* Gold set for fourth straight weekly gain on Mideast unrest
* U.N. Security Council set to meet on Libya later
* Palladium on track for biggest 1-week drop since Jul. 2010
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Feb 25 (Reuters) - 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 <XAU=> was bid at $1,401.85 an ounce at 1000 GMT
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 <GCJ1> fell $13.40 an ounce to $1,402.30.
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 favour 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 edged higher in early
trade, while German government bond futures were a touch lower
-- 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 their climb 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. [] []
UNREST EYED
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 <GLD> fell to a nine-month
low at 1,211.568 tonnes on Thursday. []
Holdings of the largest silver ETF, the iShares Silver Tust
<SLV>, meanwhile, rose to a six-week high at 10,666.35 tonnes on
Thursday. []
Silver <XAG=> was bid at $32.73 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 <XPT=> was at $1,785.74 an ounce against
$1,777.49, while palladium <XPD=> was at $777.49 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.
(Reporting by Jan Harvey; Editing by Alison Birrane)
