Gold extended its three week advance and now looks poised to continue its northern journey as Middle East/North Africa protests and retaliation amongst the government lead traders to seek safety, which is positive for the yellow metal. Of particular concern are the developments in Libya, and now growing concern in Iraq. As fears continue to gather pace, market participants should not rule out the bullion testing $1430/oz.

This past week, gold broke above its key resistance area of $1400 as army colonels in Libya aim to halt Mr. Qaddafi’s 42 year reign. According to Human Rights Watch, at least 300 people have been killed in the 11 days of violence and the number is expected to rise further as protests seem unlikely to calm, while Mr. Qaddafi vowed that he will fight the protests until his “last drop of blood.” The developments are worrisome not only for the fact that they look poised to gather pace, but also because protests could spread to countries like Saudi Arabia. It is important to attribute and note the recent rise in oil and gold to the possibility of protests spreading to Saudi Arabia due to the fact that the energy rich country is a key supplier of oil to countries like the U.S. Going forward, so long as tensions remain in the spotlight, contagion fears will linger and gold could witness further buying pressure as trader’s hedge against the declines in the other assets.

Meanwhile, debt fears in the 17 member euro area are deepening, adding confirmation to my bullish gold outlook. As of late, the yield on Portugal’s, Spain’s, and Greek 10 year notes are up 6bp (7.31 percent), 1bp (5.34 percent), and 4bp (11.60 percent) respectively. The increase in yields should not be overlooked alongside the increase in credit default swaps because these concerns are poised to return to top headlines in financial news soon. With regards to credit default swaps, insurance against a default in Greece stands at 944.21, marking its highest level since early January, while insurance against Spanish, Portuguese, and Irish debt extend their advance. As the troubled economy runs out of options, leaders are pushing EU leaders to adopt a new crisis measurement at its summit next month. Failure to meet market expectations will not only send the euro into a free fall, but will also lead gold to push higher.

 

Key events next week that will have an influence on gold prices will be the European, Canadian, and Australian Central Bank rate decision’s in addition to U.S. nonfarm payrolls. Dovish statements by policy makers paired with a dismal employment report in the world’s largest economy could lead the yellow metal higher. Taking a look at price action, market participants could witness further gains so long as downside risks remain capped by $1393/oz. -MW

 

 

  //

 

 

LONDON, Feb 25 (Reuters) - Gold rose on Friday, headed for
its fourth consecutive week of gains, as investors kept a close
watch on the situation in Libya and the energy market.


  
 TECHNICALS
 * Gold support at $1,370 an ounce, resistance at $1,432 an
ounce and 14-day RSI at 64.
 * Platinum support at $1,760 an ounce, resistance at $1,867
and 14-day RSI at 47.
 * Silver support at $32.40 an ounce, resistance at $34.35
and 14-day RSI at 64.

   

GOLD HEDGE

 Investors often buy gold as a means of protecting their
portfolios against rising inflation expectations as gold rises
in line with other asset prices, as opposed to bonds where
returns are eroded, or currencies, which lose purchasing power.

 Rising inflation eventually leads to rising interest rates,
which ultimately can prove negative for gold, which bears no
yield, but when inflation threatens growth, bullion can often
offer investors the hedge they need.

 The unrest across North Africa and the Middle East boosted
other perceived safe-haven assets such as the Swiss franc, which
hit a record against the dollar CHF=.

 " There is no reason why we can't break through the recent
high around $1,416 and head towards $1,420 if the unrest
continues in Libya,"  said Darren Heathcote, head of trading at
Investec Australia.

 " Of course if it spreads even further in field or becomes
more violent, gold will benefit further as a safe haven." 

 Investor interest in gold has not translated into inflows
into major exchange-traded products, such as the SPDR gold trust
(GLD), or ETF Securities' gold funds, since the protests in
Egypt in late January.

 Yet investors have increased their holdings of COMEX gold
futures < 0#GC:>  this month and until the price broke above
$1,400 an ounce this week, dealers had reported fairly healthy
consumer buying.

 The rally in the last four weeks has attracted sales of
scrap into the market, which has acted as something of a
headwind for the spot gold price, dealers said.

just below a seven-week high on Thursday, as violence in Libya
continued to buoy safe-haven demand in bullion and high oil
prices, which have triggered inflation fears, also lent support.	

