Gold prices rose above $1,400 an ounce on Friday and were on track for a fourth straight week of gains, supported by interest in the metal as a haven from risk as violence flared in Libya and across the Middle East region. The UN Security Council is to meet later to discuss a draft proposal for sanctions against Libyan leaders, who are battling for survival against a popular uprising in which French estimates say some 2,000 people may have died.
Spot gold was bid at $1,406.20 an ounce at 1432 GMT against $1,401.47 late in New York on Thursday, and is on track for its fourth consecutive weekly gain. US gold futures for April delivery fell $8.70 an ounce to $1,407.10. "We have seen a big decrease in risk appetite, a fall, certainly after mid-February, in equities and the industrial metals, but an increase in oil with uncertainty over a supply shock," said VM Group analyst Carl Firman.
"Alongside that you have risk aversion, and we have seen gold and silver benefit. And I think that is here to stay until the situation becomes clearer." On Thursday spot prices rose as high as $1,417.92 an ounce, close to the metal's record high of $1,430.95. While signs emerged this week's elevated risk aversion was coming off the boil - European stocks rose, while German government bond futures retreated a touch - strength in oil prices this week is still unnerving investors.
"People are looking to buy dips in gold, from an investment perspective, on the back of the Middle East issues," said Standard Bank analyst Walter de Wet. "If tension eases there, I can see gold coming off." The unfolding situation across the Middle East and North Africa will remain in focus next week. Civil unrest first broke out in Tunisia, from where it spread quickly to Egypt, and then to Bahrain, Libya, Yemen and others.
Saudi Arabia this week unveiled a $37 billion package to try to insulate the kingdom from the wave of protests across the Arab world, while Algeria lifted a 19-year-old state of emergency as it tried to appease opposition groups. "In order for already high gold and silver prices to be sustained, the market may require a steady diet of increased strife in the Middle East, coupled with higher oil prices," HSBC analyst James Steel said in a note.
Investment demand in developed markets for products like gold-backed exchange-traded funds remained soft. Holdings of the largest, New York's SPDR Gold Trust fell to a nine-month low at 1,211.568 tonnes on Thursday. Holdings of the largest silver ETF, the iShares Silver Tust, meanwhile, rose to a six-week high at 10,666.35 tonnes on Thursday. Silver was bid at $32.80 an ounce against $32.09. The metal is on track for a fifth consecutive weekly gain, although it slipped sharply from 31-year highs on Thursday, putting in its worst one-day performance since December. Elsewhere, platinum was at $1,785.99 an ounce against $1,777.49, while palladium was at $782.22 against $771.