Gold gained on Monday and hovered near a 28-year high after a weak U.S. dollar spurred buying from investors and speculators, who believed the price could rise further as fundamentals supported the metal.

The physical sector saw jewelers selling gold scrap to Singapore, a centre for bullion trading in Southeast Asia, but dealers also noted early buying from investors as crude oil hovered near record highs.

Spot gold rose to $734.70/735.50 an ounce from $731.60/732.40 late in New York. Gold rallied to its highest since January 1980 of $739 on Friday on technical buying and short-covering amid inflation fears and a falling dollar.

The most-active December gold contract on the COMEX division of the New York Mercantile Exchange rose $3.5 to $742.4 an ounce on electronic trade, after hitting another 28-year high at $747.1 an ounce last week.

We have noted net long positioning on COMEX and net inflows in ETFs, and with the dollar so out of favor, we believe that the gold price may well breach our 3-month trading target of $750 an ounce, UBS analyst Glyn Lawcock in Sydney said in a report.

Gold remained one of the most significant real assets, typically acting as a safe-haven investment during economic downturns, he said.

Record-high oil prices, the Federal Reserve's surprise move to slash interest rates by 50 basis points and a record-low dollar against the euro have elevated gold's safe-haven appeal, helping it move away from a seven-week low of $641.10 hit in August.

Gold has risen as much as $102.2 since the start of 2007.

Bullion used to back StreetTRACKS Gold Shares, the world's largest gold exchange-traded funds, rose to a record 577.10 tones last week which reflected strong interest from long-term investors.

I've seen fund buying and my guess is that U.S. funds are pushing up the market today, said a dealer in Singapore.

People still think the upward trend is intact after the market closed above $730 in New York. We may try the higher levels although I think there will be resistance at $745 and $750, he said.

Gold spiked to a record high of $850 in January 1980 when investors bought the metal heavily on high inflation linked to strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution.

Japanese financial markets are closed on Monday for a public holiday. The benchmark August 2008 gold futures on the Tokyo Commodity Exchange ended 27 yen per gram higher at 2,746 yen on Friday.

Thailand is still selling scrap but the Indonesians have slowed down a bit. I've seen early buying although $735 seems to be attracting some profit taking as well, said a physical dealer in Singapore, referring to gold's intraday high of $735.90.

In currencies, the euro edged up to $1.4106, having climbed as far as $1.4121 on electronic trading platform EBS late last week -- its highest since the single European currency's launch in 1999.

The dollar fell to 115.03 yen but has rebounded from a low of 113.98 yen last week.

Dealers are keeping a close eye on whether the dollar breaks the all-time low of 78.19 hit on its trade-weighted index in 1992, a development that could ignite a further sell-off in the currency.

(Additional reporting by James Regan in Sydney)