* Weak physical demand caps gold's gains on weaker dollar
* Break above recent range depends on EUR/USD rises
* Noncommercial net long futures ease from record, still high
By Chikako Mogi
TOKYO, Oct 26 (Reuters) - Gold inched up towards $1,060 on
Monday as the dollar fell to a 14-month low against the euro, but
weak physical demand capped the upside for bullion.
After hitting record highs above $1,070 per ounce on Oct. 14,
gold prices have traded in a narrow range centred on $1,060, with
support near $1,040.
Gold has gained on the dollar's decline because a weaker
dollar boosts investor interest in gold as a hedge and makes
bullion cheaper for non-dollar holders, but buying momentum has
lost steam given weak jewellery demand and high prices spurring
scrap sales.
"Gold remains in an uptrend as long as the dollar is in a
downtrend, but with physical demand weak, bullion lacks
incentives to test new highs," said Koichiro Kamei, managing
director at financial research firm Market Strategy Institute.
"The market is moving in tandem with the euro/dollar moves."
Expectations for U.S. interest rates to stay low well into
next year will likely push the euro higher, with some forecasting
the single currency will reach $1.52 in the coming three months.
As of 0540 GMT spot gold <XAU=> inched up to $1,054.25 an
ounce, compared with New York's notional close of $1,053.95.
It had risen as high as $1,056.90 on Monday.
U.S. gold futures for December delivery <GCZ9> edged down to
$1,055.20 an ounce, off an intraday high of $1,058.00. On Friday
the contract fell $2.20 to $1,056.40 on the COMEX division of the
New York Mercantile Exchange.
The euro may hit $1.52 and even higher in the coming three
months and euro zone officials may not express serious concerns,
as the single currency is not extremely strong on the basis of a
trade-weighted average, said Masafumi Yamamoto, chief foreign
exchange strategist for Japan at Barclays Capital.
"A turnaround for the dollar is unlikely to happen until we
can envisage U.S. interest rates rising, making it easier for the
euro to test its upside," he said.
The euro rose to a 14-month high of $1.5064 <EUR=> on Monday.
[]
Gold eased on Friday as the dollar rose against the euro and
sterling on a strong U.S. housing report and bleak UK economic
data.
Kamei expected the precious metal's support to remain firm at
$1,020-$1,030 per ounce and prices to stay near the upper end of
the recent $1,040-$1,070 range until hedge funds start reporting
their results next month, which may weigh on gold as they take
profits before their book closing.
Speculative positions in U.S. gold futures eased from peaks
but stayed at high levels, indicating that new money continued to
enter even when others took profits, he said.
Noncommercial net long U.S. gold futures positions fell 1.5
percent to 250,107 lots in the week to Oct. 20 from a record
253,955 lots the week before, the weekly Commitments of Traders
report published by the Commodity Futures Trading Commission
showed. []
Investors were less bullish, as holdings at the world's
largest gold-backed exchange-traded fund, the SPDR Gold Trust
<GLD>, stood at 1,108.094 tonnes as of Oct. 23, unchanged from
the previous business day. []
Turkey's gold imports will fall by more than two-thirds to a
historic low of less than 50 tonnes this year on record bullion
prices and an increase in sales of scrap, a senior industry
official said on Friday. []
Precious metals prices at 0548 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 1054.45 0.50 +0.05 19.80
Spot Silver 17.64 -0.01 -0.06 55.83
Spot Platinum 1351.50 -7.00 -0.52 45.01
Spot Palladium 334.00 1.00 +0.30 81.03
TOCOM Gold 3125.00 -20.00 -0.64 21.45 37747
TOCOM Platinum 4008.00 -60.00 -1.47 51.13 10153
TOCOM Silver 521.10 0.20 +0.04 63.20 302
TOCOM Palladium 991.00 -3.00 -0.30 80.18 183
Euro/Dollar 1.5031
Dollar/Yen 91.88
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Risa Maeda; Editing by Michael Watson)
