* Fed holds rates steady, signals potential cuts
* Palladium hits 12-week high
* Spot gold has gained about $80 so far this month
* GRAPHIC-2019 asset returns: http://tmsnrt.rs/2jvdmXl
By Eileen Soreng
June 20 (Reuters) - Gold prices surged to their highest in more than five years on Thursday after the U.S. Federal Reserve signalled a possible interest rate cut as early as next month, pressuring U.S. Treasury yields and the dollar.
Spot gold XAU= was up 1.6% at $1,380.96 per ounce as of 1213 GMT, after hitting its highest since March 17, 2014 at $1,386.38.
Gold prices have gained about $80 so far this month.
U.S. gold futures GCcv1 jumped 3% to $1,389.10 an ounce, after touching their highest since April 2018 at $1,397.70.
"The driver for the surge is obviously the Fed delivering the dovish tilt that the market was looking for. It removed the 'patience' approach to cutting rates," Saxo Bank commodity strategist Ole Hansen said.
The Fed on Wednesday signalled interest rate cuts beginning as early as July, saying it is ready to battle growing global and domestic economic risks as it took stock of rising trade tensions and growing concerns about weak inflation. interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.
The Fed's rate signal came before meetings at other major central banks in Asia and Europe that were expected to flag similar moves. The European Central Bank and the Australian central bank had signalled this week more policy stimulus was needed.
"We are seeing interest rate expectations being reduced so dramatically because economic data is not moving up to previous strength and that has also raised questions of how much further stock markets could continue to benefit from these rate cuts," Hansen said.
Even though the U.S. central bank left its benchmark interest rate unchanged for now, the shift in the Fed's view since its last policy meeting weighed on the dollar and U.S. Treasury yields. USD/ US/
Meanwhile, China's commerce ministry said top Chinese and U.S. officials would resume trade talks in accordance with the wishes of their leaders, but China hopes the United States will create the necessary conditions for dialogue. XAG= gained 1.2% to $15.34 per ounce, after hitting its highest since March 27 at $15.40.
Platinum XPT= rose 1.2% to $820.26 per ounce, while palladium XPD= was 1% higher at $1,515.02 per ounce, having hit a 12-week high of $1,531.38 earlier in the session.