* Rate hike worries prompt gold market to take breather
* Western air strikes on Libya, Mideast tension underpin
* Coming up: U.S. new home sales data Wednesday
(Rewrites, updates prices, adds comments, adds NEW YORK
dateline/byline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, March 22 (Reuters) - Gold was little
changed on Tuesday as interest-rate hike worries prompted the
market to take a breather, but Western air strikes on Libya and
escalating political unrest in other Arab countries underpinned
safe-haven demand.
Gold trimmed initial gains, following the euro, but the
metal stayed within striking distance of its record $1,444.40
an ounce set on March 7.
The dollar hovered near 15-month lows against a basket of
currencies on expectations of a euro zone interest rate hike
next month. A weak dollar benefits gold, but higher interest
rates could weigh heavily on non-yielding bullion, which must
compete against other interest-bearing assets for investors'
fund.
"Gold is taking a time out, and that's partly due to the
anxiety of some financial players regarding higher interest
rates in Europe, tightening in China, Asia and other parts of
the world," said James Dailey, portfolio manager of the TEAM
Asset Strategy Fund <TEAMX.O>.
Spot gold <XAU=> inched up 0.1 percent at $1,426.95 an
ounce by 12:35 p.m. EDT (1635 GMT). U.S. most-active April
futures <GCJ1> rose 0.1 percent to $1,427.50 with volume
running lower than usual.
The dollar held around 4-1/2 month lows against the euro,
as investors take the view that the Federal Reserve will not
tighten its monetary policy any time soon, while other central
banks prepare to raise their benchmark rates as growth
improves. []
Fears of fiat currency depreciation have powered gold to
record highs. The metal has benefited tremendously after the
Fed announced a plan to buy $600 billion of long-dated U.S.
Treasury bonds since last November.
"There is an increasing anxiety about how central banks
around the world are treating their currencies," Dailey said.
"On any dips of size, there is a voracious appetite of physical
gold."
Reflecting some of this waning appetite to hold gold was a
drop in holdings of bullion in the world's largest gold
exchange-traded fund, the SPDR Gold Trust <GLD>, which
witnessed its largest one-day outflow since late January.
[]
Spot silver <XAG=> rose 1 percent to $36.40 an ounce, just
a few cents away from its 31-year high of $36.70 last reached
in early March.
Spot platinum <XPT=> eased 0.3 percent at $1,736.99 an
ounce, while palladium <XPD=> lost 1.1 percent to $736.50.
Prices at 12:35 p.m. EDT (1635 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCJ1> 1427.50 1.10 0.1% 0.4%
US silver <SIK1> 36.410 0.424 1.1% 17.7%
US platinum <PLJ1> 1741.30 -3.60 -0.2% -2.1%
US palladium <PAM1> 739.50 -2.80 -0.4% -7.9%
Gold <XAU=> 1426.95 1.90 0.1% 0.5%
Silver <XAG=> 36.40 0.35 1.0% 18.0%
Platinum <XPT=> 1736.99 -5.01 -0.3% -1.7%
Palladium <XPD=> 736.50 -8.50 -1.1% -7.9%
Gold Fix <XAUFIX=> 1426.00 0.50 0.0% 1.1%
Silver Fix <XAGFIX=> 35.95 -21.00 -0.6% 17.4%
Platinum Fix <XPTFIX=> 1736.00 8.00 0.5% 0.3%
Palladium Fix <XPDFIX=> 739.00 1.00 0.1% -6.6%
(Additional reporting by Silvia Antonioli in London; Editing
by Lisa Shumaker)
