PRECIOUS-Gold above $1,590 as continued euro zone easing seen
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By Clara Denina
LONDON, March 12 (Reuters) - Gold rose more than 1 percent to above $1,590 an ounce as traders interpreted comments by an ECB official that euro zone inflation pressures were abating as an indicator of continued monetary easing and covered their short positions.
Accommodative monetary policies favour gold as low interest rates encourage investors to put money into the non-interest-bearing assets.
The metal started the day with a firmer tone, supported by some physical buying in Asia, but a stronger dollar and continued redemptions in gold-backed exchange-traded funds kept prices in check.
Spot gold rose as much as 1.1 percent to its highest level since Feb. 28 at $1,598.20 an ounce. It was up 0.8 percent at $1,592.44 by 1520 GMT. The metal broke above the $1,560 and $1,585 range, in which it had been confined since the start of March, triggering automatic buy orders at key resistance levels between $1,586 and $1,587, traders said.
U.S. gold futures for April delivery rose 0.9 percent to $1,592.80.
"(ECB policy maker Jens) Weidmann's comments provided the trigger the market was looking for, and obviously the automatic buy orders kicked in at $1,587, taking it near $1,600," Saxo Bank head of commodity strategy Ole Hansen said.
"The market has been trying to find its footing for weeks, and every time has been knocked back by various economic data, but prices were trading in the upper end of the $1,560-$1,585 range this morning, so the reaction was immediate."
Gold on Friday slid to a two-week low of $1,560.80 on signs of improving economic conditions in the United States.
The ECB's Weidmann said inflationary pressure was easing, suggesting that the central bank would continue an accommodative monetary policy, traders said.
In wider markets, the dollar retreated against the yen and lost some ground versus the euro, while global equity markets were mixed, with a record-breaking rally in U.S. stocks pausing after a seven-session string of gains.
Holdings of SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, fell to the lowest since October 2011 at 1,236.729 tonnes on March 11 from 1,236.739 in the previous session.
Analysts said, however, the pace at which ETF investors exit their positions has been easing. I the past week 21.9 tonnes were liquidated, compared with a 56.7 tonne loss in the previous week, according to Standard Bank.
With major economic data sparse during the week, the next event is U.S. consumer inflation data on Friday, which is likely to provide some direction, analysts said.
Markets were monitoring the U.S. budget crisis, which some see as a threat to nascent recovery in the world's top economy, as well as the troubles in the euro zone due to Italy's political uncertainty.
PHYSICAL DEMAND IN ASIA
Physical buying continued in Asia, also spurred by comments from Kikuo Iwata, nominee to the Bank of Japan's deputy governor role, that the central bank must boost quantitative easing as part of a 'bold' monetary policy aimed at ending years of deflation.
Average daily combined volumes traded on the three main gold contracts on the Shanghai Gold Exchange in the first two months of 2013 rose 24 percent on the year, according to Reuters calculations.
Among other precious metals, spot palladium fell 0.8 percent to $770 an ounce, off Friday's peak at $784.50, its highest since September 2011.
Platinum was unchanged at $1,593.49 after a lower start. Silver was up 0.8 percent to $29.17, tracking gold's upward move. Holdings of the biggest silver ETF iShares Silver Trust stood unchanged at 10,646.48 tonnes in the previous session. (Editing by Keiron Henderson and Jane Baird)
