* Dollar gains against major currency basket <.DXY>
* SPDR Gold holdings rises closer to record high
* Physical demand underpins bullion
(Updates prices, fixes weekdays in pars 1 and 3))
By Humeyra Pamuk and Rebekah Curtis
LONDON, Dec 22 (Reuters) - Gold hit 6-1/2 week lows on
Tuesday, hurt by a firmer dollar which analysts see pressuring
bullion into the new year.
Analysts said gold could test lows in the near term after
breaking through $1,100, as investors close positions before the
end of the year, but their appetite to buy bullion on dips would
support the market.
Spot gold <XAU=> was $1,086 an ounce by 1454 GMT, versus
$1,092.85 an ounce last quoted late in New York on Monday.
Prices hit $1,085.10, their lowest since Nov.5.
"It's a dollar story," said RBS metals analyst Stephen
Briggs. "There has been a really dramatic move in the dollar
over the past weeks...With a move like this you would expect
gold to go down."
The dollar index <.DXY> reversed early losses to gain 0.1
percent against a basket of major currencies. A firmer dollar
makes dollar-priced commodities costlier holders of other
currencies.
But Briggs added that gold had held up well in the face of
such abrupt recent gains in the dollar.
"This move in the dollar is partly a weakening of the euro,
so that isn't so negative for gold," he added.
U.S. gold futures for February delivery <GCG0> fell 0.8
percent to $1,086.9 per ounce, compared with $1,096.00 on the
COMEX division of the New York Mercantile Exchange. Futures fell
$15.50 on Monday from the previous day.
ETF HOLDINGS RISE
But there has been solid buying on dips in anticipation of
renewed price appreciation in 2010, underscoring extended gains
in the holdings of the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust <GLD>.
SPDR Gold Trust <GLD> said its holdings rose 6.097 tonnes or
0.5 percent to 1,132.708 tonnes on Monday. They hit a record
high of 1,134.03 tonnes on June 1. []
And as a sign of robust physical demand, premiums for gold
bars jumped to their highest in months after a drop in bullion
prices spurred buying from investors and jewellers across Asia,
dealers said. []
India's spot gold prices rose on Monday as buying gained
momentum in the market after a correction in prices in the
previous week, dealers said. []
Despite recent price dips, in the longer term many analysts
believe bullion's potential to rise remains intact.
"The investment sentiment towards gold is very positive,"
said analyst Suki Cooper at Barclays Capital, adding the worries
about inflation and the health of the economy could help support
gold prices.
Among other precious metals, silver <XAG=> was at $16.85 an
ounce against $17.01 and platinum <XPT=> at $1,401.5 versus
$1,414.50. Palladium <XPD=> was bid at $357 against $360.50.
(Additional reporting by Chikako Mogi in Tokyo, Editing by
Anthony Barker and Keiron Henderson)
