[CALGARY, Alberta] Gold prices hit a four-month peak on Monday as the US dollar index slumped to its lowest in three years but some analysts said the greenback's slide could be short-lived as it was not driven by fundamentals.

Spot gold was up 0.1 per cent at US$1,339.66 an ounce by 1826 GMT after touching its strongest since Sept 8 at US$1,344.44. The precious metal rose for a fifth straight week last week, gaining 1.4 per cent.

US gold futures were up 0.4 per cent at US$1,340.50 an ounce.

"We have been seeing a steady decline in the dollar, not so much because the United States is seeing weakness but because the European Central Bank could very well withdraw monetary accommodation later in the year," said Bart Melek, head of commodity strategy at TD Securities in Toronto.

The euro rose on Monday after an ECB official said the central bank could end its bond purchase scheme after September.

Mr Melek said some investors were also looking to diversify exposure to equity markets, which have been hitting new record highs in recent weeks.

The dollar index was down 0.67 per cent at 90.367, having reached its weakest since January 2015 at 90.279 in early trade.

A weaker US currency makes dollar-denominated assets such as gold cheaper for holders of other currencies, while higher rates could dent demand for non-interest-paying gold.

"The weakness in the dollar is not justified by fundamentals," Capital Economics analyst Simona Gambarini said, adding the US Federal Reserve was widely expected to raise interest rates, which would favour a stronger dollar, while the European Central Bank should keep rates on hold.

Adding a touch of bullishness to gold was data from the US Commodity Futures Trading Commission on Friday, which showed hedge funds and money managers raised their net long positions in Comex gold and silver in the week to Jan 9.

Iran's president said on Sunday the United States had failed to undermine a nuclear deal between Tehran and major powers, and hailed the accord as a "long-lasting victory" for Iran, state television reported.

US President Donald Trump on Friday delivered an ultimatum to European signatories of the deal to fix the "terrible flaws"in the agreement with Iran, or the United States would pull out.

Palladium was up 0.32 per cent at US$1,127.00 on Monday, after hitting a record high of US$1,138.

The metal has seen a sustained rally from high demand in the auto industry amid a supply deficit, analysts said, adding that the sharp price increase was largely overdone.

Spot silver rose 0.57 per cent to US$17.35 an ounce, after touching a near three-month high at US$17.42.

Platinum was up 0.2 per cent at US$995.50, after touching its highest since Sept 11 at US$1,001.40.

REUTERS