PRECIOUS-Gold Recovers Amid Equities, Libya Situation; Central Banks in Focus, Reports Reuters

Gold Prices Stabilize Amid Economic Concerns and Middle East Tensions

Gold prices stabilized on Wednesday, recovering from earlier highs as global equity markets showed firmness and tensions in Libya continued to influence the market. However, potential gains for gold could be limited due to concerns that some central banks may soon begin tightening monetary policy, which could reduce gold’s attractiveness as an inflation hedge.

Recent comments from leading U.S. Federal Reserve officials indicated that further bond purchases are not necessary to bolster the economy. Similarly, European Central Bank President Jean-Claude Trichet expressed worries about rising food and energy prices fueling inflation.

The ongoing unrest in the Arab world continues to support gold prices. A coalition of 40 governments and international organizations has agreed to maintain NATO-led airstrikes against Libyan forces until Colonel Muammar Gaddafi complies with a U.N. resolution to cease violence against civilians.

As of 0233 GMT on Wednesday, spot gold was virtually unchanged at $1,416.10 an ounce, after peaking at $1,419.50 during the day. This figure remains significantly lower than the recent record high of approximately $1,447 reached last week. On Tuesday, gold experienced a small decline of 0.1 percent, influenced by discussions on potential monetary policy adjustments.

Market analyst Jonathan Barratt from Commodity Broking Services commented, "You need to consider how severe inflation is before taking any action; the economy must gain momentum first." He noted that the situation in the Middle East is heavily impacting gold prices and shaping market behavior.

On the ground in Libya, Gaddafi’s well-equipped forces managed to slow the advance of rebel forces, leading to increasing international pressure for him to resign. Tensions were also evident in Syria, where President Bashar al-Assad organized mass rallies to counter challenges to his reign, and in Yemen, where protests called for President Ali Abdullah Saleh to step down.

Gold futures for April hovered around $1,416 per ounce without significant movement. Meanwhile, Japan’s Nikkei index saw modest gains as the dollar strengthened against the yen, although the market remained within a narrow trading range due to limited progress at a stricken nuclear power plant.

A dealer in Hong Kong noted, "There is some physical buying, but we’ve also seen sales as prices rise. The situation in the Middle East is tense, yet investors are wary about potential interest rate hikes in the eurozone, which creates a cap on the market." He suggested possible support for gold around $1,410, with resistance levels at $1,420 and $1,422, indicating that the market may trade within this range for the remainder of the week.

In other markets, physical gold demand for jewelry, dental applications, and electronics is projected to increase by over 5 percent this year, marking the highest growth rate since 2000.

Current Precious Metals Prices (as of 0233 GMT)

• Spot Gold: $1,416.10 (+0.01%)
• Spot Silver: $36.90 (-0.46%)
• Spot Platinum: $1,744.49 (+0.58%)
• Spot Palladium: $753.97 (+0.76%)

Currency Exchange Rates

• Euro/Dollar: 1.4079
• Dollar/Yen: 82.73

These figures reflect the ongoing complexities of global economic conditions and geopolitical tensions affecting precious metals markets.