Gold held near $1,400 an ounce in Europe on Friday, supported by interest in the metal as a haven from risk as violence flared in Libya, but struggled to maintain traction as some investors cashed in this week's hefty gains.
The U.N. 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 $1,401.55 an ounce at 1216 GMT (7:16 a.m. EST) against $1,401.47 late in New York on Thursday, and is on track for its fourth consecutive weekly gain. U.S. gold futures for April delivery fell $13.60 an ounce to $1,402.20.
On Thursday spot prices rose as high as $1,417.92 an ounce, close to the metal's record high of $1,430.95.
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 next big support we see is around $1,370, and it could realistically go and test those levels, he said. (But) we still favor buying gold on dips, and we think we are probably going to test $1,430 again soon.
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 -- ongoing strength in oil prices is still unnerving investors.
U.S. crude futures have rallied more than 14 percent so far this week, their biggest weekly gain since March 2009, amid concerns over supply from major oil producer Libya, and worries that unrest there may spread.
Prices continued to edge higher on Friday, stoking fears that a sharp rise in oil prices could derail global growth.
Meanwhile, nominally safe assets like gold, government bonds and the Swiss franc have all benefited from this week's unrest, with the Swiss currency hitting record highs against the dollar.
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.
As long as Saudi Arabia remains stable the risk factor in the Middle East is to some degree contained.
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 tones on Thursday.
Holdings of the largest silver ETF, the iShares Silver Tust, meanwhile, rose to a six-week high at 10,666.35 tones on Thursday.
Silver was bid at $32.64 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 $1,786.74 an ounce against $1,777.49, while palladium was at $777.15 against $771.
Palladium prices are set to fall 9 percent this week, their worst weekly performance since July 2010. The autocatalyst material, like other industrial metals, has suffered from concerns a spike in oil prices could hurt the economic recovery.