UPDATE 5-Stronger dollar expected to cap gold's gains
* Investors opting for U.S. Treasuries over gold
* Receding inflation fears weigh on sentiment
* Investor selling could accelerate if gold falls below $700
(Updates prices)
LONDON, Nov 13 (Reuters) - Gold rose on Thursday as bargain hunters entered the fray, but analysts said gains will be capped by the stronger dollar and receding inflation fears.
Spot gold XAU= was at $718.90/720.90 an ounce at 1541 GMT from $711.35 an ounce in New York late on Wednesday, when it slipped to $707.80, its weakest since October 27. Earlier it briefly touched $725 an ounce.
The dollar retreated against the euro, but it is still up more than 20 percent since hitting a record high above $1.60 in July. [USD/]
"Gold will struggle in an environment where the dollar is strengthening," said Calyon analyst Robin Bhar.
"Safe-haven buying will continue to underpin the gold price, but it looks as if people are more inclined to move into U.S. Treasury bonds and bills."
Any move by investors into U.S. government bonds will boost the U.S. currency, which, when it is rising, makes metals priced in dollars more expensive for holders of other currencies.
The dollar has been rising since August when markets realised the financial crisis and economic slowdown would not be confined to the United States.
"We are revising our gold forecasts lower on Goldman Sachs currency revisions as USD shifts are the dominant driver of gold prices," Goldman Sachs said in a note. [ID:nN12464746]
Gold prices have tumbled by about 30 percent since hitting a record high of $1,030.80 an ounce in March.
"Should gold break through $700 an ounce we are concerned that the metal could continue to fall as ... investors may liquidate into an already weakening market," investment bank Fairfax said in a note.
