* Unrest spreads to Bahrain, Libya after Egypt protests
* China reserve requirement hike limits gains
* Coming up: G20 meeting of finance chiefs in Paris
(Updates prices)
By Jan Harvey
LONDON, Feb 18 (Reuters) - Gold hit five-week highs in
Europe on Friday and silver its strongest since 1980 as growing
unrest in the Middle East lifted interest in precious metals,
though another reserve requirement hike from China curbed gains.
Gold's bounce-back after it fell more than 6 percent in
January has wrong-footed some investors who were waiting for
lower price levels to buy into the market, analysts said.
Spot gold <XAU=> was at $1,384.55 at 1224 GMT against
$1,383.30 late in New York on Wednesday, while U.S. gold futures
for April delivery <GCJ1> rose 30 cents to $1,385.40.
Silver <XAG=> was at $31.85 against $31.74 after hitting a
high of $31.95, a 31-year peak.
Gold earlier hit a five-week peak at $1,388.15 an ounce. It
briefly pared gains after China said it was raising lenders'
reserve requirements by 50 basis points, but remains firmly
underpinned by investment interest in precious metals.
[]
"(There has been) a remarkable move in silver, which has
helped gold back towards $1,400," said Saxo Bank senior manager
Ole Hansen.
"Middle East/North African unrest was undoubtedly the
trigger, but it looks like investors have been waiting for the
opportunity to buy at lower levels, and once that opportunity
disappeared they returned for fear of missing the move."
Concerns over the political stability of the region has
flared this week, with unrest spreading after protests in
Tunisia and Egypt unseated leaders there. []
Government crackdowns on protesters claimed lives this week
in both Libya and Bahrain. []
"Support (for gold) will continue to come from tensions in
the Middle East, where protesters in Bahrain were dispersed
yesterday by the military," said MF Global in a note.
"Similar conditions were seen in Libya and Iran, and
discontent is expected to continue to fester in these countries
as well as Saudi Arabia, Algeria, and Iraq."
G20 EYED
On the wider markets, the dollar firmed a touch versus the
euro. Usually a stronger dollar would weigh on gold, but the
usual inverse link between the two has recently weakened. []
Financial markets are awaiting this weekend's Group of 20
meeting in Paris, where finance ministers and central bankers
will discuss imbalances in the global economy. []
Silver remains the chief focus of the precious metals
complex, however. [] []
"The investor spotlight is firmly focused on silver
following recent headlines about producer hedging, in light of
bullish industrial demand prospects, and due to the general
tightness in the market, which last month flipped silver
forwards into backwardation," said Swiss bank UBS in a note.
"All these factors have conspired to tweak investor
interest," it added.
The gold:silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- dropped to its lowest in 13
years at 43.48 on Friday, slightly below its 2006 low, Reuters
data showed, as silver prices outperformed.
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Graphic showing gold:silver ratio: http://r.reuters.com/xaf28r
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Investment demand for silver-backed exchange-traded funds
has shown some signs of stabilising after hefty outflows last
month. Holdings in the largest, the iShares Silver Trust <SLV>,
edged up to 10,438.56 tonnes on Thursday from 10,411.23 tonnes.
"We expect silver to continue outperforming gold, and our
bullish view for silver is encouraged by the break above the
$31.26 high," said Barclays Capital in a note.
"We now look to push higher to our initial target near
$33.00 and then the $37.00 area."
Among other precious metals, platinum <XPT=> was at $1,834
an ounce against $1,842.74, while palladium <XPD=> was at
$843.97 against $840.97.
(Editing by James Jukwey)
