Gold retreated below $1,360 an ounce on Friday after the resignation of Egyptian President Hosni Mubarak following weeks of protest took some heat out of risk aversion. Despite Friday's decline, bullion posted its second consecutive weekly gain as fears that Egypt's unrest would spread across the Arab world had put a floor on gold prices, traders said.
Mubarak, the second Arab leader to be overthrown by a popular uprising in a month, handed power to the army after 18 days of relentless rallies against poverty, corruption and repression caused support from the armed forces to evaporate. "The geopolitical risk and the incentive to buy gold on the back of that are probably reduced," said Hayden Atkins, an analyst at Macquarie. "Tension will still be simmering, but it won't be as big a news story for people to trade off."
Spot gold fell 0.3 percent to $1,359.20 an ounce by 1:28 p.m. EST (1828 GMT), having earlier risen to a three-week high of $1,368.16 an ounce. US gold futures for April delivery settled down $2.1 at $1,360.4. "The biggest question of course is if this (Mubarak's stepping down) will lead to problems elsewhere. I think that's what we need to focus on going forward, and that will keep gold steady," said Bill O'Neill, partner at commodities firm LOGIC Advisor.
Gold fell 6 percent in January after a run of well-received US data and easing worries about Europe's debt crisis shifted investor focus onto assets seen as higher-risk, but its slide has been arrested this month. Investment demand for gold remained soft, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, easing nearly a tonne on Thursday. They are down just over 55 tonnes so far this year.
In the same period of 2010, they fell around 27 tonnes. Silver slipped 0.2 percent to $30.04 an ounce. The tightest physical supplies in four years have tipped the US silver futures market into backwardation this week, making near-term prices more expensive than more distant months.
Holdings in the world's largest silver ETF, the iShares Silver Trust, rose around 18 tonnes to 10,388.45 tonnes on Thursday, their first increase since January 24. Platinum dropped 0.8 percent to $1,809.50 an ounce, while palladium lost 1.2 percent to $810.75.