* Dollar/gold correlation most negative since late Jan
* Middle East tension in focus; PGMS ease
* Coming up: U.S. ICSC chain stores; 1145 GMT
(Updates throughout, pvs SINGAPORE)
By Amanda Cooper
LONDON, March 22 (Reuters) - Gold rose for a fifth day on
Tuesday, fed by the broad weakness in the dollar and by investor
demand for safe-haven assets as ongoing Western air strikes on
Libya stoked tensions in the Middle East.
Investors also kept an eye on Japan's progress in averting a
full-blown nuclear disaster, caused by an earthquake and tsunami
on March 11 that is believed to have killed over 20,000 in the
world's third-largest economy. []
Gold's inverse relation to the dollar index <.DXY>
strengthened for a fourth day to reach its most negative in two
months, while the U.S. dollar fell to its weakest level in over
15 months against a basket of major currencies.
Spot gold <XAU=> rose 0.3 percent to $1,429.25 an ounce by
1015 GMT, while most-active U.S. April futures <GCv1> rose 0.2
percent to $1,429.50.
"There's certainly been people looking at euro/dollar in
particular and the DXY, which is approaching some big levels, so
that's playing into it. For sure, the situation in the Middle
East and North Africa is generating some buying interest," said
Credit Suisse analyst Tom Kendall.
The dollar has slid against most major currencies, falling
to 4-1/2 month lows against the euro, as investors take the view
that the Federal Reserve will not tighten its ultra-loose
monetary policy any time soon, while other central banks prepare
to raise their benchmark rates as growth improves.
Low U.S. rates create a favourable environment for gold,
which as a non-yielding asset, must compete against stocks,
bonds and currencies for investor attention.
INFLATION HOTS UP
Crude oil held close to 2-1/2 year highs, underpinned by
concern over the impact on supply as unrest spread across the
Arab world, where forces loyal to Muammar Gaddafi attacked a
town near Tripoli after a third night of air raids on the Libyan
capital. [] []
A prolonged period of high oil prices could worsen the rise
in global inflation triggered by record high food prices,
particularly in the emerging world, which could ultimately prove
supportive to gold, which investors sometimes use to shield
their portfolios from return-sapping price pressures.
"The tension in Libya and the Middle East and North Africa
region is supportive of gold prices. There is little doubt that
gold would test a new high in the near future," said Li Ning, an
analyst at Shanghai CIFCO Futures.
"In the medium to long term, concerns about inflation will
continue to buoy gold."
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Top News on Japan: []
Top News on the Middle East unrest: []
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Japan appears to be making progress containing its nuclear
crisis as it restored power cables to all six reactors and
started a pump at one of them to cool overheating nuclear fuel
rods. But rising smoke and haze from two of the most threatening
reactors suggested the battle was far from won. []
Holdings in the world's largest gold-backed exchange-traded
fund, SPDR Gold Trust <GLD>, staged their largest one-day
outflow since late January, reflecting some of the recent
profit-taking by investors in physical metal. []
Spot silver <XAG=> tracked gold's strength and hit an
intra-day high at $36.33 an ounce, just a hair off a 31-year
high of $36.70 hit in early March. It was trading at $35.92.
Platinum and palladium eased. Both metals came under
pressure last week from investors who worried over a potential
drop in demand from the Japanese auto industry following the
earthquake. This led to the largest drop in speculative holdings
of palladium in New York <0#CFTC> since at least 1995.
But analysts said the clear-out could pave the way for fresh
buying to come into the market.
"I would say that it leaves the market in a much more
healthy position, if you like, for a move higher later on, as it
is not as overextended as it was," said Credit Suisse's Kendall.
Spot platinum <XPT=> was last down 0.1 percent at $1,739.74
an ounce, while palladium <XPD=> was off by 1.6 percent at
$733.28 an ounce.
(Additional reporting by Rujun Shen in Singpore; Editing by
Alison Birrane)
