Gold hits record above $1,110/oz

By Jan Harvey

LONDON (Reuters) - Gold hit a record high above $1,110 an ounce in Europe on Monday as the dollar index .DXY slid 1 percent on expectations U.S. interest rates will remain low, boosting interest in the metal as an alternative asset.

Spot gold reached a peak of $1,110.85 an ounce, and was bid at $1,109.50 an ounce at 1:20 p.m., against $1,096.30 late in New York on Friday.

The precious metal is extending last week's near 5 percent gains, when fund buying took it to record highs after India's central bank bought 200 tonnes of gold from the International Monetary Fund and the dollar weakened further. Deutsche Bank trader Michael Blumenroth said some inflation fears are starting to be felt, while the weak dollar remains the key driver of the market. "People are expecting more weakness there," he said.

"In general, the rally looks healthy," he added. "Gold feels comfortable with four digits now."

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $14.30 to $1,110.00 an ounce.

The dollar weakened broadly on Monday after a G20 meeting and U.S. jobs data did little to alter the view that U.S. interest rates will stay low for the foreseeable future, offering little incentive to buy the currency.

Weakness in the U.S. unit tends to benefit all dollar-priced assets, as it makes them cheaper for holders of other currencies.

Other commodities also rose, with industrial metals climbing across the board and oil prices gaining more than $1 a barrel. Strength in crude prices often helps support gold, which can be used as a hedge against oil-led inflation.