Gold inched up towards $US1060 on Monday as the US dollar fell to a 14-month low against the euro, but weak physical demand capped the upside for bullion.
After hitting record highs above $US1070 per ounce on October 14, gold prices have traded in a narrow range, centering around $US1060, with support near $US1040.
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 US interest rates to stay low well into next year will likely push the euro higher, with some forecasting the single currency to reach $US1.52 in the coming three months.
In Asian trade, spot gold inched up 0.3 per cent to $US1056.65 an ounce from New York's notional close of $US1053.95.
US gold futures for December delivery erased earlier losses to hold steady at $US1057.2 an ounce, compared with $US1056.40 on the COMEX division of the New York Mercantile Exchange.
The euro may hit $US1.52 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 US interest rates rising, making it easier for the euro to test its upside," he said.
The euro rose to a 14-month high of $US1.5064 on Monday.
Gold eased on Friday as the dollar rose against the euro and sterling on a strong US housing report and bleak UK economic data.
Kamei expected support to remain firm at $US1020-$US1030 per ounce and prices to stay near the upper end of the recent $US1040-$US1070 range until hedge funds start reporting their results next month, which may weigh on gold as they take profits before their book closing.
Speculative positions in US gold futures eased from peaks but stayed at high levels, indicating that new money continued to enter even when others took profits, he said.
Investors were less bullish, as holdings at the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, stood at 1108.094 tonnes as of October 23, unchanged from the previous business day.
Turkey's gold imports will fall by more than two thirds to a historic low of less than 50 tonnes this year on record bullion prices and an increase in sales of scrap, a senior industry official said on Friday.
