* Rate hike worries prompt gold market to take breather
* Western air strikes on Libya, Mideast tension underpin
* Gold chart points to $1,500/oz but resistance seen
* Coming up: U.S. new home sales data Wednesday
(Rewrites, updates prices, adds comments, graphic, changes
dateline/byline, previously LONDON)
By Frank Tang
NEW YORK, 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 in
April. 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 $1,425.95 an
ounce by 2:56 p.m. EDT (1856 GMT). U.S. most-active April
futures <GCJ1> settled up 0.1 percent to $1,427.60 with volume
at about one-fifth lower than its 30-day average.
On the charts, a rising channel dated back to January
indicates gold will target above record $1,500 an ounce after
it breaches resistance area between $1,445 and $1,466, said
Rick Bensignor, chief market strategist of Dahlman Rose.
(Graphic: http://link.reuters.com/beq68r )
Spot silver <XAG=> rose 0.9 percent to $36.36 an ounce,
just a few cents away from its 31-year high of $36.70 last
reached in early March.
The dollar held around 4-1/2 month lows against the euro,
as investors take the view that the U.S. Federal Reserve will
not tighten its monetary policy any time soon, while other
central banks prepare to raise their benchmark rates as growth
improves. []
Even as the traditional inverse correlation between gold
and the dollar has slightly tightened recently, bullion's link
with the dollar could be erratic over the longer term, traders
said.
CURRENCY DEPRECIATION FEAR
Fears of fiat currency depreciation have powered gold to
record highs. The metal has benefited tremendously since last
November, when the Fed announced its plan to buy $600 billion
of long-dated U.S. Treasury bonds to boost growth.
"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."
However, investor appetite has waned, which was reflected
by a drop in bullion holdings in the world's largest gold
exchange-traded fund, the SPDR Gold Trust <GLD>, which
witnessed its largest one-day outflow since late January.
[]
Gold has risen nearly 10 percent since late January, when
unrest was first reported in Tunisia and later spilled into
Egypt, Libya and across the Arab world.
Yemen's president on Tuesday said his country would descend
into civil war if he were forced to quit and Washington voiced
concern about instability in the Arab state that has become an
al Qaeda stronghold. []
Platinum group metals were under pressure as demand for
autocatalyst took a hit due to Japan's massive quake nearly two
weeks ago. Major automakers including Toyota <7203.T> and Honda
<7267.T> have yet to resume full production due to a shortage
of parts and workers. [] []
Spot platinum <XPT=> eased 0.2 percent at $1,737.99 an
ounce, while palladium <XPD=> lost 1.2 percent to $736.
Prices at 2:56 p.m. EDT (1856 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1427.60 1.20 0.1% 0.4%
US silver <SIK1> 36.269 0.268 0.0% 17.2%
US platinum <PLJ1> 1739.40 -5.50 -0.3% -2.2%
US palladium <PAM1> 737.85 -4.45 -0.6% -8.1%
Gold <XAU=> 1425.95 0.90 0.1% 0.5%
Silver <XAG=> 36.36 0.31 0.9% 17.8%
Platinum <XPT=> 1737.99 -4.01 -0.2% -1.7%
Palladium <XPD=> 736.00 -9.00 -1.2% -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 Amanda Cooper and Silvia Antonioli in
London; Editing by Marguerita Choy)
