Gold rose above $1,410 an ounce in Europe on Monday as turmoil in the Middle East region lifted safe-haven buying and fuelled a fresh spike in oil prices, stoking concerns over U.S. growth and knocking the dollar.
Spot gold was bid at $1,411.15 an ounce at 1028 GMT, against $1,409.15 late in New York on Friday. U.S. gold futures for April delivery rose $2.50 an ounce to $1,411.80.
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The metal is currently on track for its biggest one-month rise since last August, but analysts say more may be needed to take gold above its record high at $1,430.95 an ounce.
Unrest across the Middle East and North Africa, which unseated leaders in Tunisia and Egypt before spreading across Libya, Bahrain, Yemen and, most recently, Oman, has fuelled a 6 percent rise in gold prices this month.
"(Gold) found a bit (of support) early on after the news from Oman overnight. Overall it is making a slow grind higher with a lack of conviction," said Ole Hansen, senior manager at Saxo Bank.
"As long we have all this uncertainty, precious (metals) should prosper, but from the price action in gold over the last couple of weeks some escalation is needed in order to bring prices higher into new territory."
Omani police fired rubber bullets at stone-throwing protesters demanding political reform on Sunday, killing two people, and demonstrators set government buildings and cars ablaze, witnesses said.
In Libya meanwhile, rebels awaited a counter-attack by Muammar Gaddafi's forces after the country's leader defied demands that he quit to end the bloodiest of the Arab world's wave of uprisings.
Rebels holding Zawiyah, 50 km west of Tripoli, said about 2,000 troops loyal to Gaddafi had surrounded the city.
The news sparked a $1 a barrel rise in oil prices, which in turn dragged the dollar down to a 3-1/2 month low against a basket of six major currencies, as the unit was pressured by concerns over the outlook for U.S. growth.
"Higher oil prices are a double edged sword as far as gold is concerned," said UBS in a note. "On the plus side, should elevated oil prices persist, concerns about a corresponding negative impact on global economic growth could spurn renewed interest in safe havens."
"(But) rising oil prices also contribute to higher inflation prints. This creates a difficult task for policy makers, particularly the ECB (European Central Bank) and BoE (Bank of England), who are debating a return to monetary policy normalisation. The return of interest rate hikes will act as an anchor for gold at lower price levels."
On the supply side of the market, a survey by sector researcher Surbiton Associates showed Australia maintained its number two ranking in gold output behind China in 2010 with production of 266 tonnes.
Among other precious metals, silver was bid at $33.37 an ounce against $33.31. Prices have rallied 19 percent this month, their biggest one-month rise since May 2009.
The gold/silver ratio -- or number of ounces of silver needed to buy an ounce of gold -- is currently around 42, having hit a 13-year low near 41.5 last week as silver outperformed other precious metals.
Among other precious metals, platinum was at $1,801.49 an ounce against $1,803.50, while palladium was at $788.22 against $785.40.