SINGAPORE, March 23 (Reuters) - Gold prices steadied on
Wednesday, as escalating unrest in the Middle East and North
Africa underpinned safe-haven demand, but a modest rebound in
the dollar could weigh on the sentiment as fears on Japan's
nuclear crisis eased.

 The troubles in the Middle East turned increasingly violent
with Syrian troops opening fire on protesters and Yemen's
president warning that the country would slip into civil war if
he was forced to quit. 	

 " Gold is still taking its cue from the situation in the
Middle East,"  said Ong Yi Ling, an analyst at Phillip Futures,
adding that it could increase safe-haven flows into the precious
metal.	

 Oil prices have moved in tandem with gold since the Middle
East tensions broke out at the end of January. Lofty oil prices
have stoked worries of inflation down the road, adding to gold's
allure as an inflation hedge. 	

 Spot gold was little changed at $1,428.50 an ounce by
0656 GMT. U.S. gold futures was nearly flat at $1,428.80.	

 Bullion has been moving in a narrow range of $4 in the past
two sessions, lacking momentum for a further rise on easing
fears over Japan's nuclear crisis, even though the battle to
contain the problem was ongoing and concerns on food
contamination are rising. 	

 Profit-taking was spotted as prices rose towards $1,430,
seen as a key resistance level, traders said.	

 " Investors don't know what to do -- we see profit-taking at
the high price range, but fears of inflation as well as the
Middle East crisis triggers buy-back by speculators when prices
go down,"  said a Hong Kong-based dealer.	

 Improving outlook for developed economies, including the
United States, has prompted some investors to move into riskier
assets such as equities, he added.	

 Technical analysis showed that unless gold effectively
breaks above the pivotal resistance at $1,435, market sentiment
might be bearish, pressuring prices down to $1,416, said Reuters
market analyst Wang Tao.	

 Investors are also eyeing the currency market. The dollar
index edged up after sinking to a 15-month low in the
previous session, as the euro hovered below a 4-1/2 month high.
 	

 Sovereign debt problems in Portugal and Ireland sapped
appetite for the single currency, as Portugal's parliament will
vote on the government's latest austerity measures on Wednesday.
 	

 A rebound in the dollar could hurt sentiment on commodities.	

 Spot silver inched down 0.3 percent to $36.22, just
off the 31-year high of $36.70 hit on March 7. 	


  

SINGAPORE, March 23 (Reuters) - Spot gold was steady on
Wednesday, underpinned by nervousness over the Middle East
turmoil as fighting in Libya continued and Yemen slid towards
the edge of a civil war, but a rebound in the dollar weighed on
prices.	

 FUNDAMENTALS	

 * Spot gold edged down 0.2 percent to $1,427.05 an
ounce by 0044 GMT.	

 * U.S. gold futures was flat at $1,427.20.	

 * Investors are closely watching the rapidly developing
turmoil in Yemen, where thousands of protesters took to the
street and President Ali Abdullah Saleh warned of a civil war if
he were forced to quit. 	

 * Fears over Japan's nuclear crisis have eased, but TEPCO,
the operator of the quake-crippled Fukushima nuclear plant, said
it needed more time before it could say the reactors were
stabilised. 	

 * Holdings in the SPDR Gold Trust , the world's largest
gold-backed exchange-traded fund, extended the decline from the
previous session, down 0.91 tonnes to 1,214.869 tonnes by March
22. 	

 * Gold prices could rally up to $1,600 an ounce by next
year, as rising inflation and investor desire for safe-haven
assets feeds demand for the metal, gold miners told the Reuters
Global Mining &  Steel Summit. 		

 MARKET NEWS	

 * Wall Street snapped a three-day winning streak on Tuesday,
even as investors adjusted to the insecurity created by events
in Japan, the Middle East and North Africa. 	

 * The dollar index edged up from a 15-month low hit
in the previous session. The euro hovered below a 4 1/2-month
high as worries about debt problems in Portugal and Ireland
sapped appetite for the currency.  	

 * U.S. crude futures were hardly changed in early Asian
trade on Wednesday as concerns over fighting in oil producer
Libya and unrest in Yemen were weighed against expectations
official U.S. figures would show crude oil stocks rose last
week. 	

