* Gold up 1 pct, biggest one-day rise since March 1
* Crude oil spike, fall in dollar trigger short-covering
* Bullion faces tough technical resistance below $1,700
* ETFs show largest one-day outflow in three months
(Rewrites, updates comment, market activity; adds NEW YORK
dateline, second byline)
By Frank Tang and Amanda Cooper
NEW YORK/LONDON, March 23 Gold rose 1 percent on
Friday, on track for its biggest one-day gain in almost a month,
as higher crude oil prices and a sharp drop in the dollar
prompted investors to cover short positions after a sell-off
earlier in the week.
Bullion is set for its first weekly rise in four weeks.
Fading hopes of further U.S. monetary easing had led to weakness
in the precious metal, reflected in a huge outflow from bullion
exchange-traded funds and some funds exiting the gold trade.
Gold, which was oversold after falling $150 in the last four
weeks, rallied after data showed U.S. new home sales fell to a
four-month low, a fund manager said.
"The jump today is somewhat sparked by the bad home sales,
which increased the chance of the Fed bringing easing back to
the system, and that's why gold is reacting positively," said
James Rife, an assistant portfolio manager at Haber Trilix
Advisors, which has $2 billion in assets.
Spot gold was up 1 percent at $1,660.79 an ounce by
12:41 p.m. EDT (1641 GMT), recovering from a two-month low hit
in the previous session.
U.S. gold futures for April delivery rose $18.20
to$1,660.70 an ounce in moderate volume.
However, momentum weakened somewhat after the metal failed
to breach resistance at $1,670, near the highs of its last seven
sessions, said Daniel Hwang, senior technical strategist at
Gold could face strong headwinds between $1,680 and $1,700,
where many key moving averages converged after the metal's
pullback, Hwang said.
The gold price has lost 2 percent so far this month as a
shift in investors' perception of the health of the U.S. economy
in particular has made so-called safe-haven assets less
attractive than stocks or higher-yielding currencies.
GOLD ETFS POST OUTFLOW
The decline in the gold price earlier this week took its
toll on investment in exchange-traded funds backed by physical
metal, resulting in the largest one-day fall in holdings on
Friday in three months.
ETF holdings hit a record of nearly 70.9 million ounces on
Tuesday, but the past couple of days of outflows have wiped out
all of the build-up that had taken place so far in March.
Markets are attaching lower probability to the U.S. Federal
Reserve's embarking on a fresh round of government-bond buying,
or quantitative easing, to keep short-term interest rates low to
stimulate growth. That shift has been a key driver in this
month's fall in the gold price.
"We think that quantitative easing and abnormally low U.S.
interest rates have been a huge support for gold prices. It's no
surprise that the falling gold price recently has been
accompanied by quite a significant rise in U.S. interest rates,"
Nic Brown, head of commodity research at Natixis, said.
Silver took its lead from gold, rising 1.8 percent to
$32.12 an ounce, as did the platinum group metals.
Platinum rose 0.7 percent to $1,625.74 an ounce,
while palladium gained 0.8 percent on the day to reach
$653.72 an ounce.
Prices at 12:41 p.m. EDT (1641 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold 1660.70 18.20 1.1% 6.0%
US silver 32.135 0.790 2.5% 15.1%
US platinum 1629.70 17.60 1.1% 16.4%
US palladium 657.90 6.85 1.1% 0.3%
Gold 1660.79 15.81 1.0% 6.2%
Silver 32.12 0.57 1.8% 16.0%
Platinum 1625.74 11.69 0.7% 16.7%
Palladium 653.72 4.97 0.8% 0.2%
Gold Fix 1664.00 13.00 0.8% 5.7%
Silver Fix 31.54 -25.00 -0.8% 11.9%
Platinum Fix 1617.00 8.00 0.5% 17.1%
Palladium Fix 658.00 4.00 0.6% 3.5%
(Editing by Dale Hudson)