LONDON, Feb 22 (Reuters) - Gold fell on Tuesday, following
six days of gains, as a rising dollar outweighed safe-haven
demand arising from violence in the Middle East, and silver
retreated from Monday's 31-year peaks.

 Deadly protests in Libya pushed oil prices to 2-1/2 year
highs, fanning fears of inflation and undermining investor
confidence in the global economic outlook.

 Libyan leader Muammar Gaddafi vowed defiance in the face of
a mounting revolt against his 41-year rule on Tuesday, making a
fleeting television appearance to scorn protesters and deny he
had fled the country. 

 The gold price has risen by nearly 5 percent this month as
protests in favour of democratic reform across North Africa and
the Middle East turned bloody. Investors have grown increasingly
uneasy that the crisis could spread.

 Spot gold XAU= was last down 0.6 percent at $1,394.14 an
ounce at 1235 GMT, having risen on Monday to its highest in
about seven weeks. U.S. April gold futures GCJ1 were up 0.7
percent at $1,398.50 an ounce.

 " It's not all one-way traffic,"  said Credit Agricole analyst
Robin Bhar. " Obviously, we've had the turmoil escalating in the
region and jitters and it's all understandable. Maybe this is
the top for the time being." 

 He added, " Those safe-havens -- the dollar, Treasuries and
gold -- should stay in demand, and other riskier assets such as
equities and copper and so on will get sold off as we've seen in
the last 12 hours or so." 

 LIBYA IN FOCUS

 The dollar rallied broadly, creating a headwind for gold as
the escalating tension in Libya prompted selling in
higher-yielding assets such as the euro EUR= in favour of the
U.S. currency and the Swiss franc CHF=.

 " The current situation there is really akin to a keg of
dynamite,"  said Ong Yin Ling, an investment analyst at Phillip
Futures in Singapore.

 " Whether Gaddafi will be toppled or whether we will witness
a revolution, I think the final outcome is still uncertain. But
the situation is likely to get worse before it gets better.
Going forward, (gold) could still remain supported due to the
crisis, which is unlikely to be resolved anytime soon." 

 Gold, like Treasuries and the Swiss franc, tends to draw a
bid from investors in times of political or financial turmoil as
it did in 2010 with the euro zone debt crisis.

 Gold is still 2.7 percent below December's record high of
$1,435.90 an ounce, but dealers in Asia reported a pick-up in
sales of scrap after the spot price's near-4 percent rise over
the prior six sessions. [GOL/AS]

 Silver XAG= came under pressure in line with other
industrial commodities, falling by as much as 4.3 percent to a
low of $32.39 an ounce, as investors closed their positions
following a three-day rally that lifted prices by nearly 4
percent.

 It later traded at $33.15 an ounce.

 The price on Monday hit its highest since early 1980 above
$34 an ounce, driven by limited supplies for near-term delivery
and the prospect for rising demand as the wider economy
recovers.

 The gold-silver ratio, used to measure how many ounces of
silver can buy one ounce of gold, fell on Monday to a 13-year
low around 41, reflecting silver's recent outperformance over
gold.

 Platinum and palladium fell in line with base metals.

 Data from Switzerland, a major clearing hub for platinum
group metals in Europe, showed palladium exports reached their
highest since July 2010.

 Exports of palladium, used mainly in catalytic converters
for gasoline-powered vehicles, rose to 9,938 kg from 6,374 kg in
December, the largest amount since 11,731 kg in July last year.
 Spot palladium XPD= was last down 2.7 percent at $830.50, while platinum XPT= was down 1.5 percent at $1,818.74.

 (Additional reporting by Lewa Pardomuan in Singapore  Editing
by Jane Baird)

SINGAPORE, Feb 22 (Reuters) - Gold slipped on Tuesday after rising to its
highest in seven weeks, but sentiment was still underpinned by deadly unrest in
North Africa and the Middle East as well as uncertainty over the future of oil
prices, while silver jumped to its strongest level since 1980. 	

 High oil prices sparked by violence in Libya fed fears of inflation, one of
the main concerns of investors, who are otherwise in a generally bullish mood on
expectations that the global economic recovery is now sustainable. Libyan leader
Muammar Gaddafi appeared on state television signalling his defiance and saying
he had not fled a revolt against his 41-year rule. 	

 " I think the current situation there is really akin to a keg of dynamite," 
said Ong Yin Ling, investment analyst at Phillip Futures in Singapore.	

 " Whether Gaddafi will be toppled or whether we will witness a revolution, I
think the final outcome is still uncertain. But the situation is likely to get
worse before it gets better. Going forward (gold) could still remain supported
due to the crisis, which is unlikely to be resolved anytime soon."  	

