Gold Gains from Softer Dollar, Geopolitics


"Since the Japanese earthquake, gold has fallen by more than 3%."

Gold rose for a fourth day on Monday, drawing strength from a softer dollar and from its appeal as a safe haven while Western powers carry out air strikes on Libya and Japan struggles to avert nuclear disaster.

The dollar rose against the yen for a second day but fell against a basket of major currencies to its lowest in 15 months, under pressure from the view that U.S. interest rates would not rise anytime soon.

The gold price, which is set for its tenth consecutive quarterly gain, was last up 1.0% at $1,433.50 an ounce by 1510 GMT, while most-active U.S. April futures were up 1.1% at $1,431.40.

Gold has re-established its traditional negative link to the dollar since the Japanese earthquake struck ten days ago, which triggered widespread selling across financial markets.

"You can't deny the escalating Middle East problems and the oil price are all supportive factors, but I wonder whether the big jump (in the gold price) is more weaker dollar-related," said Credit Agricole analyst Robin Bhar.

Unsettling investors further was a second wave of U.N.-authorized air strikes against Libya's Muammar Gaddafi, which a government spokesman called "barbaric" and Russian Prime Minister Vladimir Putin said resembled "medieval calls for crusades."

Gold usually benefits from periods of heightened risk aversion, but since the Japanese earthquake, the price has fallen by more than 3%.

"As long as we have this tendency towards risk aversion in the market, gold will be struggling. It's such a high%age of the total investment in commodities, so if there is anything to be reduced, gold is often in the firing line in that respect," said Saxo Bank senior manager Ole Hansen.

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