SINGAPORE - Gold prices steadied, as escalating unrest in the Middle East and North Africa underpinned the safe-haven demand, but the rise lacked momentum due to easing fears over Japan's nuclear crisis and a modest rebound in the dollar.
The troubles in the Middle East turned increasingly violent with Syrian troops opening fire on protesters and Yemen's president warned that the country would slip into civil war if he was forced to quit.
"Gold is still taking its cue from the situation in the Middle East," analyst at Phillip Futures Ong Yi Ling said, adding that it could increase safe-haven flows into the precious metal.
Oil prices have moved in tandem with gold since the Middle East tensions broke out at the end of January. Lofty oil prices have stoked worries of inflation down the road, adding to gold's allure as an inflation hedge.
Spot gold edged down 0.1 per cent to $US1,427.85 an ounce by 1329 AEDT. US gold futures was nearly flat at $US1,428.
Bullion has been moving in a narrow range of $US4 in the past two sessions, lacking momentum for a further rise on easing fears over Japan's nuclear crisis, even though the battle to contain the problem was ongoing.
Profit-taking was spotted as prices rose towards $US1,430, seen as a key resistance level, traders said.
"Investors don't know what to do – we see profit-taking at the high price range, but fears of inflation as well as the Middle East crisis triggers buy-back by speculators when prices go down," a Hong Kong-based dealer said.
Improving outlook for developed economies, including the United States, has prompted some investors to move into riskier assets such as equities, he added.
Technical analysis showed that unless gold effectively breaks above the pivotal resistance at $US1,435, market sentiment might be bearish, pressuring prices down to $US1,416, Reuters market analyst Wang Tao said.
Investors are also eyeing the currency market. The dollar index edged up after sinking to a 15-month low in the previous session, as the euro hovered below a four-and-a-half month high.
Sovereign debt problems in Portugal and Ireland sapped appetite for the single currency, as Portugal's parliament will vote on the government's latest austerity measures on Wednesday.
A rebound in theUS dollar could hurt sentiment on commodities.
Spot silver inched down 0.1 per cent t at $US36.29, just off the 31-year high of $US36.40 hit on March 7.
