LONDON, Nov 17: Physical demand helped support gold on Monday, but analysts say a higher dollar, lower oil prices and receding inflationary worries will cap prices in the short term.

However, analysts said that over the longer term, a substantial depreciation of the dollar will help boost the precious metal. A weaker US currency makes gold priced in dollars cheaper for holders of other currencies.

Spot gold was up at $742.75/744.75 an ounce compared with $741.05 an ounce late in New York on Friday, on stronger demand from jewellery makers.

The dollar slipped on Monday, but it is higher than in July when it hit record lows against the euro under $1.60.

We are quite bullish for gold the long term, primarily because we see the dollar weakening substantially on all this liquidity being pumped into the system, said Dan Smith, analyst at Standard Chartered.

To ease the credit crunch and financial crisis, central banks around the world have slashed interest rates and made available large amounts of cash to the banking sector.

The realisation that financial problems would not be confined to the United States has helped bolster the dollar.

But expectations of an acceleration of government debt issuance in the United States is likely to hit dollar sentiment over the coming year, analysts said.

Given ... the unprecedented demand for physical, particularly gold coins and bars, and the possibility that the dollar strength is unsustainable longer term, we believe that precious metals could outperform, UBS said in a note.

Gold has struggled to maintain an uptrend since hitting a two-month high of $931 an ounce in early October. It is down nearly 30 per cent since hitting a peak at $1,030.80 in March.

Gold is often used as a hedge against inflation and financial market uncertainty, which was not allayed by a meeting of the Group of 20 countries over the weekend.

Prices of platinum, used to make auto catalysts, have collapsed by more than 60 per cent since a record high of $2,290 an ounce in March.

The platinum market is looking ahead to a report on the platinum and palladium markets from the world’s top platinum refiner, Johnson Matthey, due on Tuesday.

Platinum was at $823/843 an ounce from $833.50 late in New York on Friday, palladium at $216/221 from $213 and silver at $9.56/9.64 from $9.48.—Reuters