Gold rose above $1,430 an ounce on Tuesday, supported by clashes in Libya, but remained well off the previous session's record high as a retreat in oil prices prompted some investors to cash in gains in the metal.
Spot gold was bid at $1,433.95 an ounce at 1216 GMT, against $1,430.74 late in New York on Monday. U.S. gold futures for April delivery firmed 20 cents an ounce to $1,434.70.
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Prices hit a record $1,444.40 an ounce and oil rallied on Monday after troops loyal to Libyan leader Muammar Gaddafi launched a counter-offensive against rebels protesting against his 41-year rule, fuelling fears Libya was facing civil war.
Both oil and gold later retreated, however. Oil prices can be seen as a leading indicator of risk perceptions in the oil-rich Middle East and North Africa region, so falling prices tend to suggest less need to hold gold as a haven from risk.
As gold is often traded as part of a commodities basket which also includes oil, so the two tend to move in line."Despite the escalation of the unrest in Libya, gold has been struggling to gain a foothold above the old highs with some investors seemingly happy to lock in profit at these levels," said Saxo Bank analyst Ole Hansen.
"It is still too early to say whether we are treading water before the next push higher, or if we actually need a retracement before the buyers feel comfortable enough to take it up into a new range.
"Given the fact that we have failed to push higher amid the highest level of uncertainty for the last two years, almost any setback in crude prices will have an impact on gold, and silver," he added.
U.S. crude prices fell from the previous day's 2-1/2 year highs on Tuesday and Brent crude briefly dropped more than $2 to below $113 as Kuwait's oil minister said OPEC was in talks to boost output for the first time in more than two years.
Oil prices have surged in recent weeks after violence broke out in OPEC member Libya, and as fears grew that unrest in North Africa and the Middle East could spread throughout the region.
VIOLENCE RAGES IN LIBYA
Rebels fighting to overthrow Muammar Gaddafi have rejected an offer from the Libyan leader to negotiate his exit even as they battled to hang on to early gains in the insurrection.
On the international front, Britain and France led a drive at the United Nations for a no-fly zone over Libya, a move that would prevent Gaddafi from unleashing air raids on rebel fighters and towns or from flying in reinforcements.
A pause in the oil rally helped stock markets move higher after two days of losses in Europe. The euro remained under pressure versus the dollar after a Moody's downgrade of Greece's debt ratings on Monday.
"This reminder about sovereign concerns ahead of this month's meeting of EU ministers to agree a crisis mechanism structure serves to highlight the problems facing the euro area," said CMC Markets analyst Michael Hewson.
Concerns over euro zone sovereign debt were a major factor pushing gold prices higher last year.Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, rose for the first time since February 1 on Monday, by 6.7 tonnes.
Meanwhile holdings of the largest silver ETF, the iShares Silver Trust, rose to two-month highs of 10,898.14 tonnes, climbing 103.25 tonnes, their largest one-day rise since February 23.
Silver was bid at $36.32 an ounce against $35.85, having hit a 31-year high at $36.70 an ounce on Monday.
Elsewhere platinum was at $1,797.50 an ounce against $1,816.49, while palladium was at $779.22 versus $785.97.