LONDON (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 was bid at $1,099.90 an ounce at 1155 GMT, against $1,103.85 late in New York on Monday. U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange eased $1.40 to $1,100.00 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 jewelry 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.
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
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 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 was bid at $17.30 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.
