Chinese monetary tightening brought gold down from five-week highs Friday, but the precious metal has steadied amid persistent buying.
The most-actively traded contract, for April delivery, was recently 60 cents higher at $1,385.70 U.S. a troy ounce on the Comex division of the New York Mercantile Exchange.
The metal pulled back as China's central bank said Friday it will raise the reserve requirement ratio for banks by 0.5 percentage points, the second such increase this year, as inflationary pressures remain in the spotlight.
Gold is considered a hedge against rising consumer and producer prices, so moves aimed at curbing inflation can take some of the shine off the metal.
The reserve requirement increase, which takes effect Thursday, is the latest move by China to curb inflation. The consumer price index rose 4.9% in January, up from December's 4.6% rise, and economists have warned that consumer price inflation is likely to accelerate in February.
The Peoples' Bank of China raised benchmark lending and deposit interest rates earlier this month and raised the reserve requirement ratio six times and benchmark interest rates twice in 2010. The last reserve ratio increase took effect Jan. 20.
Gold prices surged to record highs above $1,400 U.S. in December as worries about sovereign debt problems in Europe and concerns about long-term inflation from easy U.S. monetary policy boosted the metal as a safe-harbor investment and alternative currency.
Ultralow interest rates have also been key to gold's rise because they lower the opportunity costs of holding the non-interest-bearing metal.
The liberalization of the Chinese gold market, as well as central banks becoming net buyers have also helped prices, as have recent worries about unrest in the Middle East.
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