Gold ended the European week still favoured by the investor community which has been badly unsettled by hostility between India and Pakistan, the sliding dollar and shaky equity markets.
Fears of war between India and Pakistan over Kashmir began to show signs of easing until the Pakistan government said it planned a series of routine nuclear missile tests.
Although Pakistan said the tests were unrelated to the tensions over Kashmir and India said for its part that it was unconcerned, the news stoked up alarm in the gold market.
Gold, which can offer nervous investors a stable vehicle in which to put their cash, has drawn strength from the conflict in India, as well as from ongoing violence in the Middle East, and it ended the week at two and a half-year highs.
Gold's traditional status as a safe haven has been reaffirmed.
"Few in the market will want to be left short at the close of trading for the week, with clear upside potential should there be any further negative moves in either the US dollar and/or the geopolitical environment," said Adam Rowley, metals analyst at Macquarie Research in London.
Gold closed at US$321.50/US$322.25 an ounce in London on Friday, up from US$317.40/US$317.90 at its previous close on Thursday.
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