Gold surges 3.5 pct on dollar, equity slip

By Jan Harvey

LONDON (Reuters) - Gold surged 3.5 percent on Thursday as the dollar weakened against the euro and as equity markets slipped.

The U.S. currency had already traded lower for much of the session as expectations for a U.S. rate hike receded after comments from the Federal Reserve on Wednesday.

Gold XAU= rose to $909.60/910.60 an ounce at 10:10 a.m. EDT from $879.60/880.60 an ounce late in New York on Wednesday. Earlier in the session it touched $910.60, its highest level since May 27.

The combination of a weak dollar and a slide in the equity markets on concerns over the health of the automotive sector "has been critical for gold", Merrill Lynch analyst Daniel Hynes said.

"This has set gold off again after it had been stuck in a trend for a while now," he said.

Platinum and silver tracked gold higher, rising 3 percent and nearly 5 percent respectively.

The U.S. Federal Reserve dampened hopes for a rate hike, saying inflation, while still a worry, was likely to temper later in the year.

"The Fed wasn't as hawkish as the market expected, hence the dollar is under pressure," said JP Morgan analyst Michael Jansen.