* Dollar index <.DXY> extends losses to 14-month lows
* Oil prices rise to new 2009 highs above $75 a barrel
* Gold buying picks up in India for Dhanteras festival
(Updates throughout, previous TOKYO)
By Jan Harvey
LONDON, Oct 15 (Reuters) - Gold prices edged lower in Europe
on Thursday on concerns a rally which took the precious metal to
record highs of $1,070.40 an ounce in the last session had been
overdone.
A fall in the dollar index <.DXY> to 14-month lows pushed
gold sharply higher on Wednesday, but it failed definitively to
breach resistance at $1,069 an ounce. A further slide of the
U.S. currency has failed to spark fresh buying.
Spot gold <XAU=> to $1,055.85 an ounce at 0920 GMT against
$1,061.90 late in New York on Wednesday.
"If we come back through $1,055, we could have more of a
serious correction, but we are really in the hands of outside
influences at the moment," said Simon Weeks, head of precious
metals at the Bank of Nova Scotia.
"Sentiment is still very negative towards the dollar."
While weakness in the U.S. unit is likely to support gold
for the moment, in the longer term a question mark remains over
how far the dollar can fall. "At the end of the day, the dollar
still remains the world's clearing currency," said Weeks.
"People still hold a lot of dollars round the world, and it
is not in anyone's interests to have a major meltdown."
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange fell $8.00 to
$1,056.80 an ounce.
The dollar fell to 14-month lows against the euro <EUR=> on
Wednesday as comments from U.S. policymakers reinforced
expectations U.S. interest rates will stay lower for longer than
those of other major economies. []
A weak dollar tends to support gold, as it boosts the
metal's appeal as an alternative asset and makes it cheaper for
holders of other currencies.
OIL EXTENDS GAINS
Strong oil prices, which also supported buying of gold and
commodities as an asset class, extended gains to a year-high of
$75.72 a barrel on Thursday, after U.S. industry data showed a
decline in crude stockpiles. []
On the wider markets, European shares extended gains to hit
a one-year high for a second session, with strong earnings
reports from the likes of JPMorgan <JPM.N> and a consequent rise
in U.S. stocks supporting buying. []
Rising appetite for risk is weighing on the dollar, as
investors turn to higher-yielding currencies at the expense of
the U.S. unit. However, a correction in stock markets could
reverse the trend, analysts say.
Physical demand for gold picked up in India for the
Dhanteras festival, typically an auspicious time for gold
buying, as prices softened. India was the world's biggest gold
consumer last year. []
But while demand is higher than in recent weeks, it is well
down on a year ago, dealers said. "People who used to buy 10
grams, are buying five grams," said Shekar Jog, a partner with
Sangli-based V.S. Bullion. "But they are still buying."
Among other precious metals, silver <XAG=> was at $17.73 an
ounce against $17.85, tracking the correction in gold, while
palladium <XPD=> was at $323 against $326.50.
Platinum <XPT=> was at $1,345.50 an ounce against $1,358,
having hit a 13-month high of $1,362.50 an ounce on Wednesday.
"Platinum is holding onto its gains to new highs," said
technical analysts at Barclays Capital in a note. "Such price
action is encouraging for further gains into the $1,400 area."
(Editing by James Jukwey)
