LONDON, Dec 19 (Reuters) - Gold is technically well placed to regain its October peak near $930 an ounce, but strong resistance at this level will be a major stumbling block to any return to record highs above $1,000. The precious metal is benefiting from a weakening dollar, and if this trend continues, faces little technical resistance until it climbs well above $900 an ounce, analysts say. On Friday afternoon, spot gold fixed in London at $835.75.
"There is a good chance that the short-term rally (in gold) is going to extend towards $879," said Karen Jones, technical analyst at Commerzbank.
"From here we regard $933 as the critical level -- that is the downtrend you draw from March and it is also the high we saw from October," she said.
"That is the really major resistance level on the upside."
In the short term, this level is likely to cap prices, Jones said. However, if the euro-dollar rate continues to strengthen, prices could rally further, and move back towards the highs of $1,030.80 seen in March this year.
Barclays Capital said the outlook was turning bullish in the medium term.
"Consolidation above $829 implies further gains to $889, then $905," it said. However, "a move above $931 is needed to target $1,050".
The euro-dollar exchange rate hit a near 3-month high of $1.4719 on Thursday, boosting interest in gold as a currency hedge, although it has eased a little since. The precious metal typically trades in the opposite direction to the dollar.
"The fact that the dollar has turned means we are probably going to see gold shift back to re-test the topside of its range," JP Morgan's global head of FX and commodity technical strategy Robin Wilkin said.
Wilkin said he expects to see a move back towards $950-1,030 in the next couple of months, based on a continued weakening of the dollar. He sees the first line of resistance on the way up to these levels at $882.
"After that, there is really nothing until you get to more meaningful levels, which are the previous highs -- $931 on October 10 and $988 on July 15," he said.
Redtower Research chief strategist Gerry Celaya says although he expects gold to trend higher in the short term, he does not see it back above $1,000.
"Potentially we could go up to $930-935, where we have the spot highs from October and falling trendline resistance," he said. However, "if we start breaking below $835-830, that would take $935 off the table", he said.
