SINGAPORE (Reuters) - Gold rebounded from its weakest level in three weeks on Tuesday as the U.S. dollar took a break after a rally, spurring demand from bargain hunters and lifting other precious metals.
Bullion has gained in the past two months to hit a record around $1,070 an ounce on October 14 as declines in the U.S. dollar raised the metal's safe-haven appeal. Gold is seen as a hedge against both inflation and a depreciating dollar.
Cash gold added $4.85 an ounce to $1,041.95 by 0618 GMT (2:18 a.m. EDT), having hit an intraday low of $1,036, its lowest level since October 6.
"I guess the dollar's movement will still be the key factor to look at. The previous record highs around $1,030 should come in as key supports for now," said Adrian Koh, an analyst at Phillip Futures in Singapore.
"Physical buyers will probably want the downward momentum to continue, but there aren't really any clear signals yet," said Koh, referring to demand from the jewelry sector.
U.S. gold futures for December delivery barely changed at $1,042.60 an ounce after falling $13.60 or 1.3 percent to $1,042.80 on Monday.
The dollar slipped against a basket of currencies on Tuesday after posting its best daily gain since September as investors unwound short dollar positions following a fall in stocks and commodities.
The dollar index .DXY, a measure of the greenback's performance against six other major currencies, fell 0.2 percent to 75.924, but above a 14-month low of 74.94 set last week. Despite the current rebound in prices, an analyst at a Japanese trading company expected gold to fall to $1,030, given the recent market trend of stocks falling ahead of U.S. monthly payrolls data at the beginning of each month.
While falls in stock markets usually boost gold's safe-haven appeal, investors have recently preferred the dollar itself as a safer place to park their money.
"In the past two months, stocks peaked out and fell before the U.S. jobs data was out, regardless of whether the actual data were bullish or bearish," said the analyst, adding that the drop could happen again due to uncertainty in the global economy. "It's an event risk we should be prepared for," he said. Another drag might come from a sell-off in silver, which started its ascent before gold, buoyed by expectations that a global economic recovery would boost demand from industrial users, traders said.
Speculative positions in U.S. gold and silver futures both eased from peaks but stayed at high levels.
Underlining the weakening mood, data confirmed a further outflow of money from the world's largest gold-backed exchange-traded fund.
The SPDR Gold Trust said its holdings fell 1.22 tonnes on Monday to 1,106.874 tonnes, down about 3 tonnes from the recent high earlier this month.
(Additional reporting by Risa Maeda in TOKYO; Editing by Clarence Fernandez)