 Spot gold fell $4.05 an ounce to $1,401.90 by 0308 GMT. It had risen
as high as $1,410.65 an ounce as protests that have unseated leaders in Egypt
and Tunisia spread to neighbouring states, including Libya.	

 Bullion was below a lifetime high around $1,430 struck in December.	

 Libyan forces loyal to Gaddafi have fought an increasingly bloody battle to
keep the veteran leader in power with residents reporting gunfire in parts of
the capital Tripoli and one political activist saying warplanes had bombed the
city. 	

 A bullish target at $1,423.57 per ounce for spot gold remains intact,
as its long-term bull trend could have resumed, according to Wang Tao, a Reuters
market analyst for commodities and energy technicals. 	
U.S. gold futures for April rose $13.7 to $1,402.3 an ounce.	
 Silver jumped to its highest since 1980 above $34 an ounce on high
gold prices and also on hopes of a sustainable recovery in the global economy.	
 Spot silver is seen as making a limited gain to $38.20 per ounce over
the next four weeks, as pointed out by a trendline,  because the current wave (5)
is unlikely to extend, after the wave (3) has travelled a much longer distance
as part of a five-wave cycle that started from the Feb. 2010 low at $14.63,


acccording to Wang Tao. 	
The gold-silver ratio, used to measure how many ounces of silver can buy one
ounce of gold, fell to a 13-year high around 41. Forward silver was cheaper than
cash prices, indicating tightness. 	
 " Silver is moving so fast. That's scary. But with the unrest and tension in
the Middle East and rising oil prices, I reckon it will stay firm,"  said a
dealer in Singapore.  	
 " Physical silver is definitely one of the reasons why the price is high. I
think the silver backwardation has caused the push too."  	
 Brent crude oil futures rose by more than $2 to as much as $108.18 per
barrel from the previous close on continued fears that violence in Libya could
lead to wider disruptions in supply from the OPEC country. 	
 In other markets, the dollar edged up against a basket of major currencies,
while the Nikkei fell for the first time in seven days, moving away from its
highest levels in over nine months, as the Middle East turmoil triggered


profit-taking in overbought blue-chip shares.  	  

SINGAPORE, Feb 22 (Reuters) - Gold extended gains and rose to its highest in
seven weeks on Monday as growing unrest in the Middle East and rising oil prices
underpinned sentiment, lifting silver to its strongest level since 1980. 	

 FUNDAMENTALS	

 * Spot gold $3.75 to $1,409.70 an ounce by 0052 GMT as protests that
have unseated leaders in Egypt and Tunisia spread to neighbouring states,
threatening the grip of long-entrenched autocratic leaders elsewhere. 	

 * Libyan leader Muammar Gaddafi appeared on state television on Tuesday and
signalled his defiance over a mounting revolt against his 41-year rule.
 	

 * U.S. gold futures for April rose $21.7 to $1,410.3 an ounce.	

 * Silver jumped to its highest since 1980 above $34 an ounce.	

 MARKET NEWS	

 * The U.S. dollar edged up against a basket of major currencies early in
Asia on Tuesday, although the Australian dollar eased and could suffer further
declines as mounting tension in the Middle East drive investors to cut risk.
 	

 * U.S. crude futures extended gains on Tuesday, with the March contract
 reaching $94.49 per barrel, the highest for any nearby month since
October 2008, as concern grew that violence in Libya could lead to wider supply 	
disruptions from the OPEC country. 	

  * Japan's Nikkei average moved away from its highest levels in over 9
months and fell on Tuesday for the first time in seven days as turmoil in the
Middle East made investors wary of riskier assets triggering profit-taking on 	
overbought blue-chip shares. 	

 RELATED NEWS	
>  Libya may face civil war as Gaddafi's grip loosens 	
>  Libya turmoil prompts oil surge, hits equities    	
>  Egypt asks for freeze on Mubarak assets           	
>  Yemen's Saleh says won't be forced out by anarchy 	
>  Exiled Bahrain opposition leader to return home   	
>  New Zealand's Christchurch hit by strong quake    	
>  G20 keeps China onboard but tough talks ahead     	
>  Ivorian troops kill protesters, AU meets Gbagbo   	
>  Iran naval ships plan to cross Suez Canal on Tues 	
>  First US drone hits in Pakistan in weeks kill 11  	
>  Russia summons U.S. envoy over Japan dispute      	
>  Hamburg rout bodes ill for Merkel in election year 	
	

SINGAPORE, Feb 21 (Reuters) - Gold rose to a seven-week high
on Monday as spreading unrest in the Middle East burnished the
metal's appeal as a safe-haven asset, while prices of silver and
palladium hit historic highs on expectations of growing
industrial demand. 	

