PRECIOUS-Gold up but off high after volatile post-Fed trade

* Bullion hits record near $1,800; then swings after Fed

* Gold also at all-time peak in euro, sterling

* ETF holdings touches record highs (Recasts throughout, updates prices and market activity to settlement; drops LONDON from dateline)

By Barani Krishnan

NEW YORK, Aug 9 (Reuters) - Gold rallied for a second day on Tuesday, hitting a record high early, then churning until it finally settled more than 1 percent higher after the Federal Reserve boosted Wall Street with a plan to keep U.S. rates low.

Trade was volatile as investors periodically took profits on the rally of nearly 5 percent over the last two days -- among the biggest two-day advances for gold since November 2008, when the financial crisis was escalating.

Both bullion and gold futures jumped more than 3 percent in early and late trade -- hitting record highs of nearly $1,800 first on fears about the global economy and reapproaching those levels after the Fed statement before paring gains.

"I think investors have got a lot smarter since 2008," said Michael Daly, precious metals analyst at PFGBest in Chicago.

"They've come to realize that gold's one of the easiest things to liquidate for profit in a crisis and that's why everybody's piling into this market."

Since the end of June, gold has gained some 13 percent.

At least one major investor, BlackRock , confirmed analysts' theory that profits from gold were being used to cover losses or enlarge stakes in other markets.

James Holt, investment strategist at Blackrock, told Reuters the world's largest money manager planned to use returns from its gold and bonds investments to seek out bargains in falling global equity markets. [ID:nL3E7J9144]

The spot price of gold , which tracks trading in bullion, was around $1,737 an ounce late Tuesday afternooon, up about 1.2 percent from Monday's close. It traded above $1,750 after the Fed statement and hit a record high above $1,778 earlier.

Spot gold priced in euros , sterling and yen also hit record highs.

U.S. gold futures for December delivery stood just above $1,740 in late trade on the New York Mercantile Exchange's COMEX metals division. It rose above $1,750 post-Fed and hit a record high above $1,782 earlier. December gold settled Tuesday's official trading session at $1,743, versus Monday's $1,713.20.

Technically, the yellow metal appeared well supported for further gains, albeit after a pullback, some said.

"We're well above all the daily-moving averages; the 21; the 55; the 100; and the 200. So that suggests upside momentum," said Eric Viloria, senior technical strategist at forex.com.

"But it looks like gold's little exhausted in this area even if the long-term trend still remains upward. We'll be looking for a potential correction. But I'll also view any correction as an opportunity to buy further."

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Graphics:

Inflation adjusted gold price: http://r.reuters.com/pun62s

Biggest weekly equity falls:

http://link.reuters.com/pud23s

Asset returns in the last week:

http://link.reuters.com/xus92s

Ratio between gold and U.S. oil:

http://graphics.thomsonreuters.com/WT1/20110808175037.jpg

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ANZ's head of metal sales Peter Hillyard expressed a similar sentiment.

"The market could come off from here, but it's headed in a northerly direction. From where we are now, you might think we could see some sort of pull-back. But I'm talking about a momentary thing, a pull-back like the loading of a gun, which then fires away."

The Fed, in an unprecedented move, said it will keep interest rates near zero at least until 2013 and is considering further action, which it did it not specify.

Stocks on Wall Street surged, recovering partially from Monday's battering, as many read the central bank's open-ended action pledge as an indication that it might inject more money into markets after the $600 billion stimulus that ended in June. U.S. oil prices, however, fell sharply to below $80 per barrel due to the lack of details in the Fed pledge. [.N] [O/R]

"The statement was extremely negative in its outlook on the economy," said Omer Esiner, chief market analysts at Commonwealth Foreign Exchange in Washington.

"By pegging the extraordinarily low interest rates to a date in the distant future, the Fed has essentially said that they see the current level of weakness lasting far longer than previously expected."

A Reuters poll showed the United States faced a one-in-four chance of slipping back into recession, and there was potential for more Fed stimulus to avert that. [ECILT/US] [ECILT/WRAP]

"Anytime you have weak growth and money injection, it's a recipe for a gold rally," said Daly at PFGBest.

Reflecting the rush into gold, holdings of metal in exchange-traded funds rose for a twelfth day to an all-time high near 70 million ounces, equivalent about half of total supply in 2010, based on World Gold Council data. [GOL/ETF]

Among other precious metals, silver fell around 3.5 percent on the day to just below $38 an ounce.

Platinum rose about 2 percent to around $1,748 an ounce, while palladium climbed 2.7 percent to around $734 an ounce.

(Additional reporting by Amanda Cooper and Jan Harvey in London; Editing by David Gregorio)