Gold rises a shade on sentiment despite dollar rise

An employee takes gold ingots to be weighed in a room for final weighing and packaging at the Krastsvetmet plant in the Siberian city of Krasnoyarsk November 16, 2009.

NEW YORK/LONDON (Reuters) - Gold prices settled slightly higher on Thursday, rebounding from early losses as strong investment fund demand more than offset selling prompted by a higher dollar.

James Steel, chief commodities analyst at HSBC, said investors bought gold late in the session after a dollar rally lost steam.

"Gold was able to rally despite the fact that the stock market was weak and commodities were lower. The underlying sentiment is still very good," said James Steel, chief commodities analyst at HSBC.

Also boosting gold was a report that billionaire hedge fund manager John Paulson was launching a new gold fund using $250 million of his own personal investment.

Spot gold was at $1,145 an ounce at 3:47 p.m. EST (2047 GMT), compared with $1,144.70 late in the previous session in New York on Wednesday, when it hit a record $1,152.75 an ounce.

U.S. COMEX December gold settled up 70 cents at $1,141.90 an ounce on the NYMEX.

The metal remains firmly underpinned by positive sentiment after a number of central bank bullion purchases earlier in the month, traders say, including India's acquisition of 200 tons of gold from the IMF.

"The expectation is that there will be more of that to come," said Simon Weeks, director of precious metals at the Bank of Nova Scotia.

"From a sentiment point of view, that indicates that central banks are looking for ways of addressing reserve imbalances. As such, that is a positive for gold."

The World Gold Council said on Thursday only a "negligible" 1.5 tons of gold had been sold by signatories of the Central Bank Gold Agreement in the year starting September 27.

Prices also got a boost from elevated levels of call options, or rights to buy, for U.S. December gold futures, traders said.

The dollar and yen rose as declines in stock and commodity markets revived the safe-haven appeal of the U.S. and Japanese currencies. <FRX/> World stocks as measured by MSCI .MIWD00000PUS dipped 1.5 percent, while Wall Street broadly ended more than 1 percent lower. .N

Oil prices slid more than 2 percent and industrial metals declined. Gold often tracks crude, viewed as a hedge against oil-led inflation. <O/R> <MET/L>

MOMENTUM INTACT

Analysts say gold has gained momentum during a rally that has lifted prices 9 percent since the start of November.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose 3.66 tons or 0.3 percent on Wednesday to 1,117.493 tons, their first rise since November 9.

Silver edged down to $18.53 an ounce against $18.54. The world's largest silver ETF, the iShares Silver Trust, said its holdings rose to a record 9,021.31 tons on Wednesday.

Platinum was at $1,441 an ounce against $1,439.50, while palladium was at $365.50 against $368.50. Rhodium hit a 13-month high of $2,550 an ounce.

(Reporting by Frank Tang and Jan Harvey; Editing by David Gregorio)