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 SINGAPORE: Gold steadied on Wednesday on firmer equities and upheaval in Libya, although further gains could be capped by worries that some central banks will have to soon start tightening monetary policy, a move that would dent bullion's appeal as a hedge against inflation.

In recent days, several top US central bank officials have said further bond purchases by the Federal Reserve were not needed to support the economy, while European Central Bank President Jean-Claude Trichet noted his inflation concerns from rising food and energy prices.

But an uprising in the Arab world remained a key supporting factor for gold, as a conference of 40 governments and international bodies agreed to press on with a NATO-led aerial bombardment of Libyan forces until Muammar Gaddafi complied with a UN resolution to end violence against civilians.

Spot gold hardly moved, standing at $1,416.10 an ounce by 0233 GMT after hitting an intraday high of $1,419.50 -- still well below a lifetime high around $1,447 struck last week. It had dropped 0.1 percent on Tuesday as the talk of monetary tightening prompted selling.

"You've got to ask yourself, how bad is inflation? I think, really, you've got to get the economy moving before anything happens," said Jonathan Barratt, managing director of Commodity Broking Services in Melbourne.

"I think the market itself will probably get a little bit headstrong if, in fact, we continue to get concerns in the Middle East. I think gold is really being played out by what's happening in the Middle East and risk aversion trade."

Muammar Gaddafi's better armed and organised troops reversed the rapid westward advance of rebels on Tuesday as world powers meeting in London piled pressure on the Libyan leader to step down.

In Syria, President Bashar al-Assad sought to deflect the greatest challenge to his 11-year rule by mobilising tens of thousands of Syrians in mass rallies across the country, while in Yemen, protesters demanded an end to President Ali Abdullah Saleh's rule.

US gold futures for April was barely moved at $1,416.0 an ounce.

Japan's Nikkei average made modest gains on Wednesday after the dollar rose against the yen, but remained tethered in a narrow range for a seventh straight     session amid little progress at the crippled nuclear plant.

"There's a bit of physical buying but we've also seen some selling on the upside. The Middle East is a tense, but people also think interest rates will go up in the euro zone, which is why the market is capped," said a dealer in Hong Kong.

"It's a mixed market. We may see support at $1,410, while the upside is capped at $1,420 and $1,422. We may trade within this range for the rest of the week. Speculators don't seem to know what to do."

Holdings on the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , were unchanged at 1,211.836 tonnes.

In currencies, the yen wallowed at 10-month lows versus the euro and near a three-week trough on the dollar on Wednesday, having suffered broad losses after several major chart support levels were breached.

Against the dollar, the euro held near $1.4100 , finding the going tough after a crack at levels above $1.42 last week was met with selling interest

Gold demand to make jewellery, dental fillings and in electronics will jump by more than 5 percent this year, the biggest rise since 2000, metals research and consultant CPM Group said on Tuesday.

Copyright Reuters, 2011

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