* Dollar lifts from 15-month low but remains vulnerable
* Physical demand picks up, volumes still weak
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Nov 10 (Reuters) - Gold softened a touch in Europe
on Tuesday as the dollar index recovered from the 15-month low
it hit in the previous session, but remained near record highs
as traders bet the currency's recovery would be temporary.
Spot gold <XAU=> was bid at $1,101.40 an ounce at 1007 GMT,
against $1,103.85 late in New York on Monday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange firmed 70 cents to $1,102.10 an ounce.
The precious metal hit an all-time high of $1,110.85 an
ounce on Monday as the dollar index, which measures the U.S.
currency's performance against a basket of six others, plummeted
to its lowest since August 2008.
"My feeling is we will actually see the dollar break down
further in the next few weeks, and that will help take gold up
to new levels," said Standard Chartered analyst Daniel Smith.
"We think $1,200 is quite a realistic target before the end of
the year."
He said trade was likely to be choppy going into the new
year, however, with jewellery demand still weak as high prices
put off buyers, and interest in exchange-traded funds static.
"Underlying demand needs to play a bit of catch-up with
where prices are," he said.
The dollar edged up on Tuesday, reversing some of its
recent losses but staying close to a 15-month low against a
currency basket <.DXY>. []
Weakness in the U.S. unit boosts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
Other commodities also weakened, with sector bellwether oil
and base metals such as copper declining. Gold tends to track
crude prices, as the metal can be bought as a hedge against
oil-led inflation. [] []
DEMAND PICKS UP
Some physical demand for gold did trickle into the market,
however, with holdings of the world's largest exchange-traded
fund, the SPDR Gold Trust <GLD> in New York, rising just over 6
tonnes on Monday. []
ETFs issue securities backed by physical stocks of an asset,
and have proved a popular way for buyers to invest in gold this
year without having to take delivery of the metal.
Gold buying in India, the world's biggest bullion market
last year, ticked higher as early strength in the rupee helped
the metal, dealers said. []
Among other precious metals, silver <XAG=> was bid at $17.34
an ounce against $17.57. But the metal is well positioned for
gains, according to technical analysts who study past price
movements to determine the future direction of trade.
"Silver continues its push higher, targeting the confluence
of resistance in the $18.60/61 area," said technical analysts at
Barclays Capital.
"While this may prove to be a near-term hurdle, it should
only prove temporary -- indeed, the gold/silver ratio indicates
that it is poised to resume its trend of outperformance."
The gold/silver ratio rose to 63.2 at the end of last week,
against 60.7 at the end of September, suggesting silver has
become cheaper relative to gold.
Elsewhere, platinum <XPT=> was bid at $1,348.50 an ounce
against $1,357.50, while palladium <XPD=> was at $330.50 against
$331. Both metals are primarily used in autocatalysts and have
benefited from perceptions the economy is recovering.
"Platinum is currently trading slightly off its high,
mirroring the sustained optimism surrounding an economic
recovery," said Commerzbank in a note.
(Reporting by Jan Harvey; Editing by Anthony Barker)
