Gold prices tumbled nearly 5 percent to a one-week low below $1,140 an ounce on Friday as investors fearing debt default in Dubai sought safety in dollars and cash.

Other precious metals also slipped. Silver hit a two-week low of $17.66 an ounce, while platinum and palladium touched one-week lows of $1,418.50 and $351 an ounce respectively.

Spot gold briefly hit a low of $1,136.80 a troy ounce, the lowest since November 16 and was bid at $1,153.50 an ounce at 1429 GMT from $1,192.60 on Thursday, when the precious metal hit $1,194.90 -- a record high.

Dubai has been the catalyst for an event that was overdue both in gold and forex, said Simon Weeks, director of precious metals at Bank of Nova Scotia. But now that the trend has been reversed think it will continue for a while longer, he said.

Longer term, gold will come back that much stronger and no doubt will make new highs but for now we come lower, Weeks said, adding $1,125-1,130 an ounce was a support level.

Dubai said on Wednesday two flagship firms planned to delay repaying billions of dollars in debt. State-backed Dubai World has $59 billion of liabilities -- a big chunk of the emirate's total debt of $80 billion.

That has raised the spectre of default and triggered a sell-off of risky assets such as commodities and stocks.

For graphic on risk assets click on http://graphics.thomsonreuters.com/119/GLB_RSKA1109.gif

Gold, a traditional safe haven, has also been sold because the higher dollar makes the precious metal more expensive for holders of other currencies.

The events in Dubai highlight the elevated level of sovereign risk heading into next year, the potential pockets of dollar strength that this can deliver, Deutsche Bank said in a research note.

Many investors will also be selling gold, up more than 30 percent this year, to pay for losses elsewhere.

Margin calls might be playing a part here, particularly for Middle Eastern investors, said David Thurtell, analyst at Citi.

CENTRAL BANKS BUOY

But analysts said expectations of gold purchases by central banks in emerging markets will help buoy prices.

Earlier this week the International Monetary Fund said it had sold 10 tons of gold to the Central Bank of Sri Lanka, adding the sale was part of the 403.3 tons approved by its executive board in September.

The IMF has already sold 202 tons to the Reserve Bank of India and the Bank of Mauritius.

The central bank story is the one that has driven gold higher not just the dollar story, said Daniel Major, a metals analyst at RBS Global Banking & Markets.

Earlier this week the IMF declined to comment on a newspaper report which suggested India could buy more gold from the fund.

Also driving gold are purchases by investors looking for a hedge against inflation that could be triggered by the vast amounts of money being pumped into the global economy by central banks and governments around the world.

That can be seen in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, holding 1,127.860 tons as of November 25 and within touching distance of the record 1,134.03 tons seen on June 1.

Spot silver was at $17.90 an ounce from $18.61 late in New York on Thursday, platinum at $1,425.50 an ounce from $1,452 and palladium at $359 an ounce from $368.

(Additional reporting by Veronica Brown, Editing by William Hardy)

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