LONDON, England - October 12, 2010 - Gold rose back towards $1,350 an ounce in Europe on Monday as the dollar languished, with confidence in the U.S. currency undermined by expectations the Federal Reserve will persist with a loose monetary policy.

The dollar has lost significant ground in recent weeks due to speculation that the Fed will introduce further monetary easing after a spate of soft economic data. This helped push gold prices to a record $1,364.60 an ounce last week.

Spot gold was bid at $1,348.95 an ounce at 1438 GMT, against $1,343.25 late in New York on Friday. US gold futures for December delivery rose $4.40 an ounce to $1,349.70.

Afshin Nabavi, head of trading at MKS Finance in Geneva, said he remains broadly positive on gold, with the dollar the main driver of the market.

“$1,339-$1,340 ought to remain a good support,” he said. A breach of that could send us to $1,335, but I still think $1,400 a good possibility for the year-end.