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LONDON (Thomson Financial) - Gold eased from the seven-week high it hit earlier in the session as the dollar bounced back from the lows it touched against the euro yesterday, but remained supported by safe haven buying after Benazir Bhutto's assassination in Pakistan last week.

Gold earlier rose to its highest level since early November as the US dollar slipped against the major currencies, after economic data released on Friday showed the housing slump is worsening, renewing speculation that the Federal Reserve will continue to cut interest rates.

Weakness in the US currency increases gold's appeal as an alternative investment, and makes the precious metal, which is denominated in dollars, cheaper for holders of other currencies.

The dollar later rebounded a little, weighing on gold, analysts said.

However, investors are also continuing to buy into gold as a hedge against geopolitical risk in the wake of Benazir Bhutto's assassination in Pakistan last week, which has stopped prices from falling further, analysts said.

The yellow metal is often seen by investors as a 'safe' asset which can be relied on to hold its value in times of economic or political instability.

At 12.04 pm, gold was trading at 833.60 usd, down from the 839.10 usd it reached in late New York trade on Friday. Earlier in the session it hit a new seven-week high of 843.03 usd.

The precious metal is likely to continue trading within a relatively narrow range today ahead of tomorrow's New Year holiday, but is set to resume its upward trajectory as January gets underway, analysts said.

"Barring any unlikely surprises on New Year's Eve where most trading centres will be on shortened sessions, the yellow metal looks determined to close the year on a strong note, notching up its biggest annual gain in 28 years and very likely to post 3-digit gains year-on-year," said analysts at Standard Bank.

"Funds buying interests remain apparent and it would appear they would look to a high year end settlement rather than cashing in on their already substantial gains."

"Gold is likely to consolidate its impressive gains made in 2007 and after heading for its seventh annual gain in a row, expectations are for higher peaks to be achieved in the New Year as the unrelenting strength does not look like it will abate anytime soon," they added.

Among other precious metals, platinum eased to 1,529 usd against 1,535 usd an ounce, while palladium was trading at 362 usd an ounce against 363 usd.

Meanwhile silver was flat at 14.74 usd against 14.77 usd.