SINGAPORE, March 1 (Reuters) - Spot gold rose more
than 1 percent on Thursday, as its biggest daily decline in more
than three years attracted buyers who bet on a further rally in
bullion despite the slightly hawkish tone of U.S. Federal
Reserve Chairman Ben Bernanke.	
     Asia's physical gold market witnessed a buying frenzy as
jewellers, traders and investors rushed to take advantage of the
nearly $100 drop in prices overnight, helping to boost prices.	
    Investors had hoped the Fed will launch another round of
quantitative easing, pushing cheap money into the market that
would boost inflation, against which gold is a traditional
hedge, and give investors additional firepower to buy bullion.	
    But Bernanke stopped short of signalling more asset buying
in an otherwise dovish testimony in front of Congress, driving
down stock markets and boosting the dollar. 	
    While the chances of quantitative easing were reduced, the
Fed will likely adopt some measures to promote growth, said Dong
Tao, chief regional economist for Credit Suisse in Hong Kong.	
    "But liquidity will remain the driver of financial markets
-- this story has not changed, although it will be a fragile
story in the sense that markets will be highly volatile," Tao
added.	
    Spot gold rose 1.5 percent to $1,720.33 an
ounce by 0606 GMT, rebounding after a 5 percent fall on
Wednesday, its largest one-day loss since December 2008.	
    Gold prices rose rapidly after the Shanghai Gold Exchange
started trading in the morning, as investors took advantage of a
$10 discount in spot prices in the global market versus Shanghai
prices. The discount has since narrowed, with Shanghai gold
 trading at 349.30 yuan a gram, or $1,724.32 an
ounce.	
    U.S. gold gained 0.6 percent to $1,721.60.	
    Bullion is still up 10 percent this year, on track for its
twelfth annual gain, as interest rates remain low and central
banks boost liquidity.	
    Banks took 530 billion euros of cheap three-year funds from
the European Central bank of Wednesday, bringing to over a
trillion euros the amount of money the bank has injected into
the financial system in two months. 	
    Technical analysis suggested that spot gold's rebound may
end at $1,726 an ounce, said Reuters market analyst Wang Tao.
 	
    	
    	
    BUYING OPPORTUNITY	
    Gold's long-term outlook remains intact despite Bernanke
refraining from indicating further quantitative easing, and the
sharp drop in prices provided a good buying opportunity, traders
said.	
    "It's been a long time since we see such decent buying,"
said a Hong Kong-based dealer, "The fact that Bernanke did not
mention more quantitative easing was an excuse to sell, but
people are still confident in gold."	
    He added that $1,700 should provide a firm support for gold.	
    Dealers said buying came from across Asia, including China,
Thailand and Indonesia.	
    As a sign of unwavering interest in gold, holdings in the
SPDR Gold Trust, the world's largest gold-backed exchange-traded
fund, gained 0.7 percent on Feb. 29 to 1,293.676 tonnes, its
highest in two and a half months. 	
    So long as real interest rates stay low gold will remain
attractive, said analysts. In January, the Fed pledged to keep
interest rates low until at least 2014.	
    Other precious metals also staged rebounds. Spot silver
 rose 0.9 percent to $34.91, after shedding more than 6
percent in the previous session.	
    Spot platinum climbed 1 percent to $1,691.99, and
spot palladium rebounded 0.4 percent to $700.97.	
    	
     Precious metals prices 0606 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1720.33   25.09   +1.48     10.01
  Spot Silver        34.91    0.32   +0.93     26.07
  Spot Platinum    1691.99   17.25   +1.03     21.46
  Spot Palladium    700.97    2.50   +0.36      7.43
  COMEX GOLD APR2  1721.60   10.30   +0.60      9.88        37276
  COMEX SILVER MAR2  35.00    0.41   +1.19     25.36           40
  Euro/Dollar       1.3346
  Dollar/Yen         81.04

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