Gold inched higher in Europe on Tuesday as persistent concerns over the euro zone debt crisis supported safe-haven demand for the metal, but the stronger dollar limited gains.

Spot gold was bid at $1,237.20 an ounce at 1111 GMT (7:11 a.m. EDT), against $1,236.05 late in New York on Monday. U.S. gold futures for August delivery eased 60 cents to $1,238.00.

The precious metal rose back toward last week's record high near $1,265 an ounce on Monday, reaching a peak of $1,262.45, but corrected sharply in later trade.

Both times gold reached $1,260 over the last week it has been instantly hammered $30-$35 lower, said Ole Hansen, senior manager at Saxo Bank.

The focus seems to have shifted back toward the strong dollar/weak commodity relation. This has increased the risk for a deeper correction, he added. If support at $1,224 is broken it could get a bit ugly.

The dollar rose against a basket of currencies on Tuesday, while the euro slumped to a lifetime low against the Swiss franc and a 1-1/2 year low versus sterling.

The single currency was depressed by concerns over banks' obligation to repay 442 billion euros ($539.4 billion) on Thursday that they borrowed a year ago at rock-bottom rates as part of the European Central Bank's efforts to boost liquidity.

Appetite for nominally riskier assets was soft, with European shares falling on Tuesday following a weak performance among Asian stocks, which are on course for their worst quarterly performance since the end of 2008.

Commodity stocks led the fall in Europe, as oil and industrial metals weakened. Copper fell nearly 4 percent, while other base metals like zinc and lead slid even further.

Oil fell as much as 1.9 percent to below $77 as the dollar weakened and forecasts indicated tropical storm Alex would skirt the main production region in the U.S. Gulf of Mexico.

Gold is often traded as part of a basket of commodities, and can be sensitive to moves in broader commodity prices.

SEASONALLY WEAK

Investment demand for physical gold remained a major support for prices, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, still at a record high 1,316.177 tonnes on Monday.

But gold is entering a seasonally weak period for physical demand which could undermine any push higher, analysts said.

June-August are the months in which demand for gold retreats, said Societe Generale in a note. Along with the onset of the vacation period in North America and Europe, the Indian market slows significantly.

The average difference in tonnage (consumption) between the second and third quarters 2000-2008 was 41 tonnes, it added.

Other precious metals underperformed gold, with silver easing to $18.55 an ounce against $18.68, platinum to $1,542.95 an ounce against $1,565, and palladium to $461.48 against $466.

Weakness in other commodities is weighing on the metals, which are more industrial in use than gold. Platinum and palladium are chiefly consumed by carmakers, while silver is widely used in electronics manufacturing and in alloys.

(Editing by Sue Thomas)

Precious metal Gold