Gold rose above $942 per ounce on Monday, strengthening as the dollar turned lower against six major currencies with slight caution toward riskier assets also proving supportive.

Gold was at $941.75 per ounce at 1256 GMT, up from $938.05 quoted late in New York on Friday. The precious metal earlier hit an intra-day high at $942.50 but is some way off a two week high of $948.20 hit last Friday.

A cautious approach to risk kept global stock market gains in check, while crude held under $70 per barrel following a bearish report on demand from the IEA, sapping gold’s appeal as a hedge against oil-induced inflation.

Analysts said the precious metal was holding onto gains but lacking upward momentum as currency markets would be indecisive until U.S. non-farm payroll data was released on Thursday.

“The dollar is going to be critical, and as long as it continues to weaken that tends to mean that gold will slowly grind higher,” said Dan Smith, an analyst at Standard Bank.

“We’re looking at more risk averse behaviour in coming weeks, which we think will push gold higher,” he added.

DOLLAR STEADIES

The dollar slipped after data from the Chicago Federal Reserve showed U.S. economic activity remained extremely weak in May, consistent with a continuing recession.

The currency was under pressure last week following Chinese calls for a super-sovereign global reserve currency.

But the case for a dollar alternative was undermined on Monday when the central bank governor of the United Arab Emirates told Reuters that the prospect was difficult to contemplate and plans to replace the dollar would not succeed.

U.S. gold futures for August delivery strengthened to $941.90 per ounce, up 0.7 percent on the day.

Analysts also said the precious metal could be due for a slight correction following last week’s rally.

“The price of crude oil is still below $70 per barrel, and that (crude) has been a key driver of inflation fears and also the gold price,” said Jesper Dannesboe, an analyst at Societe Generale.

“We had the correction from $1,000 down to around $910, and then another correction upwards. Now I think we’re heading down again,” he added.

Reflecting concern that gold may have lost some of its appeal to investors, the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust , said its holdings remained at 1,125.74 tonnes as of June 26, when it fell 0.5 percent.

It is currently down 0.7 percent from a record volume of 1,134.03 tonnes, marked on June 1.

Further undermining physical demand, ETF Securities said the amount of gold it holds to back its Gold Bullion Securities exchange-traded commodity fund had declined 567 ounces on June 26.

Noncommercial net long U.S. gold futures positions fell 5.3 percent to 166,294 lots in the week to June 23 from 175,543 lots, a weekly report by the U.S. Commodity Futures Trading Commission showed.

In other precious metals markets, spot silver eased to $13.96 quoted late in New York on Friday, while platinumdropped to $1,185.50 and palladium rose slightly to $245.50.

LONDON, June 29 (Reuters)