Gold's drop to the lowest price in more than a month encouraged investors to buy the metal.

Futures on Friday dropped below $1,100 an ounce for the first time since November 10 as the dollar touched a three-month high against a basket of six major currencies. The precious metal reached a record $1,227.50 on December 3 and is headed for the ninth straight annual gain.

"Gold prices have fallen down to a level where you might start to revive investment demand," said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. Gold futures for February delivery rose $4.10, or 0.4 per cent, to $1,111.50 an ounce on the Comex division of the New York Mercantile Exchange.

Earlier, the price fell as much as 0.9 per cent.

"There is some buying interest," said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. "You're going to see more buyers come back at these levels." For the week, gold fell 0.8 per cent as the dollar rallied 1.7 per cent against the six-currency basket. The metal has fallen for three straight weeks.

For the year, the metal gained 26 per cent as the euro gained 2.4 per cent against the dollar. "There's a lot of reallocation going on," said Platt of Archer Financial. "Those markets which had done the best this year are starting to show disinvestment, and those that haven't are showing some pop. Gold has been one of the bigger investment vehicles this year."

Investor holdings

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, were unchanged at 1,120.51 tonnes, its Web site showed. They reached a record 1,134 tonnes on June 1. Gold held in ETF Securities Ltd.'s exchange-traded products declined 0.4 per cent to 7.85 million ounces , its Web site showed.
"We think that investment demand is likely to remain strong," said Stefan Graber, a Singapore-based analyst at Credit Suisse Group AG, citing low real interest rates and an expectation that the dollar may resume its decline. Real interest rates are typically defined as the interest rate less inflation. Silver futures for March delivery rose 12.5 cents, or 0.7 per cent, to $17.32 an ounce on the Comex. The metal has gained 53 per cent this year.