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LONDON (Thomson Financial) - Gold rose as the dollar softened from this morning's levels and looks set to remain generally weak and as traders took advantage of a very brief price dip earlier.

The precious metal, trading at almost 865 usd per ounce, had touched a day low of 855.08 earlier, but with sentiment still upbeat, investors buying on price dips have lifted gold's value.

At 1.28 pm, spot gold rose to 863.33 usd an ounce against 863.20 usd in late New York trade Friday, having earlier today hit a day high of 864.83 usd. On Thursday gold hit 869.05 usd an ounce, its highest ever price, following strong oil prices which hit a record of around 100 usd a barrel last week.

"The prospect of a weak USD, high oil prices and geopolitical risks mean that the path of least resistance is higher," said JP Morgan analyst Michael Jansen. "Gold could easily trade towards $900/oz in Q1 and Q2, with the micro fundamentals of poor mine supply and limited Central Bank sector sales, solid investor demand and middling jewellery demand keeping dips to the $800/oz area," he added.

The dollar was steady at weaker levels against major currencies after recovering from Friday's sharp losses, with worries over the outlook for the US economy continuing to cloud the outlook for the currency.

Gold moves in the opposite direction to the greenback as dollar-denominated commodities become cheaper for those trading in other currencies. The precious metal moves in line with oil prices as gold is seen as a hedge against energy-led inflation. New York's main WTI benchmark was lower this morning, trading just below 98 usd.

On Friday, US data showed the world's biggest economy created jobs at its slowest pace in more than four years in December, adding just 18,000 jobs.

"After the release of Friday's US non-farm payroll data, the US dollar looks very vulnerable again. Also, with most market participants expected to return en masse this week, precious metals should see good trading volumes," said Standard Bank analyst Walter De Wet.

Gold has risen by around 60 pct since this time last year as the dollar languished in 2007, as oil prices almost doubled, as demand from growing economies grew and as investors fearful of a credit crunch bought the metal as a safe store of value.

Many analysts reckon gold's rally is not over yet, with some saying there is a case for the metal to touch the 1,000 usd per ounce milestone.

Elsewhere, platinum was down at 1,532 usd per ounce against 1,541 usd in late trades Friday on profit taking, after the metal hit a historic high of 1,553.50 usd an ounce last week.

In other precious metals, palladium was also lower at 364 usd from 370 usd per ounce, while silver was down at 15.30 usd against 15.33 usd.