Tokyo - Spot gold inched lower on Thursday but remained within striking distance of the $1 100 level after hitting an all-time high for the second straight session on a weak dollar the previous day.
News this week of India's purchase of 200 tonnes of gold from the International Monetary Fund has also provided gold with upward momentum to rise back towards $1 100.
The IMF's transaction represents about half of a long-planned bullion sale, which now has the gold industry wondering who will be buying the remainder that is due to be sold.
The dollar remains under pressure after falling on Wednesday after the US Federal Reserve reiterated its commitment to keep interest rates low for an "extended period".
Akira Doi, a managing director at Tokyo's Daiichi Commodities, said gold could fall on profit-taking this month after it eventually hits $1 100.
"Funds close their books in November, and one should keep in mind they may decide to pocket profits and sell this month," he said.
Noncommercial net long positions in US gold futures remained near a record.
He added, however, that gold was likely to remain above $1 000 even if it is hit by profit-taking, noting that India's purchase from the IMF was made near an average of $1 045 an ounce.
"I think that fact will have a psychological impact on the market ... there is no longer any surprise in seeing a four-figure price for gold," Doi said.
Bullion also remains attractive as an alternative investment.
"There is also the persistent worry about the economy to support gold," said Shuji Sugata, a manager at Mitsubishi Corp Futures.
Spot gold was at $1 088.45 an ounce at 03:15 GMT, down 0.4% from New York's notional close of $1 092.35. It rose to an all-time high of $1 097.25 on Wednesday.
US gold futures for December delivery were at $1 089.20 an ounce, up 0.2%.
Futures hit a record $1 098.50 on Wednesday.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1 108.399 tonnes as of November 4, unchanged from the previous business day.
The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its bullion holdings stood at 8 740.15 tonnes as of November 4, down 3.85 tonnes or 0.04% from the previous business day.
Yamana Gold's chief executive expects gold prices to keep breaking records over the next year, but at the same time acknowledges that rising energy prices and a recovering economy could drive mining costs higher.
Other precious metals were also a touch lower.
Spot silver was at $17.33 an ounce compared with $17.44 in New York.
Spot platinum was at $1 353 an ounce, down from $1 364, while sister metal palladium was at $326 versus $327.
Both metals are used as an auto catalyst to clean car exhaust fumes.
- Reuters