Gold ticks up on Middle East tension, econ worries

Gold ticks up on Middle East tension, econ worries
By Lewa Pardomuan
SINGAPORE | Thu Mar 10, 2011 10:33pm EST
(Reuters) - Gold ticked up on Friday after reports of police firing on protesters in Saudi Arabia ignited fears of further Middle East unrest, but bullion was 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.

Saudi police fired in the air to disperse protesting Shi'ites and three people were injured on the eve of a day of protests called for Friday by activists using the Internet, while protests were planned in other Gulf countries such as Yemen, Kuwait and Bahrain.

The time after Friday prayers has proved to be crucial in popular uprisings in North Africa and the Middle East which have brought down Tunisian and Egyptian rulers who once seemed invulnerable.

Gold added $3.30 to $1,415.89 by 0309 GMT, but a surging U.S. dollar was likely to 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."

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 $35.31 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 euro stayed on the backfoot early in Asia on Friday after having suffered its biggest one-day fall against the dollar in a month, and further losses may loom if a euro zone summit fails to soothe market nerves on sovereign debt.

In the energy market, oil was steady near $103 on Friday after its biggest one-day loss in a month, with investors watching for developments in Saudi Arabia after police clashed with protesters ahead of a planned "Day of Rage" against the monarchy.

(Reporting by Lewa Pardomuan; Editing by Ed Lane)