Gold pushed higher on Friday as a major earthquake in Japan and unrest in the Middle East kept the metal underpinned, but a fall in oil prices reduced the metal's appeal as a refuge from inflationary pressures. Spot gold was bid at $1,415.40 an ounce at 1621 GMT, up from $1,412.59 late in New York on Thursday.
"It's a logical reaction," Robin Bhar, an analyst at Credit Agricole said of gold's rise. "With all the fear factors and the risk aversion and the desire for ways to hedge against that."
The biggest earthquake to hit Japan since records began 140 years ago struck the north-east coast, triggering a 10-metre tsunami that swept away everything in its path, killing hundreds of people. "The earthquake will act as a blow to growth in the short term, because it will be a drag on the economy," Bhar added.
Also keeping markets nervy, police flooded the streets of the Saudi capital on Friday to deter a planned demonstrations inspired by pan-Arab revolt, but a small Shia protest was reported in the country's oil-producing east.
Meanwhile, in Libya forces loyal to leader Muammar Gaddafi intensified a counter-offensive against insurgents. But the metal was down about $30 from a lifetime high of $1,444.40 a troy ounce on Monday.
Investors protect their portfolios by buying gold when they expect rising price pressures, often fuelled by energy costs, but US crude futures slipped to around $100 a barrel. Disruption to output from Saudi Arabia, which has the world's biggest reserves, however, would send oil prices much higher. "Historically, those sort of events in the Middle East have tended to be quite supportive," said Michael Lewis, head of commodity research at Deutsche Bank.
"But the effect will probably fade quite quickly."
Gold prices were little affected by data showing US retail sales rose an expected 1 percent in February and by other data showing US consumer sentiment fell to its lowest level in five months in early March. Silver was bid at $34.92 an ounce from $35.25 on Thursday, having rallied to a 31-year peak above $36 on Monday. Holdings of iShares Silver Trust were unchanged at a record high at 10,974.06 tonnes.
"While clients we visited in the US and Canada over the past two weeks mostly wanted to talk about gold, we noted a clear upward shift in their interest in silver," UBS said in a note.
"There is little doubt that gold has lost some of its previous supporters to silver. Of those clients able to invest in the metal itself, rather than being restricted to silver equities, close to half were extremely bullish on silver's prospects." Spot platinum was at $1,771.74 an ounce from $1,760.24 on Thursday and palladium at $750.72 an ounce from $765.50 an ounce.
"The appeal of (platinum and palladium) has been tainted by people worrying about the rise in oil prices and the impact on economic growth," a trader said.
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