Gold eased on Tuesday as investors booked profits after prices hit record highs the day before, but sentiment was underpinned by a weak dollar which makes bullion cheaper for holders of other currencies and boosts its appeal as an alternative asset.
Traders said gold may slide to as low as $1,145-$1,150 in a near-term correction, but the market was bound to recover given no change in supportive factors such as the weak dollar, expectations for low U.S. interest rates and bullish sentiment after gold purchases by some central banks.
Trade was quiet and was expected to remain so ahead of the U.S. Thanksgiving holiday on Thursday, traders said. Japanese financial markets were closed for a public holiday on Monday.
Gold is facing profit-taking as it needed some correction after hitting record highs in recent weeks, said a Singapore-based trader.
Overall market sentiment remains bullish, she said.
Spot gold fell as much as 0.7 percent to $1,157.35 per ounce before trading at $1,163.60 as of 0227 GMT, down 0.2 percent. It hit an all-time high of $1,173.50 on Monday.
Gold has jumped 32 percent this year, rising 12 percent in November alone.
U.S. gold futures for December delivery eased as much as 0.6 percent to $1,157.70 per ounce before trading at $1,163.80, slightly below $1,164.70 on the COMEX division of the New York Mercantile Exchange. Futures hit a record high $1,174.00 on Monday.
Gold's rally has largely been led by funds, and other investors have been drawn into the market despite wariness about high prices.
Speculative positions dipped, with noncommercial net long U.S. gold futures positions easing 1 percent to 235,697 lots in the week to November 17 from 238,060, a weekly report by the U.S. Commodity Futures Trading Commission showed.
Investment picked up a tad, with holdings at the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rising 3.964 tonnes or 0.4 percent from the previous business day to 1,121.457 tonnes as of November 23. The rise brought the holdings closer to a record high of 1,134.03 tonnes hit on June 1.
The dollar remained pressured on Tuesday after falling the previous day against a basket of major currencies when remarks by senior Federal Reserve official James Bullard reinforced views that U.S. interest rates will stay low for a while.
Revived investor risk appetite on a rally in U.S. stocks, strong U.S. housing data and higher commodity prices, also pressured the dollar.
Other precious metals were also off Monday's multi-month highs, dragged lower by gold's retreat from record highs.
Platinum was at $1,452.50 per ounce after hitting $1,473.50 on Monday, its highest since September 2008, while silver stood at $18.59, off $18.91 hit on Monday, its highest since July 2008.
Precious metals prices at 0230 GMT
(Editing by Edwina Gibbs)