(Reuters) - Gold inched up on Tuesday, crawling back towards an 11-month high hit in the previous session, supported by a slightly weaker dollar and investor hopes for further central bank action to battle the grim outlook for global economic growth.
Spot gold marked an 11-month peak of $1,791.20 on Monday as an unexpected expansion in U.S. factory activity and more clarity on Spain's bailout plan sent some relief through the market, knocking the dollar index .DXY from a three-week high.
A weaker greenback makes dollar-priced gold more attractive to buyers holding other currencies.
Analysts said that more central banks may follow the lead of the European Central Bank, the U.S. Federal Reserve and the Bank of Japan in adopting further stimulus measures to spur economic growth, benefiting gold which is a good hedge against rampant cash printing.
"We believe that expanding monetary conditions globally will provide the catalyst for higher gold prices over the near-medium term," Deutsche Bank said in a research note.
The bank said the trend of expanding monetary conditions will help gold exceed $2,000 in the first half of 2013.
Australia's central bank cut interest rates by a quarter point to a three-year low of 3.25 percent as a slowdown in China, falling export prices and a high currency dimmed the economic outlook.
But gold barely moved, with cash prices trading at $1,777.75 an ounce by 2.29 a.m. EDT, up 0.2 percent from the previous close.
U.S. gold edged down 0.2 percent to $1,780.30.
"Gold is stuck between a weaker Australian dollar and a stronger euro after the rate cut," said a Singapore-based trader, who expected the euro's influence to increase as Europe's trading day starts.
The Australian dollar fell to a one-month low versus the dollar and slid against the euro.
Technical analysis suggests that spot gold's ascent could face resistance at $1,785 during the day, said Reuters market analyst Wang Tao.
Spain, which has become the focus of the euro zone debt crisis, will dominate market sentiment.
The "fiscal cliff" also looms as a serious concern. The term refers to a deadline at the end of the year for Washington to reach agreement to avoid spending cuts and tax rises, which could throw the U.S. economy into recession.
"We believe the major beneficiary of a third round of quantitative easing by the U.S. Federal Reserve and fiscal cliff fears will be the precious metals complex. Not only will it keep U.S. real interest rates negative for the foreseeable future, but, it will sustain U.S. dollar weakness," Deutsche Bank said.
Echoing Deutsche Bank's bullish forecast, holdings of gold-backed exchange-traded funds posted a small gain to 73.978 million ounces by September 30, inching towards a record high of 74.288 million ounces hit last week.
Trade was thin in Asian hours, as markets in China, Hong Kong and India are closed for public holidays. China will remain shut for the rest of the week.
Spot silver rose half a percent to $34.80, easing from a seven-month high of $35.36 struck in the previous session.
Spot platinum inched down 0.2 percent to $1,780.30, after posting five sessions of straight gains.
Top global platinum producer Anglo American Platinum (AMSJ.J) (Amplats) said on Monday it would fire all strikers who did not attend disciplinary hearings the following day as an illegal strike continued at four of its South African mines.
(Editing by Miral Fahmy)
Copyright 2012 Thomson Reuters. All rights reserved.
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