By Risa Maeda TOKYO (Reuters) - Gold fell on Friday after hitting an all-time high near $1,195 an ounce the previous day, as the dollar bounced from its 15-month lows against the euro and a basket of currencies. But many market players believe the dollar's declining trend will extend well into next year, and that the downside for the precious metal, seen as an alternative to the dollar, will be limited to above $1,180. Gold was also underpinned by increasing caution among investors over riskier assets as stocks fell on concerns about debt problems in Dubai. Dubai struggled to ease fears of debt default on Thursday after its move to delay repayments at two flagship firms shook confidence in the Middle East as a center for investment and a source of capital. "Gold has not broken above $1,200 just yet. But I think it could do so any time the currency market turns in favor of gold," said Tatsufumi Okoshi, senior economist at Nomura Securities Co. Spot gold was at $1,187.70 an ounce as of 0251 GMT, down 0.4 percent from the notional New York close of $1,192.60. Bullion hit a fresh record high of $1,194.90 on Thursday before the dollar gained ground on concern about debt problems in Dubai. Gold is set to rise 3 percent this week, marking the fourth straight week of gains. In the currency market, the euro was at $1.4941 after hitting a 15-month peak above $1.51 earlier this week. The dollar was off a 15-month low against a basket of currencies .DXY marked the previous day, although the yen hit a 14-year high of 84.82 yen to the dollar early in the morning before paring the gains. "The currency market is now attracting all of the volatility, so gold cannot help but follow the ups-and-downs of the dollar," Okoshi said. "The yields of U.S. Treasury bonds are low, gains in stocks have been limited and gold is the sole asset investors can buy now," he added. Bullion has risen more than 37 percent this year, including a 13 percent rise in November alone on dollar weakness, expectations of further reserve diversification by central banks and fears of inflation next year. Many expect that more central banks in developing countries will diversify their foreign currency reserves to gold. Sri Lanka's Deputy Finance Minister Sarath Amunugama said in an interview with Reuters on Thursday the country was considering buying more gold from the International Monetary Fund. The IMF said on Wednesday it had sold 10 tons of gold to the Central Bank of Sri Lanka, part of the 403.3 tonnes approved for sale by the fund's executive board in September. The fund has already sold 202 tonnes to the central banks of India and Mauritius. Continued...

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