Gold rose to its highest in more than seven weeks Wednesday, closing in on record highs as escalating unrest in Libya and soaring crude oil prices fueled fears of inflation and slower economic growth.

U.S. crude oil futures marched rapidly to hit $100 a barrel on possible supply disruption from Libya, stoking inflation concern. They later settled up nearly $3 at about $98 a barrel, its highest since October 2008.

Wall Street fell sharply for a second day as investors sought safety in bonds, gold and the Swiss franc as thousands of Libyans celebrated the liberation of the eastern city of Benghazi from the rule of Muammar Gaddafi, who was reported to have sent a plane to bomb them as he clung to power.

Spot gold rose 0.7 percent to $1,408.80 an ounce by 3:19 p.m. EST, after earlier hitting $1,416.30, its highest since Jan. 4. Bullion hit its lifetime high of around $1,430 on Dec. 7.

“This move in gold right now is acutely about the Middle East. The trade is about fear but people are viewing it as an extension of the inflation trade,” said James Dailey, portfolio manager of the TEAM Asset Strategy Fund.

U.S. gold futures for April delivery settled up $12.90 at $1,414.00 an ounce, with volume totaled about 30 percent lower than the 30-day average, in line with lower-than-usual recent turnover.

On Tuesday, gold was sold off along with grains and industrial metals as the biggest decline on Wall Street since August triggered margin selling.

Open interest, a gauge of market liquidity, climbed 3 percent to above 500,000 lots as of Tuesday for the first time since Jan. 21.

Gold has gained gained nearly 9 percent since an intraday low of $1,308 on Jan. 28 on a combination of simmering geopolitical tensions, expectation of a low interest rate environment and renewed concern about a European sovereign debt crisis.

RISK AVERSION SPREADS

Earlier in the session, the gold market took heart 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.

The broader markets showed widespread risk aversion. Stock markets retreated globally, while prices of industrial metals led by copper, 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, 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, fell to 10,342.89 tonnes on Tuesday from 10,519.05 tonnes the previous day.

Silver rose 1.2 percent to $33.45 an ounce. The metal has risen strongly this month on worries about tightness in the market, but 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’ chief executive officer, told Reuters in an interview. “The rise in mine output should keep silver still in a surplus.”

Platinum dropped 0.5 percent to $1,780.49 an ounce, while palladium lost 3.1 percent at $777.50.