Gold Near $1,140 as Firm Dollar Caps Gains

LONDON (20 Nov) Spot gold was bid at around $1,141.00 an ounce, against $1,143.50 late in New York on Thursday.

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange dipped 40 cents to $1,141.50.

But the metal could be poised to break out to new highs if the dollar's recovery falters, analysts said.

"At the moment it looks like gold is awaiting the next big clue for a further push beyond $1,154, as current fundamentals seems to have been totally factored into the price," said Pradeep Unni, senior analyst at Richcomm Global Services.

"The dollar index is hovering above the 75 zone and that strength is keeping the lid on gains," he added. "(But) the current uptrend is pretty much intact and the dips are likely to be once again used as fresh buying opportunities."

The dollar index firmed 0.33 percent on Friday as investors pared back riskier assets, weighing on higher-yielding currencies such as the Australian dollar.

Usually strength in the U.S. unit weighs on gold, as it cuts its appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

However, gold has enough support from investment interest and technical momentum to overcome this pressure, analysts said.

Investor interest in gold was boosted early this month by a spate of central bank gold purchases, including India's acquisition of 200 tons of bullion from the IMF.

The upward move resulting from this pushed gold through key technical resistance levels, fuelling strong momentum buying which took gold to a record $1,152.75 an ounce on Wednesday.

Inflation Hedge

Analysts said gold was likely to take support from interest in the metal as a hedge against inflation, which some fear will hit the markets longer term as a result of quantitative easing.

Andrew Cole, manager of the Baring Multi Asset Fund, told Reuters on Thursday that gold could hit new highs this year and next as investors look for an inflation hedge.

Though some analysts have said such buying of gold is premature, JPMorgan commented that "with respect to golden portfolio protection; remember the time to purchase insurance is before your house catches fire".

Silver was at $18.29 an ounce against $18.51. Metals consultancy GFMS said on Thursday the metal may rise above $20 an ounce as surging investment more than offsets a drop in fabrication demand.