* Dollar retreats toward 15-mth low vs basket of currencies
* Physical demand picks up, volumes still weak
(Releads, updates prices)
By Jan Harvey
LONDON, Nov 10 (Reuters) - Gold prices rallied toward recent
record highs above $1,110 an ounce on Tuesday, reversing earlier
losses, as the dollar erased initial gains against a basket of
six major currencies.
Spot gold <XAU=> hit a session high of $1,109.20 an ounce
and was at $1,106.90 at 1540 GMT, against $1,103.85 late in New
York on Monday. The market earlier dipped as low as $1,096.60.
The metal also found support from renewed investor interest
after the International Monetary Fund announced last week it had
sold 200 tonnes of gold to India's central bank, which prompted
the metal to reach record highs.
"Given all the noises hedge funds have been making, plus all
the noise surrounding further potential central bank buying, it
is difficult to see much of a downside," said Societe Generale
analyst David Wilson.
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange firmed $5.90 to
$1,107.30 an ounce.
The precious metal hit an all-time high of $1,110.85 an
ounce on Monday as the dollar index <.DXY>, which measures the
U.S. currency's performance against a basket of six others, hit
its lowest since August 2008.
Gold initially struggled to break new ground as the dollar
edged up on Tuesday, but bounced back as the currency slipped
back towards 15-month lows against a currency basket. []
Strength in the U.S. unit dampens gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies. The dollar remains
susceptible to further losses, analysts said.
"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."
DEMAND PICKS UP
But some physical demand for gold did trickle into the
market, 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 $17.44
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," technical analysts at
Barclays Capital said.
"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.
Platinum <XPT=> was bid at $1,354.50 an ounce against
$1,357.50, while palladium <XPD=> was at $332.25 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.
(Editing by Veronica Brown)
