Gold breaches record, eyes dollar

By Jan Harvey

LONDON (Reuters) - Gold prices hit record highs on Thursday on investors buying the metal as an alternative to the weakening dollar, but edged off the peak as the U.S. currency bounced back from lows in European trade.

Spot gold rallied to a record $1,122.85 an ounce in Asian trade. Its strength helped lift other precious metals, with palladium, platinum and rhodium all reaching their highest in more than a year as speculative money poured into the market.

At 10:35 a.m., spot gold was bid at $1,116.00 an ounce, versus $1,117.45 late in New York on Wednesday. U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange firmed $1.90 to $1,116.50.

"Gold is on a really strong footing, making highs early on," said Calyon metals analyst Robin Bhar. "As the dollar index strengthens, it is taking some of the attraction away from gold, but you have to say it has done well."

The dollar edged higher against the euro and a basket of six currencies .DXY in Europe on Thursday, recovering earlier losses made ahead of a meeting of Asian finance ministers this weekend.

But overall the dollar remained vulnerable to further losses as a global economic recovery boosts the appeal of assets seen as higher risk, such as equities and higher-yielding currencies.

"Consensus remains very dollar bearish, not least because of new downbeat comments from the Fed with the market expecting no change in the benchmark dollar rate for a prolonged period of time," said VTB Capital analyst Andrey Kryuchenkov in a note.

"A sustained push below 75 on the index could see gold rallying even higher towards $1,150 before the end of the month," he added.