* 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 detail and 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 increased interest in
the metal as a haven from risk and the dollar fell, but gains
were limited by concerns its run higher may have been overdone.
Spot gold <XAU=> was bid at $1,411.10 an ounce at 1600 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. []
"It is dominated by the Middle East fears and the weaker
dollar," Standard Bank analyst Walter de Wet said of the market.
"We think we could easily test the highs again for gold," he
added. "It could go all the way to $1,440 till it starts looking
a bit stretched from a fundamental perspective." The metal set a
record $1,430.95 in December last year.
Gold earlier hit a session high of $1,413.70 as the dollar
weakened after after U.S. existing home sales data. The data
showed a rise in home sales but a fall in house prices.
A weaker dollar attracts non-U.S investors to dollar-priced
metals. [] []
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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 globally, while industrial metals prices
eased, though concerns over output from oil-rich Libya boosted
crude prices. [] [] []
Meanwhile, safe havens like German government bonds and the
Swiss franc rose, with the Swissie at its highest point versus
the dollar so far this year. [] [] []
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. []
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. []
Silver <XAG=> was at $33.63 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." []
Platinum <XPT=> was at $1,793 an ounce against $1,788.50,
while palladium <XPD=> was at $802.22 against $802.23.
(Reporting by Rebekah Curtis; editing by Keiron Henderson)
