PRECIOUS-Gold rises above $1,400/oz on Libya tensions

                                
 * Markets eye Libya developments as Gaddafi vows to stay
* Risk aversion knocks stocks, lifts bonds and Swiss franc
* No cause for concern over silver supply, GFMS says
 (Updates prices, adds comment)
                                
 By Jan Harvey and Rebekah Curtis
                                
 LONDON, Feb 23 (Reuters) - Gold topped $1,400 an ounce in
Europe on Wednesday as tensions in Libya lifted interest in the
metal as a haven from risk, but gains were limited by concerns
its sharp run higher may have been overdone.
                                
 Spot gold <XAU=> was bid at $1,401.95 an ounce at 1415 GMT,
against $1,399.20 late in New York on Tuesday. U.S. gold futures
for April delivery <GCJ1> rose to $1,403.3 an ounce.
                                
 A day earlier, risk aversion lifted bullion to its highest
since Jan. 4, topping $1,410 an ounce on worries about
escalating tensions in the Middle East and North Africa.
Protests in the region this year have toppled the leaders of
Tunisia and Egypt.
                                
 A 2.4-percent rise in gold last week raised concerns the
metal was at unsustainable levels, but news from Libya supported
prices as leader Muammar Gaddafi vowed to crush a mounting
revolt against his four decades of rule. [ID:nLDE71K01F]
                                
 "The bulk of the move is a function of the Middle East
situation," Daniel Brebner, an analyst at Deutsche Bank, said. 
                                
 "We started to see the issues emerge in Tunisia and then
Egypt and that created some support initially."
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 See interactive factbox on Middle East unrest:
                                
 http://link.reuters.com/puk87r
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 RISK AVERSION SPREADS
                                
 The broader markets showed widespread risk aversion. Stock
markets retreated in Europe after a soft session in Asia, while
industrial metals prices eased, though concerns over output from
oil-rich Libya boosted crude prices. [.EU] [MET/L] [O/R]
                                
 Meanwhile, safe havens like German government bonds and the
Swiss franc rose, with the Swissie at a three-week high versus
the dollar. [GVD/EUR] [CHF/] [US/]
                                
 The dollar index <.DXY> meanwhile fell 0.3 percent, also
supporting gold by making it cheaper for non-U.S. investors.
[FRX/]
                                
 But while dealers reported strong demand for investment
products like gold bars, interest in bullion-backed exchange
traded funds softened.
                                
 The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said holdings dropped to 1,218.243 tonnes on Tuesday from
1,223.098 tonnes a day before. [GOL/SPDR]
                                
 Holdings in the world's largest silver ETF, the iShares
Silver Trust <SLV>, fell to 10,342.89 tonnes on Tuesday from
10,519.05 tonnes the previous day. [ID:nL3E7DI01Z]
                                
 Silver <XAG=> was at $33.08 an ounce from $33.04. The metal
has risen strongly this month on worries about tightness in the
market, but a spokesman for metals consultancy GFMS said on
Wednesday there was no need for concern about supply.
                                
 "We are expecting a reasonably robust increase (in new mine
output) this year," Paul Walker, GFMS's chief executive officer,
told Reuters in an interview. "The rise in mine output should
keep silver still in a surplus." [ID:nTKU000044]
                                
 Platinum <XPT=> was at $1,787.49 an ounce against $1,788.50,
while palladium <XPD=> was at $800.72 against $802.23.
                                
 (Reporting by Jan Harvey; Editing by Jason Neely)