Spot gold was bid at $1,411.10 an ounce at 1600 GMT, against $1,399.20 late in New York on Tuesday. US gold futures for April delivery rose to $1,403.3 an ounce.
A day earlier, risk aversion lifted bullion to its highest since Jan. 4, topping $1,410 an ounce on worries about escalating tensions in the Middle East and north Africa. Protests in the region this year have toppled the leaders of Tunisia and Egypt.
A 2.4-percent rise in gold last week raised concerns the metal was at unsustainable levels, but news from Libya supported prices as leader Muammar Qaddafi vowed to crush a mounting revolt against his four decades of rule.
“It is dominated by the Middle East fears and the weaker dollar,” Standard Bank analyst Walter de Wet said of the market.
“We think we could easily test the highs again for gold,” he added. “It could go all the way to $1,440 till it starts looking a bit stretched from a fundamental perspective.” The metal set a record $1,430.95 in December last year.
Gold earlier hit a session high of $1,413.70 as the dollar weakened after after US existing home sales data. The data showed a rise in home sales but a fall in house prices.
A weaker dollar attracts non-U.S investors to dollar-priced metals.
The broader markets showed widespread risk aversion. Stock markets retreated globally, while industrial metals prices eased, though concerns over output from oil-rich Libya boosted crude prices.
Meanwhile, safe havens like German government bonds and the Swiss franc rose, with the Swissie at its highest point versus the dollar so far this year.
But while dealers reported strong demand for investment products like gold bars, interest in bullion-backed exchange traded funds softened.
The world’s largest gold-backed ETF, the SPDR Gold Trust, said holdings dropped to 1,218.243 tons on Tuesday from 1,223.098 tons a day before.
Holdings in the world’s largest silver ETF, the iShares Silver Trust, fell to 10,342.89 tons on Tuesday from 10,519.05 tons the previous day.
Silver was at $33.63 an ounce from $33.04. The metal has risen strongly this month on worries about tightness in the market, but a spokesman for metals consultancy GFMS said on Wednesday there was no need for concern about supply.
“We are expecting a reasonably robust increase (in new mine output) this year,” Paul Walker, GFMS’s chief executive officer, told Reuters in an interview. “The rise in mine output should keep silver still in a surplus.”
Platinum was at $1,793 an ounce against $1,788.50, while palladium was at $802.22 against $802.23.
