Gold rises on higher oil prices, Middle East tensions

SINGAPORE (Reuters) - Gold inched up on Monday, bolstered by a jump in oil prices and safe-haven bids from rising geopolitical tensions in the Middle East.

FUNDAMENTALS

* Spot gold > was up 0.3 percent to $1,063.50 an ounce by 0043 GMT. U.S. gold futures also rose 0.3 percent. Silver > jumped nearly 1 percent to $13.91.

* Saudi Arabia cut ties with Iran on Sunday, responding to the storming of its embassy in Tehran in an escalating row between the rival Middle East powers over Riyadh's execution of a Shi'ite Muslim cleric.

* Iran's top leader, Ayatollah Ali Khamenei, predicted "divine vengeance" for the execution of Sheikh Nimr al-Nimr, an outspoken opponent of the ruling Al Saudi family.

 

* Brent crude jumped over 3 percent, while WTI rose 2.7 percent in early Asian trading on Monday.

* Higher oil prices support bullion, as gold is often seen as a hedge against oil-led inflation.

* Safe-haven bids could also be buoying gold, as the metal is seen as an alternative investment during times of geopolitical and financial uncertainties.

* Those factors offset any selloff from a stronger greenback. The dollar hovered near a two-week high against a basket of currencies on Monday in the first trading session of 2016. [USD/]

* Price rallies in gold triggered by safe-haven bids are typically short-lived.

* After losing 10 percent last year, gold faces another tough year in 2016, amidst higher U.S. interest rates and a stronger dollar.

* The Federal Reserve raised U.S. rates for the first time in December, and is expected to resort to gradual increases in this year. Higher rates dent demand for non-interest-paying gold, while supporting the dollar.

* In a reflection of bearish investor sentiment, assets of SPDR Gold Trust , the top gold-backed exchange-traded fund, fell 0.18 percent to 642.37 tonnes on Thursday, close to a seven-year low.

* The U.S. Mint sold a record amount of American Eagle silver bullion coins and sales of its gold coins rose by 53 percent this year, it said on Thursday, as weak metal prices unleashed a fresh wave of buying by investors and collectors.

* For the top stories on metals and other news, click [TOP/MTL] or [GOL]

MARKET NEWS

* Asian shares began their first trading of 2016 on a cautious note on Monday. U.S. stock futures were up 0.3 percent. [MKTS/GLOB]

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin)