Gold climbed to a seven-week high on Friday, as record oil prices and tensions across the Middle East helped the precious metal to gain two percent.

"It's a combination of things that're keeping people a bit nervous and keeping gold perhaps little bit more buoyant than we would expect," said Tony Dobra, a director at Standard Chartered Bank in London.

"Oil is up on political tension and so is gold. We saw yesterday a fall in the equities markets as well," he said.

Spot gold jumped as high as $667 an ounce near the end of European trade and was indicated at $666.00/667.50 by 1504 GMT, against $654.70/656.20 in New York late on Thursday.

Oil surged to record highs above $78 a barrel on fresh supply fears in the world's eighth-largest oil exporter, Nigeria, and political tension in the Middle East.

Israel struck Hizbollah targets and devastated a wide array of Lebanese civilian installations on Friday, drawing mounting world criticism of its tactics since Shi'ite fighters seized two of its soldiers and killed eight.

Gold is often bought as a hedge against inflation and for future sales in times of trouble. It hit a 26-year high of $730 an ounce in mid-May.

"Gold is following oil up, although the others (silver, platinum and palladium) haven't done an awful lot," one trader said.

"It's looking strong and all the stories this week have been pro-gold."

SAFE-HAVEN BUYING

Gold began its climb this week after a series of bombs hit railway carriages in India's financial hub Mumbai on Tuesday, killing about 180 people. Safe-haven buying also resurfaced after North Korea's missile test launches raised tensions.

"Dips continue to find support from bargain hunters," said James Moore, precious metals analyst at TheBullionDesk.com.

"With no sign of a let up in geopolitical tensions and oil prices potentially looking to test $80 a barrel, there is now scope for gold to test $680," he said.

Gold's strength came despite a surge in the dollar, which would usually dissuade investors from buying bullion, as concern over the escalating violence in the Middle East propted a safehaven rally.

In other precious metals, platinum crept up to $1,250/1,255 an ounce from $1,249/1,255 in New York, while palladium fell to $324/329 an ounce from $327/332.

Silver inched up to $11.58/11.68 an ounce from $11.52/11.62 in the U.S. market.