* Dollar/gold correlation most negative since late Jan
* Middle East tension in focus; PGMS ease
* Coming up: U.S. ICSC chain stores; 1145 GMT
(Updates with comment, refreshes prices)
By Amanda Cooper
LONDON, March 22 (Reuters) - Gold remained on track for a
fifth day of gains on Tuesday, fed by the broad weakness in the
dollar and by investor demand for safe-haven assets as ongoing
Western air strikes on Libya stoked tensions in the Middle East.
Investors also kept an eye on Japan's progress in averting a
full-blown nuclear disaster, caused by an earthquake and tsunami
on March 11 that is believed to have killed over 20,000 in the
world's third-largest economy. []
Gold's inverse relation to the dollar index <.DXY>
strengthened for a fourth day to reach its most negative in two
months, while the U.S. dollar fell to its weakest level in over
15 months against a basket of major currencies.
Spot gold <XAU=> was last quoted up 0.1 percent at $1,426.10
an ounce by 1130 GMT, having fallen briefly by as much as 0.1
percent to a session low of $1,423.69 before recovering.
U.S. most-active April futures <GCv1> rose 0.1 percent to
$1,427.30.
Yet analysts said any dips in gold did not spell an end to
the market's rally that has lifted the price by over 2 percent
in the last five trading days.
"I wouldn't interpret too much into the moves of the last
few moments, because volatility, not only in precious metals,
but in all of the commodities is so extremely high at the
moment," said Commerzbank analyst Daniel Briesemann.
"This volatility shows market participants are still very
uncertain about what is going on and where it is leading, so at
least in theory, it should be supportive for gold."
"There is still a very low interest-rate environment and
there is so much liquidity out there, trying to find its way
into the market and commodities are currently a very attractive
asset class, so they will definitely profit from this," he said.
DOLLAR SLIDES
The dollar slid against most major currencies, falling to
4-1/2 month lows against the euro, as investors take the view
that the Federal Reserve will not tighten its monetary policy
any time soon, while other central banks prepare to raise their
benchmark rates as growth improves.
Low U.S. rates create a favourable environment for gold,
which as a non-yielding asset, must compete against stocks,
bonds and currencies for investor attention.
"There's certainly been people looking at euro/dollar in
particular and the DXY, which is approaching some big levels, so
that's playing into it. For sure, the situation in the Middle
East and North Africa is generating some buying interest," said
Credit Suisse analyst Tom Kendall.
Crude oil held close to 2-1/2 year highs, underpinned by
concern over the impact on supply as unrest spread across the
Arab world, where forces loyal to Muammar Gaddafi attacked a
town near Tripoli after a third night of air raids on the Libyan
capital. [] []
A prolonged period of high oil prices could worsen the rise
in global inflation triggered by record high food prices,
particularly in the emerging world. This could ultimately prove
supportive to gold, which investors sometimes use to shield
their portfolios from return-sapping price pressures.
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Top News on Japan: []
Top News on the Middle East unrest: []
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Japan appears to be making progress containing its nuclear
crisis as it restored power cables to all six reactors and
started a pump at one of them to cool overheating nuclear fuel
rods. But rising smoke and haze from two of the most threatening
reactors suggested the battle was far from won. []
Holdings in the world's largest gold-backed exchange-traded
fund, SPDR Gold Trust <GLD>, staged their largest one-day
outflow since late January, reflecting some of the recent
profit-taking by investors in physical metal. []
Spot silver <XAG=> was flat, trading at $36.05 an ounce,
unchanged from levels seen late on Monday and just a few cents
away from early March's 31-year high of $36.70.
Spot platinum <XPT=> was last down 0.6 percent at $1,732.49
an ounce, while palladium <XPD=> was off 1.6 percent at $732.97.
(Editing by Alison Birrane)