LONDON, March 21 (Reuters) - Gold rose for a fourth day on
Monday, driven by concern over the impact to global growth from
the devastation in Japan, while western air attacks on Libya
added to investor uncertainty.

 Hopes of progress in averting a nuclear disaster at a
Japanese power station damaged by the earthquake and subsequent
tsunami 10 days ago helped soothe the equity markets, but there
remained enough doubt over the longer-term hit to the world's
third largest economy to encourage buying of gold.

 The gold price XAU=, which is set for its tenth
consecutive quarterly gain, was last up 0.8 percent at $1,430.90
an ounce by 1155 GMT, while most-active U.S. April futures
GCv1 were up 1.1 percent at $1,431.40.

 Last week, gold fell by as much as 2.6 percent as the
unfolding situation in Japan triggered a wave of selling in
higher-risk assets, prompting investors to liquidate their
bullion holdings to cover losses in other markets and analysts
said the high level of risk aversion might see a repeat of this.
 " It's happening against a backdrop of elevated uncertainty
from numerous places, which should give these safe-haven type
commodities a bid,"  said Saxo Bank senior manager Ole Hansen.

 " As long as we have this tendency towards risk aversion in
the market, gold will be struggling. It's such a high percentage
of the total investment in commodities, so if there is anything
to be reduced, gold is often in the firing line in that
respect." 

 Gold usually benefits from periods of heightened risk
aversion, but since the Japanese earthquake, which struck on
March 11 and is feared to have killed over 20,000, the price has
fallen by more than 3 percent.

 CRUDE UP

 On Monday, Brent crude oil 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. [O/R]

 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 end attacks on civilians. [ID:nLDE72J009]

 " 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.

 " 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 .DXY 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.


  

Gold was little changed on the week, gaining 0.1 percent to $1418.56, ensuring that the precious metal would not fall for the second consecutive week. It appeared that investors were ready to sell-off their bullion holdings, with the precious metal falling below $1385.00. Nonetheless, as markets refocused on the geopolitical tensions in the Middle East and North Africa, gold found support and retraced its losses in the early part of the week.

The week ahead, fundamentally, should propagate bullish momentum for gold as investors seek haven from risky assets amid renewed political tensions in the MeNa region. After it became clear that the United Nations would implement a ‘No-Fly Zone’ over Libya, pro-Gaddafi forces announced a ceasefire. With pro-government forces now forced to cool their aggression, any further tensions will almost certainly validate military occupation by a coalition of Western governments, which would send the price of gold even higher. Similarly, continued unrest in Bahrain should also be monitored, as violence has been wrought upon protestors at an alarming rate in recent days.

The data expected in the days ahead will prove to make or break gold in the coming week, should tensions in the MeNa region relax for the time being. British inflation data due Monday could necessitate a rate hike in the coming months from the Bank of England, which has been stepping up its hawkish rhetoric over the past few weeks. With the central bank’s minutes from their most recent policy meeting expected mid-week, any signs of rising price pressure concerns will trigger a flight to bullion as a hedge against inflation. The EU summit at the end of the week will also be in focus, as any progress made on sovereign debt concerns would boost investor sentiment regarding the Euro, pushing the U.S. dollar lower. A flight away from the greenback will push the value of all precious metals higher, on a nominal basis.

 

On a technical basis, the pair bounced off of its range bottom, and 50-SMA, of an ascending channel which has been in place since the turn of the year. The RSI on the daily chart, after falling sharply the past two weeks, has once again turned to the upside, suggesting further gains as the most recent corrective wave appears to have been completed. The rate of pace at which gold is accelerating has also increased, with the Slow Stochastic oscillator issuing a buy signal, with the %K turning higher than the %D this week, at 41 and 35, respectively. To this end, the MACD Histogram is tailing off of its bearish divergence when the differential becomes positive, bullish momentum is confirmed. A break above the all-time high of $1445.85 could lead to a test of the range top at $1460. -CV



/!@dailyFX

 

 

Prepared by Jamie Saettele

 

“Gold made an outside week last week which (along with divergence with RSI on the weekly) warns of distribution and a potential top.” Price has now reached its 50 day average but a break of long term trendline support is needed in order to suggest that an important top has formed.

/@dailyFX