RTRS: PRECIOUS-Gold inches up as dollar retreats against euro
By Chikako Mogi
TOKYO, Oct 26 (Reuters) - Gold inched up towards $1,060 on Monday as the dollar fell to a 14-month low against the euro, but weak physical demand capped the upside for bullion.
After hitting record highs above $1,070 per ounce on Oct. 14, gold prices have traded in a narrow range, centering around $1,060, with support near $1,040.
Gold has gained on the dollar's decline because a weaker dollar boosts investor interest in gold as a hedge and makes bullion cheaper for non-dollar holders, but buying momentum has lost some of its steam given weak jewellery demand and high prices spurring scrap sales.
"Gold remains in an uptrend as long as the dollar is in a downtrend, but with physical demand weak, bullion lacks incentives to test new highs," said Koichiro Kamei, managing director at financial research firm Market Strategy Institute.
"The market is moving in tandem with the euro/dollar moves."
Expectations for U.S. interest rates to stay low well into next year will likely push the euro higher, with some forecasting the single currency to reach $1.52 in the coming three months.
As of 0225 GMT, spot gold XAU= inched up 0.3 percent to $1,056.65 an ounce from New York's notional close of $1,053.95.
U.S. gold futures for December delivery GCZ9 erased earlier losses to hold steady at $1,057.2 an ounce, compared with $1,056.40 on the COMEX division of the New York Mercantile Exchange.
The euro may hit $1.52 and even higher in the coming three months and euro zone officials may not express serious concerns, as the single currency is not extremely strong on the basis of a trade-weighted average, said Masafumi Yamamoto, chief foreign exchange strategist for Japan at Barclays Capital.
""A turnaround for the dollar is unlikely to happen until we can envisage U.S. interest rates rising, making it easier for the euro to test its upside," he said.
The euro rose to a 14-month high of $1.5064 EUR= on Monday.
Gold eased on Friday as the dollar rose against the euro and sterling on a strong U.S. housing report and bleak UK economic data.
