* EU debt jitters, inflation and MidEast unrest lift gold
* Silver rallies to 31-year high at $32.86/oz; ratio drops
* China reserve requirement hike largely ignored
* U.S. financial markets closed Monday for President's Day
(Recasts, updates prices, adds comments, graphic; new byline
and dateline, previously LONDON)
By Frank Tang
NEW YORK, Feb 18 (Reuters) - Gold rose above $1,390 an
ounce on Friday, notching its best weekly performance since
December, underpinned by fears over a European debt crisis,
rising inflation and growing unrest in the Middle East.
Bullion's gains sparked strong investment buying in silver,
which soared to 31-year high, further widening silver's gains
over gold and sending the gold-silver ratio to its lowest level
in 13 years.
"There is a big concern over the weekend that we can see
some problems with the EU sovereign debt, in particular there
are worries that Portugal may need a bailout very soon. Gold as
a safe haven is certainly back in focus," said Bill O'Neill,
partner of commodities firm LOGIC Advisors.
The yield on five-year Portuguese government bonds hit a
fresh euro lifetime high on Friday, after a euro zone source
told Reuters the bloc is increasingly concerned about
Portugal's fiscal conditions and believed Lisbon will need to
seek a bailout by April. []
Gold also benefits as a safe haven as worries about the
political stability of the region have flared this week, with
unrest spreading after protests in Tunisia and Egypt unseated
leaders there.
Spot gold <XAU=> rose 0.3 percent to $1,386.75 by 2:34 p.m.
EST (1934 GMT), having earlier hit a five-week high of
$1,391.75. Bullion has risen in the five straight sessions, the
longest streak since September. It gained almost 3 percent for
the week.
U.S. gold futures for April delivery <GCJ1> settled up
$3.50 at $1,388.60 an ounce, with volume about 50 percent below
its 30-day norm. That was in line with recent lower-than-normal
turnover, a possible sign of dwindling trading interest.
Silver <XAG=> gained 2.1 percent to $32.42 after hitting a
high of $32.86, its strongest level since 1980.
The gold/silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- dropped to its lowest in 13
years at under 43 on Friday, Reuters data showed, as silver
prices outperformed. (Graphic: http://link.reuters.com/jyg28r)
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Silver's rise was driven by short-term speculation and
buying related to option hedging strategies, as the backdrop of
an improving economy lifted the industrial metal, analysts
said.
Investment demand for the largest silver-backed
exchange-traded fund iShares Silver Trust <SLV> has also shown
signs of stabilizing after hefty outflows last month.
Barclays Capital said in a note it expects silver to
continue to outperform gold, with silver trading as high as $37
an ounce.
CHINA'S TIGHTENING IGNORED
Gold initially pared gains after China said it was raising
lenders' reserve requirements by 50 basis points but remained
firmly underpinned by investment interest in precious metals.
[]
"The hike in Chinese reserve requirements has clearly taken
a back seat as the investor focus has been on developments in
the Middle East, especially Bahrain," said Pradeep Unni, senior
analyst at Richcomm Global Services in Dubai.
Simmering tensions across the Arab are supporting gold, as
thousands in Bahrain took to the streets on Friday and funerals
were expected in two Libyan towns as both countries mourned
victims of government crackdowns on protesters. Anti-government
protests were also reported in Yemen. []
Gold buying spiked this week after data showed U.S. core
consumer prices rose 0.2 percent in January, the fastest pace
in more than a year, indicating a long period of slowing
inflation had run its course. Earlier this week, strong Chinese
core inflation had also boosted gold.
The technical picture has also sharply improved this week,
with prices breaching key resistance levels, including
bullion's 50-day and 100-day moving averages, analysts said.
Platinum <XPT=> dropped 0.5 percent to $1,832.99 an ounce,
while palladium <XPD=> gained 0.8 percent to $847.72, having
earlier touched a 10-year high at $855.47.
Prices at 2:21 p.m. EST (1921 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1388.60 3.50 0.3% -2.3%
US silver <SIH1> 32.296 0.726 0.0% 4.4%
US platinum <PLJ1> 1843.30 -0.70 0.0% 3.7%
US palladium <PAH1> 857.70 14.70 1.7% 6.8%
Gold <XAU=> 1387.80 4.50 0.3% -2.2%
Silver <XAG=> 32.41 0.67 2.1% 5.0%
Platinum <XPT=> 1832.24 -10.50 -0.6% 3.6%
Palladium <XPD=> 846.72 5.75 0.7% 5.9%
Gold Fix <XAUFIX=> 1383.50 -2.00 -0.1% -1.9%
Silver Fix <XAGFIX=> 31.94 133.00 4.3% 4.3%
Platinum Fix <XPTFIX=> 1836.00 3.00 0.2% 6.1%
Palladium Fix <XPDFIX=> 847.00 4.00 0.5% 7.1%
(Additional reporting by Jan Harvey in London; Editing by
Marguerita Choy)
