Weaker dollar helps gold bounce back

London: Gold firmed in Europe on , lifting off a six-and-a-half-week low hit in the previous session, due to a weaker dollar and physical buying.

Analysts said gold could test lows in the near term after breaking through $1,100, as investors close positions before the end of the year, but their appetite to buy bullion on dips would support the market.

Spot gold was $1,096.50 (Dh4,032.92) an ounce by 0949 GMT yesterday, versus $1,092.85 an ounce last quoted late in New York on Tuesday, when it fell to $1,089.85 an ounce, its lowest since November 6.

"There's some speculative demand on gold on the back of a slightly weakening dollar," said Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus.

"There's also physical demand, not so much in Europe but definitely in Asia. We're basically sitting on a key support level around $1,090 an ounce. I don't see a quick break of that level but also don't see a big recovery on the upside," he said.

The euro was up around 0.3 per cent versus the dollar, while the dollar index was down by 0.16 per cent against a basket of major currencies, making industrial metals cheaper for non-US currency holders.

Third-quarter growth and home sales data from the US due later yesterday could give markets more clues on direction, traders said.

Solid buying

There has been solid buying on dips in anticipation of renewed price appreciation in 2010, underscoring extended gains in the holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust.

SPDR Gold Trust said its holdings rose 6.097 tonnes or 0.5 per cent to 1,132.708 tonnes on Monday. They had hit a record high of 1,134.03 tonnes on June 1.