* Oil's sharp rally fuels inflation concern, benefits gold
* Palladium posts biggest one-week drop since July 2010
* Coming up: U.S. January personal income on Monday
(Recasts, updates prices, market activity; changes byline, new
dateline, previously LONDON)
By Frank Tang
NEW YORK, Feb 25 (Reuters) - Gold rose towards $1,410 an
ounce on Friday, posting its fourth consecutive weekly gain as
the crisis in Libya and soaring oil prices stoked inflation
worries.
Bullion gained 1.5 percent this week, with investors
seeking a safe haven as a popular uprising against Libyan ruler
Muammar Gaddafi closed in around him. French estimates say some
2,000 people may have died. []
Fears over supply disruptions from oil exporter Libya and
potential unrest in other major producers in the Middle East
have sent U.S. crude futures <CLc1> 14 percent higher, their
biggest weekly gain since March 2009. []
"The reality is, inflation is going to happen. It's just a
question of when, with the rise of commodities prices and the
budget deficit that we have right now," said Fred Demler, head
of commodities at futures broker MF Global.
Spot gold <XAU=> rose 0.5 percent to $1,409 an ounce by
2:37 p.m. EST (1937 GMT). Bullion hit a record $1,430.95 an
ounce on Dec. 7.
U.S. gold futures for April delivery <GCJ1> settled down
$6.50 an ounce at $1,409.30.
Safe-haven buying also increased as Wall Street stocks were
set to drop almost 2 percent for the week, their first decline
in four weeks. []
"We have seen a big decrease in risk appetite, a fall,
certainly after mid-February, in equities and the industrial
metals, but an increase in oil with uncertainty over a supply
shock," VM Group analyst Carl Firman said.
"Alongside that you have risk aversion, and we have seen
gold and silver benefit. And I think that is here to stay until
the situation becomes clearer," he said.
Assets perceived by investors as safer such as gold,
government bonds and the Swiss franc have benefited from this
week's unrest in Libya following the toppling of former
Egyptian president Hosni Mubarak, with the Swiss currency
hitting record highs against the dollar. [] []
Analysts said gold's gains had been driven by a technical
breakout on weekly charts, even as bullion still faced heavy
resistance around its December highs near $1,410 an ounce.
"A potential for bottoming in equities and a possible
climax in Middle East tensions ... can thus force a correction
back down toward the 50-day moving average near $1,374," MF
Global said in a note.
UNREST EYED
The unfolding situation across the Middle East and North
Africa will remain in focus next week. Civil unrest first broke
out in Tunisia, from where it spread quickly to Egypt, and then
to Bahrain, Libya, Yemen and others.
Saudi Arabia this week raised oil output to plug the gap
created by Libya, as the kingdom unveiled a $37 billion package
to try to insulate itself from the wave of protests across the
Arab world.
"In order for already high gold and silver prices to be
sustained, the market may require a steady diet of increased
strife in the Middle East, coupled with higher oil prices,"
HSBC analyst James Steel said in a note.
"As long as Saudi Arabia remains stable the risk factor in
the Middle East is to some degree contained," Steel said.
Investment demand in developed markets for products such as
gold-backed exchange-traded funds remained soft. Holdings of
the largest, New York's SPDR Gold Trust <GLD>, fell to a
nine-month low at 1,211.568 tonnes on Thursday. []
Holdings of the largest silver ETF, the iShares Silver
Trust <SLV>, meanwhile, rose to a six-week high at 10,666.35
tonnes on Thursday. []
Silver <XAG=> gained 1.3 percent to $33.12 an ounce. The
metal posted a fifth consecutive weekly gain.
Platinum <XPT=> rose 1.3 percent to $1,799.99 an ounce,
while palladium <XPD=> increased 1.9 percent to $785.47.
Palladium, one of the top performers in the commodities complex
last year, notched its biggest weekly drop since July 2010.
Prices at 3:00 p.m. EST (2000 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1409.30 -6.50 -0.5% -0.9%
US silver <SIH1> 32.898 -0.268 0.0% 6.3%
US platinum <PLJ1> 1803.40 16.60 0.9% 1.4%
US palladium <PAH1> 785.45 7.70 1.0% -2.2%
Gold <XAU=> 1409.40 7.93 0.6% -0.7%
Silver <XAG=> 33.12 1.03 3.2% 7.3%
Platinum <XPT=> 1799.99 22.50 1.3% 1.8%
Palladium <XPD=> 786.24 15.24 2.0% -1.7%
Gold Fix <XAUFIX=> 1402.50 -2.50 -0.2% -0.5%
Silver Fix <XAGFIX=> 32.54 -74.00 -2.2% 6.2%
Platinum Fix <XPTFIX=> 1791.00 4.00 0.2% 3.5%
Palladium Fix <XPDFIX=> 785.00 7.00 0.9% -0.8%
(Additional reporting by Jan Harvey in London; Editing by
Dale Hudson)