 Gold added to a weekly gain of nearly 3 percent last week
and was poised for further upside on fresh news from North
Africa and the Middle East, where revolutions which deposed the
presidents of Tunisia and Egypt have inspired protests across
the region, threatening the grip of long-entrenched autocratic
leaders. 	

 Spot gold climbed to a seven-week high of $1,396.1,
before easing slightly to $1,395.9 per ounce as of 0658 GMT.
Gold is poised for a sixth straight session of gains.	

 U.S. markets are closed on Monday for a holiday. 	

 U.S. gold futures for April delivery climbed 0.7 	
percent to $1,395.90 per ounce, compared to Friday's settlement 	
at $1,388.60. 	

 " With the unrest in the Middle East and North Africa,
dealers couldn't leave for a long weekend with short positions,
and this reflects investor sentiment for a flight to safety," 
said Yuichi Ikemizu, Tokyo branch manager for Standard Bank,
adding that gold prices were likely to keep inching higher. 	

 Spot gold may rise to its Jan. 3 high of $1,423.57 per ounce	
as it has ignored bearish signals and continued to shoot up,
says Wang Tao, a Reuters market analyst for commodities and
energy technicals. 	

 The world's largest gold-backed exchange-traded fund, the 	
SPDR Gold Trust , said holdings fell to 1,223.098 tonnes by	
Feb. 20, its lowest in nine months, from 1,224.008 tonnes on
Feb. 15. 	

 Traders said there was slightly higher demand for gold bars 	
in the Middle East, mainly due to the unrest.	

SILVER HITS 31-YEAR HIGH

 Expectations of growing industrial demand on an improving 	
world economy and a rally in the overall precious metals market
also helped hoist silver to its highest level since 1980.	

 Spot silver rose to its 31-year high at $33.18 an
ounce.	

 The silver market has become overbought, as the Relative
Strength Indicator rose to a three-month high near 77. An RSI
reading above 70 indicates an overbought market.	

 " Cash silver is expensive now compared to the forward
market,"  said a Hong Kong-based trader, " There might be a
squeeze going on." 	

 Forward rates on Reuters pages indicated at -0.36, 	
-0.37, -0.37, -0.40 and -0.37 percent for one, two, three, six 	
and 12 months respectively. 	

 A deepening backwardation -- which means futures are cheaper	
than spot prices -- reflects tightness in the market. 	

 The gold-silver ratio, used to measure how many ounces of
silver are needed to buy one ounce of gold, dropped to a 13-year
low of 42.18. 

 Holdings in the world's largest silver-backed
exchange-traded fund, iShares Silver Trust , rose to
10,519.05 tonnes by Feb. 18 from 10,438.56 tonnes on Feb. 17.
 	

 Platinum gained 0.5 percent to $1,842.25 an ounce
while palladium hit a 10-year high of $855.50 in early
trade. 	

 Traders said platinum and palladium may see further gains on	
a solid demand outlook and supply concerns. 	

Technical Outlook:  Prices put in a Doji candlestick below resistance at $1379.81, the 61.8% Fibonacci retracement level, hinting the corrective upswing recorded from late January may have reached its apex. Renewed bearish momentum from here initially targets the 50% Fib at $1366.15.

 

 

  17 February 2011 06:51 GMT

 

 

This past week, it seemed as if gold overtook $1380 with ease as tensions in the Middle East deepened, while global inflationary pressures continue to make policy difficult in major economies. With regards to the former, following protests in Egypt, Iranian state TV said that warships were en route to the Suez Canal due to growing unrest in Bahrain Yemen. As of late, reports have shown that at least five people have been killed since the protests in Yemen which began on February 14th  against Bahrain’s ruling Al Khalifa family. The troubles do not stop there protests have now emerged in Algeria and Iran. Therefore, as tensions in the Middle East continue to gather pace, gold could witness further buying pressure as trader’s hedge against the declines in the other assets.

The advance in the bullion is also attributed to sovereign debt concerns in the 17 member euro area. As of late, the yield on Portuguese, Spanish, and Irish 10 year notes are up 3bp, 1bp, and 4bp respectively. In particular, the yield on Portugal’s 10 year notes stands at 7.239 percent, which marks the 10thconsecutive session that the yield has held above 7 percent. 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.

Going forward, debt concerns in the Euro-Zone and tensions in the Middle East will likely remain in the spotlight and will continue to spur interest in gold next week as solutions are unlikely to arrive by the end of February. Taking a look at price action, technical developments in gold are painting a bullish picture for the yellow metal. The MACD has yet to reverse course after signaling for gains February 1st, while intraday charts remain supported by a rising trend line. So long as the bullish trends remain intact, upside risks remain.

///DailyFX