* Dollar plumbs fresh 14-month lows against the euro
* Stock markets rise, denting safe haven demand for dollar
* Physical offtake remains weak, caps gains
(Updates prices, adds comment)
By Jan Harvey
LONDON, Oct 26 (Reuters) - Gold prices edged higher in
Europe on Monday as weakness in the dollar supported buying, but
weaker physical demand for the precious metal capped gains.
Spot gold was bid at $1,055.15 an ounce at 1337 GMT, against
$1,053.95 late in New York on Friday. U.S. gold futures for
December delivery <GCZ9> on the COMEX division of the New York
Mercantile Exchange eased 40 cents to $1,056.00 an ounce.
The metal struggled to make significant fresh headway, as
demand for gold from jewellers and investors alike remained
relatively soft.
"Investment demand was the driving force in gold's rise to
new record highs," said Peter Fertig, a consultant at
Quantitative Commodity Research.
"If investor demand is not following through, there is
nothing else left, as high prices in Asia are keeping potential
buyers on the sidelines."
The dollar slipped to 14-month lows versus the euro on
Monday after a Chinese report said Beijing should increase the
holdings of euros and yen in its foreign reserves. It later
recovered from those lows, but remained soft. []
Weakness in the U.S. currency makes the precious metal
cheaper for holders of other currencies, as well as boosting
interest in gold as an alternative asset.
The dollar also came under pressure from a recovery in stock
markets, as growing evidence of a global recovery reduced safe
haven demand for the U.S. currency.
European shares edged up, recovering early losses, while
U.S. stocks opened higher on Wall Street. [] []
WEAK DEMAND
Physical demand for the metal remained soft. "Investors and
dollar doom-sayers may say gold could rise higher, but physical
markets are not at all in sync with that view," said Richcomm
Global Services senior analyst Pradeep Unni.
Wholesale gold traders in India, the world's biggest bullion
consumer last year, said they were picking up some bargains as
prices retreated from record highs, but demand was soft overall.
Investment buying was also less than buoyant. The largest
gold-backed exchange-traded fund, New York's SPDR Gold Trust
<GLD>, reported no fresh inflows on Friday. []
Speculative positions in U.S. gold futures eased from peaks,
with noncommercial net long positions falling 1.5 percent in the
week to Oct. 20 from a record 253,955 lots the week before, the
weekly Commitments of Traders report showed. []
Among other precious metals, spot silver <XAG=> was bid at
$17.66 an ounce against $17.65.
In a note, Bank of America Merrill Lynch said silver prices
had benefited from strong investment demand, and that a recovery
in economic activity was likely to be reflected in industrial
silver buying.
"After the recent sharp price rises, we are cautious on
silver in the near-term, but we believe that a spike towards $20
an ounce is possible in 2010," it said.
ETF Securities said holdings of its silver-backed
exchange-traded commodity <PHAG.L> rose 1 percent or just over
200,000 ounces to a record 21.054 million ounces on Friday.
It added that its palladium-backed ETC <PHPD.L> also saw
inflows of nearly 9,000 ounces 1.6 percent that day, bringing
its total holdings to a record 558,337 ounces.
Spot platinum <XPT=> was at $1,359.50 an ounce against
$1,358, while palladium <XPD=> was at $332.50 against $333.
(Editing by James Jukwey)
