But sharp upside moves in recent weeks and growing bullish positions on U.S. gold futures were making the metal increasing vulnerable to a correction, analysts said.
Spot gold
"Gold is doing quite well and we see a very steady uptrend at the moment, but we expect a small consolidation at some stage," said Michael Kempinski, senior trader at Commerzbank.
"The dollar is one of the main factors nowadays. Our target is $750 and I don't think we have to wait more than two weeks for that," he said adding, inflation fears and gold's safe-haven appeal were good reasons to buy gold.
The dollar hit a record low against the euro for a third straight session, hurt by worries of possible further interest rate cuts and sluggish economic growth in the United States.
The continued weakness of the U.S. dollar against the euro and other currencies is likely to remain the driving force for gold," Dresdner Kleinwort said in a daily research note.
A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against inflation.
Some traders said a drop in oil prices, which fell below $81 a barrel from record highs last week, might cap gains.
"We believe that near-term U.S. dollar weakness will see gold hit our three-month target price of $750/oz, perhaps within the next week," said John Reade, head of metals strategy at UBS Investment Bank.
"But further strong short-term gains from there are harder to see and a speculative-led correction seems likely in the next month or so ... Any signs of a bounce in the U.S. dollar will likely provoke heavy profit taking in gold," he said in a note.
Analysts said investors should not ignore large speculative positions. In the week to Sept. 18, futures speculators had net long positions of 20.4 million ounces -- not far from an all-time high of 22.76 million in September 2005
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