Gold moved higher on Tuesday to trade near two-month highs, supported by a weaker dollar, but investors remained cautious about building big positions ahead of U.S. congressional elections, dealers said.

Spot gold hit a high for the day of $626.25 an ounce and was quoted at $625.10/626.10 by 1106 GMT. It closed at $623.70/624.70 in New York late on Monday, when it touched $629.40 -- the highest since September 7.

"We have broken some key resistance in gold. We have held above that resistance and I think the medium-term prospect for gold -- the next two to three weeks -- is pretty good," said John Reade, London-based analyst at UBS Investment Bank.

"The best guess here is a period of consolidation for a few days. I don't see the ingredients in place to drive gold massively higher, anyway, simply because most of the investors are staying on the sidelines at the moment."

Gold probably needed more dollar weakness to move much higher this year, he added.

The dollar fell toward last week's one-month low of $1.2798 per euro and was last quoted at $1.2755 on jitters before U.S. congressional elections.

"Gold's recent correlation with oil and also with the dollar could generate further buying interest should further favorable movements emerge," James Moore, analyst at TheBullionDesk.com, said in a daily note.

Gold has jumped more than nine percent in the past two weeks, hitting physical demand for the metal in key consuming centers.

Relatively lower prices for most of October saw sales for Dubai's gold industry jump 25 percent during the month from a year earlier, the chairman of a gold and jewelry trade group in the Gulf emirate said.

PLATINUM DROPS

In other metals, platinum dropped to $1,172/1,177 an ounce from $1,190/1,195 in New York. On Friday, platinum spiked to its highest since September 11 at $1,213 on talk of a new platinum exchange-traded fund.

"Speculation over the possible launch of a platinum ETF has faded and that prompted profit-taking, but I think platinum will be supported as such speculation will stay," Takasahi Ogura, a manager at Kanetsu Asset Management, said.

Dealers will turn to next week's report by Johnson Matthey, the world's largest distributor of platinum, for clues on the demand-supply balance.

Palladium fell to $327/332 an ounce from $331/336, while silver edged down to $12.57/12.64 an ounce from $12.65/12.72.