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Tokyo - Gold eased off a record high above $1 110 set a day earlier as a pause in the dollar's recent decline prompted investors to lock in profits made on the precious metal.
But expectations that US interest rates will likely stay low have provided firm support and gold holdings for the world's biggest gold-backed exchange-traded fund, SPDR Gold Trust, climbed to a level not seen since July, with investors looking at bullion as an alternative asset to the US dollar.
Bullion hit a high of $1 110.85 per ounce on Monday - setting a record for the fourth time in the five trading sessions, during which it rose more than $50.
Spot gold was trading at $1 102 per ounce at 05:21, down 0.2% from New York's notional close of $1 103.85.
US gold futures for December delivery were at $1 102.40 an ounce, up 0.1% from Monday, when the contract rose $5.70 to $1 101.40. The December contract hit a record of $1 111.70 on Monday.
But some market participants pointed to the likelihood of a correction toward $1 090 to $1 080 per ounce.
"A correction is reasonable after the run-up from around $1,030 in a little over one week," said Kaname Gokon, deputy general manager at a Japanese commodity brokerage Okato Shoji's research section.
"But gold will keep looking northwards," he said, adding that borrowing costs for the dollar at near zero would keep encouraging investors to use it for funding carry trades in higher yielding assets, including gold.
The Federal Reserve last week stuck to its commitment to keep borrowing costs near zero for "an extended period" and the investors' views on interest rates were little changed by a G20 meeting and US unemployment data.
"Gold is also benefiting from the world of a zero-yielding dollar," said Gokon. "Some people buy higher-yielding currencies, such as Australian and New Zealand dollars. Others prefer buying gold without taking currency risks."
Gold has risen 25% in the year to date, while an index of the dollar against six major currencies has fallen 27% during the same period.
Gold holdings held by the SPDR Gold Trust rose by a little over 6 tonnes to 1 114.443 tonnes, marking the first increase since November 3.
- Reuters