* Dollar softens after U.S. unemployment claims climb
* U.S. core CPI rises at fastest in over a year in January
* Tensions flare in Libya, Suez as MEast unrest spreads
(Updates prices, adds comment)
By Amanda Cooper and Jan Harvey
LONDON, Feb 17 (Reuters) - Gold extended gains to four-week
highs on Thursday after data showed U.S. core consumer prices
rose at their fastest in over a year in January and as a larger
than expected rise in new unemployment claims hurt the dollar.
The metal also took support from haven buying on the back of
ongoing unrest in the Middle East, which helped gold rise for a
fourth day, its strongest run since September. []
The metal is set for its strongest weekly performance since
the start of the year as tensions flared, boosting other
perceived safe-haven assets like the Swiss franc <CHF=>, which
rose 0.3 percent on the day and U.S. Treasuries <US10YT=RR>.
Spot gold <XAU=> rose to a four-week high at $1,382.55 an
ounce after the data and was bid at $1,380.20 an ounce at 1456
GMT, against $1,374.20 late in New York on Wednesday. U.S. gold
futures for April delivery <GCJ1> rose $5.90 to $1,381.00.
The metal has erased some of the decline it posted in
January, its worst-performing month since Dec. 2009, as investor
confidence in the metal's underlying strength improved.
"The market is tending to be a little on the long side at
these levels, because they are beginning to have faith," said
ANZ Bank analyst Peter Hillyard.
"The mood of the market is that an inflation story, a war
story, an Egypt story, a Bahrain story will all be bullish for
gold, because the market is looking for those at the moment."
The prospect of rising inflation, not only in areas
currently affected by the phenomenon like China and India, but
also in the United States and Europe, has become an oft-cited
reason to hold gold in recent weeks. []
The dollar was a touch weaker versus the euro <EUR=> and a
currency basket <.DXY> after the U.S. CPI data and a separate
report showing new claims for unemployment benefits rose faster
than expected last week.
Weakness in the U.S. unit tends to lift gold's appeal as an
alternative asset and make dollar-priced commodities cheaper for
holders of other currencies.
UNREST SPREADS
The metal is also taking support from haven demand as unrest
spread across the Middle East after protests earlier in the year
unseated leaders in Tunisia and Egypt.
"Upheavals in Libya and Iranian warship threats in the Suez
Canal shifted market sentiment and pushed gold upward," said
Barclays Capital in a note.
Iranian state TV said on Thursday two Iranian warships are
due to pass through the strategic Suez Canal. A similar plan was
announced on Wednesday but then cancelled. []
Several hundred supporters of Libyan leader Muammar Gaddafi
gathered in the capital to counteract online calls for an
anti-government "day or rage" inspired by uprisings in Egypt and
Tunisia. []
The World Gold Council said overall demand for gold is
likely to remain firm this year, driven by buying from India and
China, as it released a report showing consumption of the
precious metal rose to a ten-year high in 2010. []
"We continue to see the two largest markets, China and
India, driving the market," the WGC's investment research
manager Eily Ong told Reuters.
"There have been rising income levels, still-high saving
rates and we still think strong economic growth will continue to
push up gold consumption."
Silver <XAG=> rose 0.9 percent to $30.90 an ounce, while
palladium <XPD=> reversed earlier gains to fall 0.4 percent to
$834.97 an ounce, and platinum <XPT=> rose 0.2 percent to
$1,830.
(Reporting by Jan Harvey and Amanda Cooper)
