* Dollar index hits year-low, euro-dollar touches 2009 high
* Rising gold prices hurt physical demand, fuel scrap sales
* Silver hits 13-month high in Asia, tracking gold, copper
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Sept 11 (Reuters) - Gold prices rose back towards
$1,000 an ounce in Europe on Friday as the dollar index <.DXY>
tumbled to one-year lows, fuelling interest in gold as an
alternative asset.
But gains were capped by concerns the metal's climb to
18-month highs this week was overdone amid weakness in physical
demand and rising scrap sales. Gold will have to close above
$1,000 an ounce to maintain its upward momentum, analysts said.
Silver hit a 13-month high of $16.93 an ounce, supported by
rising gold and copper prices. Spot gold <XAU=> was bid at
$998.40 an ounce at 0926 GMT against $995.50 late in New York on
Thursday, having earlier touched a high of $1,002.70.
"With the dollar marking a new year low and the magical mark
of $1,000 having been taken out, you would have expected more
price action," Commerzbank analyst Eugen Weinberg said. "That it
hasn't happened I interpret as a relative weakness."
"If this mark is not taken out on a weekly basis and should
the price stay below $1,000 an ounce, I would not be surprised
to see some selling next week."
Gold was mainly supported by weakness in the dollar, which
hit a one-year low against a currency basket <.DXY> after
stronger-than-expected Chinese data. Recovery hopes are fuelling
interest in currencies seen as higher risk. []
The euro <EUR=> reached its highest level this year against
the U.S. currency. A decline in the dollar could precipitate
substantial gains in gold, analysts said.
"Currency movements will be the principal driver for gold,
and the impact of the U.S. dollar seems to have regained its
prominence, despite a number of potential obstacles," Standard
Chartered said in a note.
"With the U.S. dollar likely to weaken further, gold should
average $1,050 an ounce in Q4."
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange rose $3.20 to
$1,000 an ounce.
PHYSICAL DEMAND WANES
On the wider markets, oil prices steadied, giving up earlier
gains that took them above $72 a barrel, while equities rose in
Europe and Asia after the Chinese data. [] []
Physical demand for gold was lacklustre as prices rose,
traders said. The largest gold exchange-traded fund, the SPDR
Gold Trust <GLD>, said its holdings were unchanged on Thursday
for a sixth day. []
Buyers of physical gold are waiting to see if the precious
metal's recent price rise is sustainable before buying the
metal. Consumer buying in key markets such as India, Turkey and
the Middle East has been slack this year as prices rose.
Among other precious metals, silver <XAG=> hit its highest
since early August 2008 in Asian trade, tracking a rise in gold
and base metals prices. It later eased back to $16.68 an ounce,
unchanged from late Thursday, as copper prices softened. []
Though silver is an investment metal like gold, it is also
widely used in industry, especially electronics manufacturing,
and often tracks moves in base metals such as copper and nickel.
"Further upside resistance is expected, with the industrial
precious metal reliant on fresh upside momentum in gold to clear
the large volume of chart lines in the $16.90-18.30 area," said
James Moore, an analyst at TheBullionDesk.com.
Platinum <XPT=> was at $1,286 an ounce against $1,284, while
palladium <XPD=> was at $289.50 against $288.50.
ETF Securities' London palladium ETF holdings edged up just
over 1,000 ounces on Thursday to a record 478,952 ounces.
(Editing by Sue Thomas)
