(updates prices)
By A. Ananthalakshmi
SINGAPORE, Feb 11 (Reuters) - Gold surged to its highest in 8-1/2 months on Thursday as investors bet that the Federal Reserve could find it hard to hike U.S. interest rates this year, while safe-haven demand amid a tumble in equities and the dollar also boosted the metal.
The Fed is unlikely to reverse its plan to raise interest rates further this year, but tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth have raised risks to the U.S. economy, Federal Reserve Chair Janet Yellen said on Wednesday. said she expected continued U.S. economic growth would allow the Fed to pursue its plan of "gradual" rate hikes, but her comments kept the central bank's options open.
A slowing of rate hikes could help bullion, keeping down the opportunity cost to hold it.
Spot gold XAU= jumped to an intra-day high of $1,213 an ounce, its highest since May 22, before paring gains to trade up 0.9 percent at $1,207.60 by 0730 GMT.
U.S. gold GCcv1 rose to an intra-day high of $1,215.30 an ounce, a near-nine-month peak.
"Stop loss orders are being triggered on the break of $1,200," said MKS Group trader Jason Cerisola.
Silver is also well bid, with the 200-day moving average providing critical support at $15.10, he said.
Silver XAG= rose 0.6 percent to $15.37 an ounce, not far from a three-month high reached earlier this week.
"Yellen made it clear that while the Fed still expects to continue on its gradual tightening path, policy was not on a pre-set course and would respond appropriately to developments," ANZ analysts said in a note, adding that gold prices will likely get some support from the dovish Fed outlook.
Bullion was also supported by inflows into safe-haven assets as investors fretted over the Fed's rate hike path.
Asian shares sputtered on Thursday, while the dollar fell to a 15-month low verses the Japanese yen.
Longer-term U.S. debt rallied hard as investors wagered that either the Fed would be unable to tighten at even a gradual pace, or that if it did hike it would only hasten the arrival of recession and deflation. spread between 10-year and two-year U.S. Treasuries shrank to the smallest since late 2007 just before the global financial crisis hit.
PRICES AT 0730 GMT
Metal
Last
Change Pct chg
Spot gold
1207.6
10.49
0.88 Spot silver
15.371
0.095
0.62 Spot platinum
931
-1.24
-0.13 Spot palladium
522.1
2.38
0.46 Comex gold
1208.3
13.7
1.15 Comex silver
15.395
0.113
0.74
COMEX gold and silver contracts show the most active months