* Gold gains for third day as Libya violence worsens
* Bernanke plays down impact of oil price spike on economy
* Coming up: US ADP private-sector employment data Wed.
(Recasts, adds comments, updates prices, adds NEW YORK
byline/dateline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, March 1 (Reuters) - Gold prices rose to
within $10 of their record high on Tuesday, while silver hit a
31-year peak, as turmoil in Libya and unrest spreading across
the Middle East prompted safe-haven buying of the metals.
The United States said on Tuesday Libya could descend into
civil war if Muammar Gaddafi refuses to quit as U.S. demands
for an end to his rule carried new weight after word of
unspecified Western military preparations. []
"What gold needed was a catalyst, and it found it in the
form of tensions that are surfacing in the Middle East and
rising oil prices, which served as an inflationary threat and
also led to political instability," said Mark Luschini, chief
investment strategist of Janney Montgomery Scott, a brokerage
that manages $53 billion in client assets.
Gold has rallied strongly since uprisings in Tunisia and
Egypt unleashed a swathe of popular protests across the region,
sending oil prices to 2-1/2-year highs and raising investors'
concern about the potential effects of high energy prices on
economic growth.
Spot gold <XAU=> rallied to a session peak of $1,424.01 an
ounce -- its highest since Dec. 7, when it hit a record
$1,430.95. The metal was up 0.8 percent at $1,421.85 an ounce
by 11:12 a.m. EST (1612 GMT), extending its winning streak to
three consecutive trading days.
The recent surge in oil prices was unlikely to have a big
impact on the U.S. economy, but could dampen growth and raise
inflation if sustained, Federal Reserve Chairman Ben Bernanke
said on Tuesday. []
Bernanke's comments initially took some steam out of gold
by supporting the dollar.
However, analyst said gold should benefit in the longer
term as it is expected that the Fed will not raise interest
rates to battle inflation, which could weigh heavily on gold.
U.S. April gold futures <GCJ1> rose 0.9 percent to $1,422.7
an ounce.
Bullion rose 6 percent in February, its largest monthly
rise since August, when the U.S. Federal Reserve first
indicated economic growth was feeble enough to warrant a
resumption in purchases of government bonds.
Since the Fed cut interest rates to 0.25 percent in
response to the global financial crisis in late 2008, the gold
price has risen 70 percent, reaching a record $1,430.95 in
December 2010.
A low-rate environment encourages investors to buy gold as
it limits the opportunity cost, or premium relinquished for
holding a non-yield bearing asset, of owning the metal.
Soaring food and energy prices have ignited inflation in
emerging economies and have begun to push up consumer prices in
the developed world, which raises the likelihood of tighter
monetary policy, usually a negative for gold.
"I wouldn't say there's a clear direction at the moment,"
said Simon Weeks, head of precious metals at Bank of Nova
Scotia. "The pendulum has swung back from (investors) being
optimistic about economic recovery to being somewhat more
cautious."
GOLD HOLDINGS FALL IN FEBRUARY
In a reflection of investor ambiguity on gold, holdings of
the metal dropped in the SPDR Gold Trust <GLD>, the world's
largest gold-back exchange-traded fund.
Holdings fell for a fifth consecutive month in February,
marking their worst string of declines since the creation of
the fund in 2004.
Silver <XAG=> hit a fresh 31-year high at $34.57 an ounce
and later was 1.9 percent higher at $34.46. Silver has risen
about 11 percent this year, shrugging off the prospect of
rising supply as industrial demand improves.
Platinum <XPT=> gained 1.4 percent to $1,830.24 an ounce,
while palladium <XPD=> climbed 2.1 percent to $811.50 an
ounce.
Prices at 11:15 a.m. EST (1615 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCJ1> 1423.00 13.10 0.9% 0.1%
US silver <SIK1> 34.260 0.440 1.3% 10.7%
US platinum <PLJ1> 1834.80 25.60 1.4% 3.2%
US palladium <PAM1> 814.00 14.40 1.8% 1.3%
Gold <XAU=> 1422.30 11.45 0.8% 0.2%
Silver <XAG=> 34.27 0.47 1.4% 11.0%
Platinum <XPT=> 1830.24 25.25 1.4% 3.5%
Palladium <XPD=> 810.22 15.75 2.0% 1.3%
Gold Fix <XAUFIX=> 1420.75 6.25 0.4% 0.7%
Silver Fix <XAGFIX=> 34.37 88.00 2.6% 12.2%
Platinum Fix <XPTFIX=> 1828.00 19.00 1.1% 5.6%
Palladium Fix <XPDFIX=> 812.00 8.00 1.0% 2.7%
(Additional reporting by Rebekah Curtis in London; Editing by
Walter Bagley)
