gold miner, said that bullion prices should rise further during a difficult credit environment.
“Currently, everybody is stretching to rethink their capital projects. I think you will see reduction in gold going forward fairly quickly,” Marion said. He expected gold prices to reach $1,500 an ounce by the end of next year. Cabot’s Lutts said that positive supply/demand fundamentals in the long run would allow prices well over $2,000 to be achievable in the next several years. “I think we are pretty close to an inflection point (in gold) where we could be seeing some stabilization, and it all rests on the dollar halting its run, and the fear coming out of all markets,” Lutts said.
Traders were watching the two-day rate-setting meeting of the U.S. Federal Open Market Committee, which was widely expected to cut rates in its decision on Wednesday.

PLATINUM, PALLADIUM JUMP

Platinum rebounded, climbing by 6 percent to its session high of $821.50, as the softer dollar boosted interest in the precious metal.
The metal was pressured to five-year lows on Monday amid fears of falling demand from carmakers, who account for about half of annual platinum consumption for catalytic converters.
“This might help turn attention back onto supply-side issues,” said Tom Kendall, precious metals strategist at Mitsubishi Corp. “Though undoubtedly (there is) more bad news to come from auto sector too in the weeks ahead.”
Spot platinum was quoted at $788.00 an ounce, higher than the $772.50 in late New York trade on Monday. Palladium rose sharply to end at $176.50 an ounce, up from Monday’s close of $167.50.
Spot silver dipped to $8.81 an ounce an ounce from its previous finish of $9.01.
Holdings of the world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, fell a further 1 percent on Monday and were down 144 tonnes week on week. (Editing by Walter Bagley)

SINGAPORE: Gold rebounded on Tuesday, after falling more than 3 per cent the previous day, as the euro bounced against the dollar but weak equity mar
kets and falling oil prices could limit further gains.Gold was trading at $732.85 an ounce, up $3.25 from New York’s notional close on Monday, when it hit a session low of $706.10 an ounce. It struck a 13-month low of $680.80 last week.

The euro edged up to $1.2448. Japan’s Nikkei average edged down 0.3 per cent on Tuesday, a day after hitting a 26-year closing low.

US crude futures fell for a third day to below $63 a barrel on Tuesday, as global recession concerns continued to dent demand.

Platinum was trading at $769.50 ounce, down $3 from New York’s notional close.

New York gold futures fell $8.8 an ounce to $734.7.

Precious metals prices at 0036 GMT Metal Last Change Pct chg YTD pct chg Turnover .

Oct. 22 (Bloomberg) — Gold is for rich guys — buying physical gold, that is. The metal’s highest and best investment use is as insurance policy against a currency collapse. For that purpose, you need a lot of it, stored around the world. Owning 20 or 30 coins is nice but won’t protect your standard of living in a world where dollars are dust.

Gold isn’t even a reliable hedge against inflation. It reached $850 an ounce in January 1980, a price not seen again until January 2008. During those intervening 28 years, gold plunged and reared but lost more than half of its purchasing power. For a 1980 investor to break even after inflation, gold would have to reach $2,200.

It might, but how long did you plan to wait?

For the average investor, gold boils down to a speculation on higher prices. The latest run-up started in August 2007, when the housing market visibly started falling apart. From $652, it raced up to $1,003 an ounce last March, zig-zagged back to $747 in September, jumped to $905, then slid to $772 as of yesterday.

Hedge funds drove the market but individuals jumped in, too. So far this year, investors have purchased 611,000 newly minted, one-ounce U.S. gold coins, compared with 315,000 in all of 2007.

“We’ve seen a switch in appetite, with investors moving from futures to physical gold, either owning it directly or going through exchange-traded funds,” says Suki Cooper, an analyst at London-based Barclays Capital.

Coins purchased strictly for their gold value, not their numismatic value, are known as bullion coins. Many countries mint them — South Africa (Krugerrand), Canada (Maple Leaf), China (Panda), Austria (Philharmonic) and Australia (Kangaroo), among others. The U.S. Mint makes Buffalos and American Eagles. For investment purposes, you want the one-ounce size.

Supply Shrinks

That is, if you can find them. The yearlong run on bullion has dried up the supply of coins for immediate delivery. Everything was out of stock last week at the online dealer onlygold.com. Kitco.com had Maples at 7 percent more than the spot gold price.

“The premium will likely come down 1 or 2 percent when all coin supplies improve a bit,” says Jon Nadler, senior analyst for Kitco Metals & Minerals in Montreal.

The various mints project the number of coins they expect to sell each year and produce on demand. Toward the end of each year, they let their inventories run down while gearing up for next year’s run. The surge of buyers left them short of high- quality blanks.

Currently, the U.S. Mint is striking only a limited number of 2008 Eagles. The wholesalers are on allocation. No Buffalos are being shipped at all, although a small number might still be minted before the end of the year. By late December, dealers expect to start receiving 2009 coins.

Coin of the Realm

For U.S. investors, American Eagles are the bullion coin of choice. You can put them into individual retirement accounts as long as they remain in their original U.S. Mint capsules. (It’s not clear that Buffalos are allowed.)

Eagles also slip through a loophole in the tax reporting law, says Scott Travers, author of “The Coin Collector’s Survival Manual.” Dealers have to report to the Internal Revenue Service if you sell 25 or more Maples or Krugerrands. They’re not required to report your sales of American Eagles and some other coins, although some may do so. (Kitco, in Canada, says it does no tax reporting at all.)

Normally, one-ounce Eagles sell for 5.5 percent to 7.5 percent over the gold price, Nadler says. Small dealers might mark up the price even more.

In this buying panic, I saw online dealers charging as much as 13 percent more than spot gold. Their Web sites warned that there might be a wait before your Eagles could be shipped.

Fool’s Gold

On EBay and the Home Shopping Network, coins sell at fantasy prices. A set of Eagles in four different weights was offered on HSN at $4,999.99. In gold, it’s worth about $1,450. Prices like these take advantage of neophytes. A coin dealer might sell a four-coin set for $1,850, Travers says.

A cheaper way of buying gold is through an exchange traded fund. The most widely traded fund, SPDR Gold Shares, costs 0.4 percent a year in fees, plus your brokerage commission. You don’t own the gold directly. A trust holds large gold bars (warehoused principally in London) and sells shares against them, which are traded on the open market. You can’t redeem in gold itself.

It costs even less to buy bullion in a pool account, such as the ones offered by Kitco. Like an ETF, a pool account sells shares in a large bar of warehoused gold. You pay just a hair over the spot gold price, and sell it back to Kitco for just a hair under. There are no annual expenses. For a fee, you can redeem in gold itself. As with ETFs, you depend on the pool’s trustee to support its guarantee.

Gold, by the way, is taxed as a collectible — whether you buy it in the form of coins, ETF shares or an interest in a pool account. Your tax rate on long-term capital gains would be 28 percent, compared with 15 percent on other assets. Only a significant price gain (or currency collapse) redeems your bet.

(Jane Bryant Quinn, a leading personal finance writer and author of “Smart and Simple Financial Strategies for Busy People,” is a Bloomberg News columnist. She is a director of Bloomberg LP, parent of Bloomberg News. The opinions expressed are her own.)

To contact the writer of this column: Jane Bryant Quinn in New York at jbquinn@bloomberg.net