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NEW YORK (Reuters) - Gold rose toward $1,410 an ounce on Friday, posting its fourth consecutive weekly gain as the crisis in Libya and soaring oil prices stoked inflation worries.
Bullion gained 1.5 percent this week, with investors seeking a safe haven as a popular uprising against Libyan ruler Muammar Gaddafi closed in around him. French estimates say some 2,000 people may have died.
Fears over supply disruptions from oil exporter Libya and potential unrest in other major producers in the Middle East have sent U.S. crude futures 14 percent higher, their biggest weekly gain since March 2009.
"The reality is, inflation is going to happen. It's just a question of when, with the rise of commodities prices and the budget deficit that we have right now," said Fred Demler, head of commodities at futures broker MF Global.
Spot gold rose 0.5 percent to $1,409 an ounce by 2:37 p.m. EST (1937 GMT). Bullion hit a record $1,430.95 an ounce on December 7.
U.S. gold futures for April delivery settled down $6.50 an ounce at $1,409.30.
Safe-haven buying also increased as Wall Street stocks were set to drop almost 2 percent for the week, their first decline in four weeks. .N
"We have seen a big decrease in risk appetite, a fall, certainly after mid-February, in equities and the industrial metals, but an increase in oil with uncertainty over a supply shock," VM Group analyst Carl Firman said.
"Alongside that you have risk aversion, and we have seen gold and silver benefit. And I think that is here to stay until the situation becomes clearer," he said.
Assets perceived by investors as safer such as gold, government bonds and the Swiss franc have benefited from this week's unrest in Libya following the toppling of former Egyptian president Hosni Mubarak, with the Swiss currency hitting record highs against the dollar.
Analysts said gold's gains had been driven by a technical breakout on weekly charts, even as bullion still faced heavy resistance around its December highs near $1,410 an ounce.
"A potential for bottoming in equities and a possible climax in Middle East tensions ... can thus force a correction back down toward the 50-day moving average near $1,374," MF Global said in a note.
The unfolding situation across the Middle East and North Africa will remain in focus next week. Civil unrest first broke out in Tunisia, from where it spread quickly to Egypt, and then to Bahrain, Libya, Yemen and others.
Saudi Arabia this week raised oil output to plug the gap created by Libya, as the kingdom unveiled a $37 billion package to try to insulate itself from the wave of protests across the Arab world.
"In order for already high gold and silver prices to be sustained, the market may require a steady diet of increased strife in the Middle East, coupled with higher oil prices," HSBC analyst James Steel said in a note.
"As long as Saudi Arabia remains stable the risk factor in the Middle East is to some degree contained," Steel said.
Investment demand in developed markets for products such as gold-backed exchange-traded funds remained soft. Holdings of the largest, New York's SPDR Gold Trust, fell to a nine-month low at 1,211.568 tonnes on Thursday.
Holdings of the largest silver ETF, the iShares Silver Trust, meanwhile, rose to a six-week high at 10,666.35 tonnes on Thursday.
Silver gained 1.3 percent to $33.12 an ounce. The metal posted a fifth consecutive weekly gain.
Platinum rose 1.3 percent to $1,799.99 an ounce, while palladium increased 1.9 percent to $785.47. Palladium, one of the top performers in the commodities complex last year, notched its biggest weekly drop since July 2010.
Additional reporting by Jan Harvey in London; Editing by Dale Hudson