Gold defies weak oil prices to rise


SINGAPORE (REUTERS) - 

Gold defied weaker oil prices and gained on Friday after a major earthquake struck northeast Japan and lingering worries about further unrest in the Middle East supported bullion.              

 But spot gold remained on track for its biggest weekly decline since late January, down more than $20 from a lifetime high hit at the start of the week.

 Tokyo gold futures on Tokyo Commodity Exchange (TOCOM) pared losses on safe haven buying after an earthquake of magnitude 8.9 struck Japan, including capital Tokyo, causing many injuries, fires and a four-metre (13-ft) tsunami along parts of the country's coastline.                

  "It's a bad Friday. It's quite a strong tremor but TOCOM is still operating," said a bullion dealer in Tokyo

  Gold added $3.66 to $1,416.25 by 0730 GMT, but a firming U.S. dollar could also cap gains. Gold hit a record of $1,444.40 on Monday, when investors poured money into bullion as oil jumped on violence in Libya and after the downgrade of Greece's credit rating reignited worries about euro zone sovereign debt.      

 "We are waiting for some escalation in the situation within Saudi. If protesters become more aggressive in some way, you might find see more buying but again, it's being pressured on one side by the dollar," said Darren Heathcote, head of trading at Investec Australia in Sydney. 

 "On the one side, we've got, probably, downward pressure as a result of a stronger dollar and a bit of flight to safety going on. On the other hand,

gold's attractiveness as a safe haven would probably increase, given the uncertainties surrounding Middle East and particularly what's going on in Saudi."             

  Brent crude fell $2 towards $113 on Friday as a quiet start to the planned "day of rage" in Saudi Arabia eased concern that unrest would spread in the world's top oil exporter, prompting investors to unwind positions.              

   U.S. gold futures for April rose $3.9 to $1,416.4 an ounce. The contract hit record at $1,445.70 on Monday.          

 Spot gold will fall more next week to a range of $1,360 to $1,376 per ounce based on its wave pattern and a Fibonacci retracement analysis, according to Wang Tao, who is a Reuters market analyst for commodities and energy technicals.               

China's February inflation data, which offered tentative signs the government is succeeding in tamping price pressures, helped boost gold on Friday. Soaring inflation in China had sparked worries it could cut the

country's demand for commodities, including gold.    

 Further monetary tightening to tamp inflation in China however remains a possibility.

  "I think we are still expecting robust demand from China. But I think the Chinese buying is more on a longer-term basis, so I guess the situation in Saudi Arabia is still a major factor supporting gold," said a dealer in Singapore.           

 "There's quite a lot fluidity regarding the situation there. I think there's a potential for some headline risks."           

  Silver was steady at $35.28 an ounce, having rallied to a 31-year peak above $36 on Monday to track rally in gold and also due to a growing interest in the metal as an alternative investment. Holdings on iShares Silver Trust  were unchanged at a record high at 10,974.06 tonnes.               

  "We have raised our silver price profile significantly, by 16 percent to $35.50 an ounce in 2011 and 18 percent to $36.25 an ounce in 2012," said BNP Paribas in a report. "We expect investment demand to remain strong throughout the year and the gold/silver ratio to stay in the low 40s."          

 The yen fell broadly and slumped to a two-week low against the dollar on Friday after a major earthquake struck Japan and triggered a slide in Japanese shares.    

  Asian shares also dropped after the massive quake, darkening an already bleak mood caused by weak economic data and unrest in Saudi Arabia.  

 (Reporting by Lewa Pardomuan; Editing by               

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