Gold’s best run in 18 months after Yemen air strikes

Gold,,,By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON, March 26 (Reuters) – Gold pared gains after hitting a 3-1/2-week high on Thursday, after a knee-jerk reaction to escalating tensions in the Middle East knocked stocks and drove investors into assets viewed as lower-risk, such as bullion and German bonds.

Stock markets worldwide were knocked lower and oil prices jumped after Saudi Arabia and its allies conducted air strikes in Yemen that fueled worries Middle East energy shipments may be put at risk. Wall Street later recovered.

The dollar was down earlier against the euro but recovered in New York trading on the view central bank policy was more favorable for the U.S. currency.

Spot gold reached a peak of $1,219.40 an ounce, before retreating to trade up 0.6 percent at $1,195.25 at 2:47 p.m. EDT (1847 GMT). U.S. gold for April delivery settled up $7.80 an ounce at $1,204.80.

“If the situation in the Middle East did not improve, prices could continue to rise, but otherwise they are likely to fall back below $1,200,” Commerzbank commodity analyst Daniel Briesemann said.

Gold was heading for a seventh session of gains, its longest winning streak since August 2012.

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