PRECIOUS-Gold up 2.7 pct, above $1,310/oz on dollar fall, short-covering

(Updates market activities)

NEW YORK/LONDON, June 19 (Reuters) - Gold rose above $1,310 an ounce on Thursday, gaining almost 3 percent as a drop in the dollar and a lack of commitment by the U.S. Federal Reserve to raise interest rates sent metal investors rushing to buy back their bearish bets.

The 2.7 percent rally in bullion marked its biggest one-day gain in eight months. Silver jumped as much as 5 percent, while platinum and palladium also climbed as new hurdles emerged to settling South Africa's mining strike.

Gold's rise to a 1-1/2 month high was boosted by the U.S. dollar index's tumble a day after the Fed signaled it will stick with a near-zero interest rate policy to support the economy, disappointing traders who had bet on hints of policy tightening.

Analysts said that market participants in droves aggressively bought back short positions that were placed earlier in the week on expectations that a stronger U.S. economy would dampen bullion demand.

"Much of what happened today is a short squeeze. I don't think this is a huge rush of new buyers into gold," said Axel Merk, chief investment officer at Merk Funds, which manages about $400 million of currency mutual-fund assets.

Spot gold was up 2.7 percent at $1,311.60 an ounce by 1:17 p.m. EDT (1717 GMT), having earlier hit $1,315.49, a four-week high.

Technical buying also helped lift prices on Thursday as the rally sent gold above tough resistance at $1,285, near a key Fibonacci retracement as well as its 50- and 100-day moving averages, analysts said.

U.S. COMEX gold futures for August delivery gained $40 to $1,312.70 an ounce, with trading volume on track to finish sharply above its 30-day average, preliminary Reuters data showed.

Gold extended the previous session's gain as the Fed said in a statement after a two-day policy meeting that it had cut its U.S. growth forecast for 2014 to a range of between 2.1 percent and 2.3 percent from 2.9 percent.

Silver gained 3.6 percent to $20.58 an ounce, having earlier hit $20.81, a three-month high. It was on track for its biggest one-day gain in four months.

Platinum rose 1.7 percent to $1,468.30 an ounce and palladium was up by 1.6 percent at $835.72 an ounce. Both were trading near one-week highs as a mining strike in major producer South Africa looked set to drag on.

South African platinum union AMCU has made "unaffordable" new demands beyond a deal struck with producers last week, mining companies said on Wednesday, dashing hopes of an end to the country's longest and costliest mining strike.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Pravin Char, David Evans, Peter Galloway and Marguerita Choy)