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Mar 21, 2011
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Gold rises on growing Middle East tensions, weak dollar

By
Reuters
Published
Mar 21, 2011

March 21 - Gold prices edged higher on Monday, fuelled by the escalating tension in the Middle East and North Africa after western forces launched air attacks in Libya, as a weaker dollar also lent support.



With unrest spreading in Yemen and Syria, western warplanes and missiles hit Libya over the weekend in a bid to force leader Muammar Gaddafi to cease fire on rebels and end attacks on civilians.

"Obviously the tensions in the Middle East, coupled with the significantly weak dollar against the euro, help give gold the current boost," said Darren Heathcote, head of trading at Investec Australia.

Spot gold gained 0.6 percent to $1,427.81 an ounce by 0718 GMT, extending gains from the previous session.
U.S. gold futures rose by 0.9 percent to $1,428.40.

Brent crude oil surged climbed 1.5 percent as a result of the rising tension in Libya, also helping to buoy the price of gold, which is used as a hedge against inflation.

"If the dollar remains weak and we get further unrest in the Middle East, there is a very reasonable chance for gold to test the record high," said Heathcote.

The dollar index declined to its lowest since the end of 2009, after the euro hit four-month highs against the dollar as the euro zone looked set to officially agree on details of bolstering a bailout fund at the March 24-25 summit.

Technical analysis showed that gold may retrace to $1,411 before resuming its uptrend towards the record high at $1,444.40.

Japan is on a market holiday on Monday, as engineers restored electricity to three reactors at a quake-damaged nuclear plant and hope to test water pumps soon, the first clear signs of progress in tackling the nuclear crisis.

Equities and commodities markets tumbled last week on fears that Japan's earthquake and tsunami could potentially derail global growth, but the World Bank said the disaster would depress growth only briefly before reconstruction kicked off.

Gold premiums in Singapore remained stable at about $1 an ounce above London spot prices, a Singapore-based dealer said.

"Some speculators have been selling today, taking the opportunity of higher prices, especially as they see some resistance at the $1,430 level," said the dealer.

Spot silver climbed 2 percent at $35.78 an ounce, leading the precious metals complex.

By Rujun Shen
(Editing by Clarence Fernandez)

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