Gold firms on Iran-Israel tension, rising oil

By Jan Harvey

LONDON (Reuters) - Gold firmed in Europe on Wednesday as reports Iran had test-fired missiles lifted oil prices and prompted buying of bullion as a safe haven.

Gold rose to $923.70/924.70 at 11:07 a.m. EDT from $921.35/922.55 an ounce late in New York on Tuesday, when the precious metal shed 1 percent to a near two-week low of $912.50 as oil prices dropped.

"The prices are holding up because of a risk premium generated by the tensions in the Middle East," said commodity analyst Manqoba Madinane at Standard Bank in Johannesburg.

"Oil prices have increased from yesterday's levels and that's also supporting the upside on gold," he said.

Iran test-fired nine missiles on Wednesday and warned the United States and Israel it was ready to retaliate for any attack over its disputed nuclear projects.

Oil rose $2 to around $138 a barrel, after Iran said it had test-fired missiles that could reach Israel and U.S. bases in the region.

Rising oil prices increase gold's appeal as an inflation hedge and boost sentiment towards commodities as an asset class while rising tension in the Middle East allures safe-haven buying.

"Gold benefits directly from geopolitical tension, so it would have received support from that news," said Merrill Lynch metals strategist Daniel Hynes.