* Unrest spreads to Bahrain, Libya after Egypt protests
* China reserve requirement hike limits gains
* Silver rallies to fresh 31-year high at $31.95/oz
(Updates prices, adds comment)
By Jan Harvey
LONDON, Feb 18 (Reuters) - Gold held close to an earlier
five-week high on Friday and silver neared its strongest since
1980 as unrest in the Middle East piqued interest in precious
metals, though a Chinese reserve requirement hike curbed gains.
Spot gold <XAU=> was at $1,384.13 at 1457 GMT against
$1,383.30 late in New York on Wednesday, while U.S. gold futures
for April delivery <GCJ1> eased 50 cents to $1,384.60.
Gold's bounce-back after it fell more than 6 percent in
January has wrong-footed some investors, who were waiting for
lower price levels to buy into the market, analysts said.
Silver <XAG=> was at $31.83 against $31.74 after hitting a
high of $31.95, a 31-year peak.
Gold earlier hit a five-week high at $1,388.15 an ounce. It
pared gains after China said it was raising lenders' reserve
requirements by 50 basis points but remained firmly underpinned
by investment interest in precious metals. []
"The hike in Chinese reserve requirements has clearly taken
a back seat as the investor focus has been on developments in
the Middle East, especially Bahrain," said Pradeep Unni, senior
analyst at Richcomm Global Services in Dubai.
"Though the situation is unlikely to get as bad as Egypt,
the 'fear factor' is fully back in the markets. Further gains
could be possible if the situation worsens."
Concerns over the political stability of the region have
flared this week, with unrest spreading after protests in
Tunisia and Egypt unseated leaders there. []
Government crackdowns on protesters claimed lives this week
in both Libya and Bahrain, while at least two people were killed
in Yemen on Friday when clashes broke out between police and
protesters. []
"Support (for gold) will continue to come from tensions in
the Middle East, where protesters in Bahrain were dispersed
yesterday by the military," said MF Global in a note.
"Similar conditions were seen in Libya and Iran, and
discontent is expected to continue to fester in these countries
as well as Saudi Arabia, Algeria and Iraq."
SILVER LEADS THE MARKET
Gold was also helped by a rally in silver prices towards $32
an ounce, breaking through to their highest in 31 years.
"(There has been) a remarkable move in silver, which has
helped gold back towards $1,400," said Saxo Bank senior manager
Ole Hansen.
"When will silver stop to catch its breath is the big
question now. A 12 percent outperformance of gold within a few
weeks looks a bit rich, but clearly it has a lot of fans."
The gold:silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- dropped to its lowest in 13
years at just under 43.5 on Friday, slightly below its 2006 low,
Reuters data showed, as silver prices outperformed.
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For a graphic showing the evolution of the gold:silver
ratio, click on: http://r.reuters.com/xaf28r
For recent stories on silver, click []
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Investment demand for silver-backed exchange-traded funds
has shown some signs of stabilising after hefty outflows last
month. Holdings in the largest, the iShares Silver Trust <SLV>,
edged up to 10,438.56 tonnes on Thursday from 10,411.23 tonnes.
"We expect silver to continue outperforming gold, and our
bullish view for silver is encouraged by the break above the
$31.26 high," said Barclays Capital in a note.
"We now look to push higher to our initial target near
$33.00 and then the $37.00 area."
Among other precious metals, platinum <XPT=> was at
$1,828.99 an ounce against $1,842.74, while palladium <XPD=> was
at $844.47 against $840.97.
(Editing by James Jukwey and Jane Baird)
