* Fed holds rates steady, signals potential cuts this year
* Silver hits nearly 3-month high
* Spot gold has gained over $80 so far this month
* Gold in Australian dollar breaches A$2,000 mark for first
time
* Spot gold may gain more to $1,404 per ounce - technicals
(Updates prices)
By Brijesh Patel
June 20 (Reuters) - Gold prices surged 2% to their highest
in more than five years on Thursday after the U.S. Federal
Reserve signalled possible interest rate cuts later this year,
sending the dollar lower and U.S. Treasury yields plunging.
Spot gold XAU= was up 1.7% at $1,382.70 per ounce as of
0657 GMT, after hitting its highest since March 17, 2014 at
$1,386.38.
U.S. gold futures GCcv1 jumped 2.8% to $1,386.30 an ounce,
after touching their highest since April 2018 at $1,397.70.
The Fed on Wednesday said it was ready to battle growing
global and domestic economic risks with interest rate cuts
beginning as early as next month, as it took stock of rising
trade tensions and growing concerns about weak inflation.
Lower interest rates decrease the opportunity cost of
holding non-yielding bullion and weigh on the dollar, making
gold cheaper for investors holding other currencies.
"The weakness in the dollar seen due to the rate cut
expectations and a lot of short-covering due to the sudden jump
in prices are behind the sharp move," said Benjamin Lu, an
analyst with Phillip Futures, adding that some of the weaker
stop losses were taken out.
"With this move, the target for gold investors has moved to
$1,400 and the key is to sustain this momentum for this week. On
the longer term, it is going to be difficult to stay above
$1,400 as with better conditions for riskier assets due to rate
cuts, investors might move to equities."
Even as the U.S. central bank left its benchmark interest
rate unchanged for now, the shift in sentiment since its last
policy meeting weighed on the dollar and U.S. Treasury yields.
USD/ US/
"Gold has taken a nice leg up" on the back of falling yields
and dollar, said Chris Weston, head of research at
Melbourne-based foreign exchange brokerage Pepperstone.
"The question now is if there is going to be a 50 basis
point cut in July, which could take gold into $1,400."
Meanwhile, gold priced in Australian dollars XAUAUD=R
surpassed A$2,000 for the first time, hitting a record high of
A$2007.82.
Gold prices have gained more than $80 so far this month.
"It is a completely momentum trade out here... There is a
big emotional situation out here with gold trading at multi-year
highs, which brings the fear of missing (factor). Gold is
rallying in every currency and that for me is a truly bullish
market," Weston added.
Spot gold may gain more to $1,404 per ounce, as it has
cleared a resistance at $1,371, according to Reuters technical
analyst Wang Tao. Other precious metals also rose, with silver XAG= gaining
1.1% to $15.31 per ounce, its highest in nearly three months,
while platinum XPT= climbed 0.6% to $815.84 per ounce.
Palladium XPD= rose 1.1% to $1,517.05 per ounce, its
highest in 12 weeks.
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Gold prices climb to multi-year highs after U.S. Fed hints at
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