 As many as 1,000 people may have been killed in the unrest.
On Wednesday, thousands celebrated as the east broke free of the
control of Mummar Gaddafi, who has vowed to crush the revolt.
For related stories, click 	

 " People don't have much confidence that the Libya crisis
will be settled any time soon, so a lot of them are betting on
gold,"  said a dealer in Singapore, " Gold will be king." 	

 Crude oil prices hit a 2-1/2-year high on mounting fears
that unrest in Libya could spread to other major Middle East
producers, including top exporter Saudi Arabia. 	

 Soaring oil prices raised concerns of higher inflation and
slower economic growth globally, which might also lead to some
gold buying.	

 Spot gold edged down 0.2 percent at $1,408.96 an
ounce by 0634 GMT, off the seven-week high of $1,416.30 hit in
the previous session.	

 U.S. gold futures inched down 0.3 percent at $1,410.	

 Spot gold will test the Jan. 3 high at $1,423.57 per
ounce, based on its wave pattern and a Fibonacci projection
analysis, said Reuters market analyst Wang Tao.	
 " There is no reason why we can't break through the recent
high around $1,416 and head towards $1,420 if the unrest
continues in Libya,"  said Darren Heathcote, head of trading at
Investec Australia.	
 " Of course if it spreads even further in field or becomes
more violent, gold will benefit further as a safe haven." 	
 Scrap sellers have taken advantage of current high price
levels to cash in, while fresh buying was limited, dealers said.	
 Spot gold rose in seven out of past nine sessions, up nearly
eight percent since it hit a four-month low of $1,308 on Jan 28.	
 " Prices are getting more dear, and some may take the
opportunity to sell then wait for the next dip to buy again," 
said the Singapore-based dealer.	
 Spot silver inched up 0.1 percent at $33.54.	
 Holdings in the world's largest silver-backed
exchange-traded fund, iShares Silver Trust , rose to
one-month high of 10,575.23 tonnes by Feb 23. 	
 Silver prices are expected to stay at three-decade highs
even as new mine output of silver is forecast to rise eight
percent on the year, keeping up with growing demand, metals
consultancy GFMS said. 	
 Spot palladium reversed early gains to inch down 0.3
percent at $774.47, headed for a third consecutive session of
loss. It hit a six-week low of $762.85 in the previous session.

Precious metals prices 0634 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1408.96   -2.56   -0.18     -0.74
  Spot Silver        33.54    0.03   +0.09      8.68

  

SINGAPORE, Feb 24(Reuters) - Spot gold edged up on Thursday,
as spreading turmoil in Libya and soaring oil prices stoked
worry of slower economic growth and continued to drive investors
seeking safe-haven to bullion.	

 FUNDAMENTALS	

 * Spot gold edged up 0.1 percent at $1,413.35 an
ounce by 0037 GMT, after hitting a seven-week high of $1,416.30
in the previous session.	

 * The most-active U.S. gold futures contract was
steady at $1,413.9.	

 * U.S. crude oil futures rose more than $1 on mounting fears
that growing unrest in Libya could spread to other oil producers
in the Middle East and North Africa. The turmoil in Libya
continued as thousands of Libyans celebrated the liberation of
their country's east from the rule of Muammar Gaddafi, who has
vowed to crush the revolt. The rising fear of tribal conflicts
and civil war sent oil prices to their  highest since August
2008.  	

 * Spot silver inched up 0.2 percent at $33.59. 	

 * Holdings in the world's largest silver-backed
exchange-traded fund, iShares Silver Trust , rose to
one-month high of 10,575.23 tonnes by Feb 23. 	

 * Strong industrial and investment demand, coupled with
mining companies' need to borrow the metal for hedge programs
have led to a squeeze in physical silver market recently, but
there was no cause for concern about supply shortages, said
metals consultancy GFMS. 	

 MARKET NEWS	

 * The dollar index edged down to a three-week low on
Thursday, as the safe-haven demand triggered by the crisis in
Libya drove investors to the Swiss franc while the greenback
appeared to lose its luster. 	

 * U.S. stocks dropped for a second straight session on
Wednesday as Libya's violence sent oil prices up briefly to $100
a barrel and tech shares sank, adding credence to calls for a
market correction. 	

 * The U.S. crude front-month contract for April delivery
 was trading at $99.10 by 2354 GMT, up $1 from the
previous session. In London ICE Brent for April delivery 
settled at $111.25 a barrel in the previous session, the highest
close since Aug. 29, 2008 for front-month Brent crude, when
prices ended at $114.05.