"The unusual move by the Federal Reserve had a slight air of menace about it as it suggested liquidity problems may be greater than expected, which may prompt more safe-haven buying of gold," said Dinsa Mehta, managing director for global commodities at Chase Manhattan Bank in New York.

"But in the longer term it may also mean the world is beginning a reflationary cycle which may also make gold more attractive," he said. The Federal Reserve cut its federal funds rate by 0.25 percentage points to 5.00 percent and cut the discount rate by the same amount to 4.75 per cent.

The Federal Reserve only recently cut the Federal Funds rate on September 29, but said it acted again before the Federal Open MarketCommittee (FOMC) meeting due on November 17 because it was concerned about growing lender caution and unsettled financial conditions.

The US dollar fell sharply against major currencies in late New York trading in response to the rate cut move by the Federal Reserve.

Earlier Comex December gold ended up $1.40 at $299.20 an ounce, after climbing back over $300 an ounce during the session for the first time in four days. Total Comex gold volume climbed to an estimated 47,000 lots, from 23,740 lots Wednesday.

In the bullion market, spot gold ended quoted $297.10/60 an ounce, compared to the London Thursday afternoon fix at $298.15 an ounce, and the New York close Wednesday around $295.60/10.

In the past month gold prices have been recovering from a 19-year low at $270.75 an ounce.

"Gold and silver markets have been very quiet this week as the U.S. dollar has stablilized and stockmarkets have found some support," said Scott Mehlman, chief bullion dealer at Credit Lyonnais Rouse in New York.

"But therecovery in the Australian dollar and fall in the Australian dollar gold price has apparently spurred some hedge buybacks by producers in the past couple of days," he said.

The Australian dollar has been recovering from 12-year lows in recent weeks, pushing the gold price in Australian dollars back down to around A$465 an ounce, the lowest level since July.

Comex December silver ended up 6.5 cents at $4.895 an ounce, after sliding to a six week low at $4.765 last Friday.

Spot silver ended quoted $4.92/97 an ounce, compared to Thursday's London fix at $4.8200 and New York's close Wednesday at $4.81/83.

Nymex January platinum closed up $2.00 at $343.00, after platinum in the bullion market fixed at its lowest level in nearly seven years Wednesday at 4339.00 an ounce.

But Nymex December palladium lost $3.00 to end at $275.00.

Earlier this week South Africa's Impala Platinum Holdings Ltd (Implats) said it had reached an agreement with the National Union of Mineworkers (NUM) to end a 15-day strike atthe Springs refinery complex. Workers at Lonrho's Platinum's West Plats mine in South Africa ended a four-day strike last Thursday.