The Dollar Index slipped as much as 0.5 percent.

India's central bank purchased 200 tonnes of gold from the International Monetary Fund last month, raising speculation that more governments will follow suit as the dollar slides.

December gold futures climbed as much as US$11.30 (HK$88.14), or 1 percent, to US$1,096.20 an ounce in New York and were at US$1,091.70 in morning trade.

Immediate-delivery bullion was at US$1,092.07 in London afternoon trade after climbing as high as US$1,095.40.

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"Everything is pointing to the price of gold going higher," said investment adviser Mike Sander. He pointed to a whopping budget deficit continuing to balloon, a Federal Reserve in no place of raising rates, and central banks diversifying away from the dollar.

The dollar weakened for the second time in three days on expectations the Fed will keep interest rates at a record low for an extended period.

Oil rose above US$80 a barrel because of the weaker dollar. US crude for December rose 75 US cents to US$80.35 a barrel in late afternoon trade in London. The US service sector grew in October for the second consecutive month but at a slower pace than forecast. The Institute for Supply Management's services index eased to 50.6 last month from 50.9 in September.

The services sector represents about 80 percent of US economic activity.

The ISM data boosted Wall Street with the Dow Jones Industrial Average 1.13 percent higher at 9,881.87 in mid- morning trade.

The US private sector shed 203,000 jobs in October, the seventh month in a row that employment declines were smaller than in the previous month, according to payrolls firm ADP. AGENCIES