NEW YORK Gold ended flat on Wednesday after hitting a record high above $1,440 an ounce on safe-haven buying spurred by political unrest in Libya, surging oil prices and testimony by the Federal Reserve chief that kept investors expecting U.S. monetary policy to stay loose.
Gold has rallied 10 percent since late January when tensions began to flare in the Middle East and Africa. Muammar Gaddafi on Wednesday launched a land and air offensive to retake territory from rebels in Libya's eastern region, and the possibility of a prolonged civil war fueled bullion demand as a hedge against uncertainty.
"You have political problems all over the world, a Federal Reserve bank that still erred on the side of easing rather than tightening, rising commodities prices in general, and growing disdain for fiat currencies generally," said Dennis Gartman, author of the Gartman Letter, a daily investment newsletter.
"It will be illogical for gold not to be going higher," he said.
Spot gold hit a session peak $1,440.10 an ounce, a record for the second straight day. It finished about 10 cents higher at $1,433.81 an ounce by 3:33 p.m. EST (2033 GMT). The metal was fixed at $1,435.50 an ounce in London.
U.S. gold futures for April delivery settled up $6.50 at $1,437.70, with volume slightly higher than the previous session but lower than its 30-day average.
Recent lower-than-usual turnover during gold's gains prompted some analysts to question whether record bullion prices are sustainable.
Gold is building on a 6 percent rise in February, its biggest one-month climb since August, triggered by unrest across the Arab world which unseated leaders in Tunisia and Egypt before spreading to Libya, Bahrain, Yemen, Oman and Iran.
Two U.S. warships were passing through the Suez Canal, heading for the waters off Libya to pressure the country's ruler to step down.
Gold's record close on Tuesday confirmed that its long-term uptrend has resumed, and the next technical resistance level is near that rising trendline at $1,487 an ounce, CitiFX said. (Graphic: link.reuters.com/faw38r)
Traders said gold was also supported by expectations of a continuation of easy monetary policies by the Fed.
In testimony to the Congress, Fed Chairman Ben Bernanke said the surge in oil prices should lead to only a modest, temporary increase in U.S. inflation "at most." That fed the view that the Fed will continue the loose monetary policy that has encouraged inflation-wary investors to buy gold.
OIL SURGES, STOCKS REBOUND
Wall Street turned higher after data showed employers added more jobs than expected last month. Violence in the Middle East and North Africa has cooled the appetite for equities but driven up prices for oil and safe haven assets.
U.S. Treasuries, German government bonds and the Swiss franc have all risen since political tensions began to flare in the region in February. .EU
Oil's rally could boost gold, analysts said, if higher energy prices appear to curb global growth.
U.S. crude futures rose above $102 a barrel on news of an airstrike in Libya near an oil terminal, as markets braced for what could be a prolonged disruption.
The positive correlation between gold and oil has strengthened in the last five sessions, but the longer-term link between the two remained largely erratic.
Silver rose to a peak of $34.96 an ounce, its strongest level since early 1980. It later eased 0.3 percent to $34.54 an ounce.
Holdings in the world's largest silver exchange-traded fund, the iShares Silver Trust, rose to their highest since January 14. The trust reported a slight recovery in its holdings last month after they posted their biggest ever one-month fall in January.
Platinum gained 0.4 percent to $1,846.74 an ounce and palladium climbed 0.3 percent to $816.97.
(Additional reporting by Jan Harvey in London; editing by Jim Marshall and David Gregorio)