* Dollar index gives up early gains; euro eyes $1.50
* Crude oil hits 2009 high above $79 a barrel
* Gold demand wilts in India after festival season
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Oct 19 (Reuters) - Gold rose on Monday, building on
the gains of the last two weeks, as the euro rose towards $1.50
and oil prices reached a new 12-month high near $80 a barrel.
The precious metal could be set to target new record highs
above the peak of $1,070.40 an ounce it set last week if the
dollar continues to weaken against the euro, boosting interest
in the metal as an alternative asset, dealers said.
Spot gold <XAU=> was bid at $1,054.70 an ounce at 0928 GMT
against $1,050.80 late in New York on Friday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange rose $4.20 to $1,055.70 an ounce.
"(Gold) held the $1,040 level rather well," said Afshin
Nabavi, head of trading at MKS Finance, saying the metal had
been supported by light physical demand from the Far East.
"If the dollar continues weakening, we ought to see a test
of $1,072," he added.
The euro rose back towards 14-month highs against the dollar
on Monday, while the dollar index <.DXY>, which tracks the U.S.
unit's performance against a basket of six other currencies,
gave up early gains to decline 0.14 percent. []
Dollar weakness, which makes gold cheaper for non-U.S.
investors, was identified by analysts as the primary driver
behind gold's rally to record highs last week.
"The dollar remains vulnerable, and investor appetite for
gold could re-emerge very quickly," said Andrey Kryuchenkov, an
analyst at VTB Capital, in a note.
Strength in bellwether commodity crude oil is also lifting
interest in gold as a hedge against oil-led inflation, and in
commodities as an asset class, analysts said.
Oil prices rose above $79 a barrel on Monday, marking their
eighth straight session of gains. U.S. earnings could be a key
driver of oil prices this week, as investors try to gauge the
strength of the global economic recovery. []
RESULTS EYED
European shares rose in early trade, boosted by a rise in
banking stocks and a firmer tone to commodities. []
The equity markets are also awaiting fresh direction from
corporate earnings, with results due from U.S. heavyweights
Apple Inc <AAPL.O> and Texas Instruments <TXN.N>. []
Some have speculated that a decline in stock markets linked
to poor third-quarter earnings could give some respite to the
beleagured dollar, consequently weighing on gold. []
Physical demand for the metal was lacklustre on Monday, with
holdings of the largest gold exchange-traded fund, the SPDR Gold
Trust <GLD>, flat for a seventh session on Friday. []
Gold buying in India, the world's biggest bullion consumer
last year, slowed to a trickle as the festival season came to an
end, while scrap supply crept up in some Asia regions as high
prices encouraged sales. [] []
Among other precious metals, spot silver <XAG=> was at
$17.44 an ounce against $17.41, while platinum <XPT=> was at
$1,346 an ounce against $1,341 and palladium <XPD=> at $327
against $326.50.
Palladium prices have risen some 9 percent in the last four
month, beating gold's 5 percent gains and a 1.4 percent rise in
platinum prices in the same period.
The metal is benefiting from hopes industrial demand for the
autocatalyst material will recover if an economic recovery picks
up steam, fears over the availability of stockpiled Russian
metal and firm investment buying.
ETF Securities' palladium-backed exchange-traded commodity
<PHPD.L> added nearly 12,000 ounces of metal to its holdings
last week, lifting them 2.3 percent to a record 540,566 ounces.
(Reporting by Jan Harvey; Editing by Anthony Barker)
