* Oil prices retreat as OPEC mulls production increase
* Bullion underpinned by ongoing clashes in Libya
* Main gold ETF sees inflow for first time since Feb. 1
(Recasts, adds comments, updates prices, adds second
byline/dateline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, March 8 (Reuters) - Gold dropped below
$1,430 an ounce on Tuesday, falling further away from the
previous day's record high as easing crude oil prices on
expectations of higher OPEC production dragged bullion and
other commodities lower.
Gold has risen about 10 percent in the last six weeks, as
clashes in Libya and turbulence across the Arab world have
encouraged investors to seek a safe-haven in which to put their
capital, while oil has gained about 17 percent in the same
period, stoking inflation worries.
"Crude oil is trading where it is today because of Libya's
crisis, which doesn't look like it's going to be over soon, and
the whole region is still unstable. So, we expect gold and oil
prices to remain at these levels or go higher," said Miguel
Perez-Santalla, vice president of Heraeus Precious Metals
Management.
Spot gold <XAU=> fell 0.3 percent to $1,425.80 an ounce by
12:02 p.m. EST (1702 GMT). U.S. gold futures for April delivery
<GCJ1> slipped $6.40 to $1,428.10.
Gold was fixed at $1,426.25 an ounce in London, down
$8.75.
GOLD FOLLOWING OIL
In the last year, the correlation between gold and oil
<CLc1> has been erratic but in the last few trading sessions
the positive link between the commodities have strengthened.
The correlation is expected to remain strong in the near
term as tension escalate in Libya, with government forces
attacking rebels with rockets, tanks and warplanes,
intensifying their offensive to crush the revolt against
Muammar Gaddafi. []
Gold hit a record $1,444.40 an ounce and oil rallied on
Monday but both oil and gold later retreated on speculation
that Gaddafi might step down. Oil prices can be seen as a
leading indicator of risk perceptions in the oil-rich Middle
East and North Africa region, so falling prices tend to suggest
less need to hold gold as a haven from risk.
"Despite the escalation of the unrest in Libya, gold has
been struggling to gain a foothold above the old highs with
some investors seemingly happy to lock in profit at these
levels," said Saxo Bank analyst Ole Hansen.
"It is still too early to say whether we are treading water
before the next push higher, or if we actually need a
retracement before the buyers feel comfortable enough to take
it up into a new range," Hansen said.
Adding to the pressure on gold was a rise in the dollar
against the euro, which fell as investors debated what the
outlook for higher euro zone interest rates might mean for the
region's more indebted nations. []
Concerns over euro zone sovereign debt were a major factor
pushing gold prices higher last year.
GOLD ETF HOLDINGS RISE
Investors poured into precious metals investment products
to seek a safe haven amid political and economic uncertainty.
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, rose for the first time
since Feb. 1 on Monday, by 6.7 tonnes. []
Meanwhile holdings of the largest silver ETF, the iShares
Silver Trust <SLV>, rose to two-month highs of 10,898.14
tonnes, climbing 103.25 tonnes, their largest one-day rise
since Feb. 23. []
Silver <XAG=> fell 0.3 percent to $35.75 an ounce, while
platinum <XPT=> lost 0.7 percent at $1,802.99 an ounce, and
palladium <XPD=> dipped 0.1 percent to $785.22.
Prices at 12:02 p.m. EST (1702 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCJ1> 1426.30 -8.20 -0.6% 0.3%
US silver <SIK1> 35.765 -0.100 -0.3% 15.6%
US platinum <PLJ1> 1808.10 -12.30 -0.7% 1.7%
US palladium <PAM1> 789.05 -1.05 -0.1% -1.8%
Gold <XAU=> 1425.80 -4.94 -0.3% 0.5%
Silver <XAG=> 35.75 -0.10 -0.3% 15.8%
Platinum <XPT=> 1802.99 -13.50 -0.7% 2.0%
Palladium <XPD=> 785.22 -1.00 -0.1% -1.8%
Gold Fix <XAUFIX=> 1426.25 -8.75 -0.6% 1.1%
Silver Fix <XAGFIX=> 36.37 -23.00 -0.6% 18.7%
Platinum Fix <XPTFIX=> 1808.00 7.00 0.4% 4.4%
Palladium Fix <XPDFIX=> 781.00 8.00 1.0% -1.3%
(Additional reporting by Jan Harvey in London)
