* Gold near record $1,720 as investors shun riskier assets
* Bullion investors look for hint of QE at FOMC meeting
* Analysts expect gold prices to hit $2,500 by year-end
* Coming up: U.S. FOMC policy statement due on Tuesday (Updates comment, market activity)
By Frank Tang
NEW YORK, Aug 8 (Reuters) - Gold surged more than 3 percent on Monday, surpassing $1,700 an ounce for the first time after Standard & Poor's cut the top-notch AAA credit rating of the United States, setting off an investor stampede for safety.
In a rout reminiscent of the 2008 financial crisis, Wall Street plunged nearly 7 percent and other commodities collapsed as panicky investors sought refuge in bullion and U.S. Treasuries.
Analysts scrambled to revise up gold forecasts and gold volatility spiked as options traders put on bullish bets.
News on Sunday of a European Central Bank bond-buying program to help shore up Italian and Spanish debt proved too little to soothe global market fears of a double-dip recession, greater government intervention and further market turmoil, any of which could extend gold's 15 percent rally since July.
In the first session since S&P's downgrade, U.S. gold
futures
"People are concerned about outright default of sovereign debt in Europe, and inflation in the United States because of money printing," said Evan Smith, a portfolio manager at U.S. Global Investors, which has $2.5 billion in assets.
"Gold will continue to move higher ... It doesn't appear that policies on government spending and debt reduction will change in the near term," Smith said.
Spot gold
Silver
U.S. gold futures for December delivery
Bullion's $50 gain was also its biggest one-day price increase since November 2008, when equity markets plummeted following the Lehman Brothers bankruptcy.
Adjusted for inflation, bullion is one of the few in the commodity complex trading below its adjusted all-time highs estimated at $2,500 an ounce.
JPMorgan
The prospect of an even longer period of low U.S. interest
rates prompted Goldman Sachs
GOLD VOLATILITY SPIKES
The CBOE Gold ETF Volatility Index <.GVZ>, which is often
referred to as the "Gold VIX" and is based on SPDR Gold Trust
"At any given moment the world's central banks could step up in an effort to calm a frantic situation. Gold may have been a one-way bet for some investors but as the risks to growth reach boiling point, so too does the price of protecting against a volatile movement in either direction," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.
The share prices of gold producers, measured by the ARCA
Gold BUGS index <.HUI>, sharply lagged bullion as Wall Street
dived. Still, Barrick Gold's
Gold benefited from safe-haven buying even as the ECB purchased about 2 billion euros in Italian and Spanish debt, the first time the central bank broadened its bond-buying program to include the euro zone's third- and fourth-biggest economies, aiming to avert a financial meltdown. [GVD/EUR]
"Investors are looking upon the ECB bond-buying as the first step towards the same kind of quantitative easing program the Fed is doing," said James Rife, assistant portfolio manager at Haber Trilix Advisors, which manages $2 billion in assets.
"So, gold acts as the only currency that you can't print more of, and you are seeing a huge institutional demand for it."
The price of the yellow metal rose above that of platinum
for the first time since December 2008. Platinum prices turned
lower on worries about demand from carmakers and were last up
0.1 percent at $1,713.49 an ounce
Palladium
SETTLE CHNG CHNG VOL US Gold DEC 1713.20 61.40 3.7 1681.70 1723.40 255,250 US Silver SEP 39.38 1.169 3.1 38.320 40.400 70,953 US Plat OCT 1723.60 4.50 0.3 1709.00 1732.90 9,281 US Pall SEP 728.50 -13.25 -1.8 713.00 743.50 3,853 Gold 1714.29 52.04 3.1 1663.14 1719.99 Silver 38.900 0.610 1.6 38.330 40.340 Platinum 1713.49 1.14 0.1 1710.00 1727.50 Palladium 716.97 -22.78 -3.1 717.02 739.75 TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 290,301 203,893 180,252 21 0.09 US Silver 88,678 71,775 60,150 47.85 1.63 US Platinum 9,427 6,481 7,531 22 2.00 US Palladium 4,083 3,799 3,928 (Additional reporting by Doris Frankel in Chicago, Amanda Cooper and Jan Harvey in London; Editing by Alden Bentley and Dale Hudson)