(Recasts, adds new analyst comment, updates prices)
LONDON, May 27 (Reuters) - Gold held firm ground in Europe on Tuesday after a long holiday weekend, moving broadly in line with the euro -- which scored record peaks against the dollar -- although analysts said the metal could still be vulnerable to a move lower.
Dollar weakness has driven the gold price sharply higher over the past couple of months, boosting it by some $55 since early April to within $15 of February's 6-1/2 year peak at $388.50.
"There are some out there who feel this is only the beginning of the dollar's slide, certainly in terms of the trade-weighted dollar. The dollar against the euro has dropped by 20 percent but in terms of the real trade weighted dollar, it's only dropped about five percent," Kevin Crisp, precious metals analyst with Dresdner Kleinwort Wasserstein, said.
"So there may be more to go in terms of revaluing against other currencies before it starts having a real impact on the U.S. economy, which is what some believe is going on at the moment," he added.
"Some of the people looking at gold are obviously those who feel that the risks are high of this extreme negative outcome in terms of the dollar and that's why they're interested in getting in," he said.
John Reade of UBS warburg said in a daily report that gold was set to make further gains in line with the falling dollar, but he also said the yellow metal's latest rally was looking tired and could retreat, especially if the dollar managed to grab back some losses.
Spot gold was indicated at $370.20/370.90 an ounce at 1500 GMT, having risen as high as $374.40. That compared with $368.40/369.10 last quoted in New York on Friday. Both New York and London markets were closed on Monday for public holidays.
Throughout Tuesday's trade, the euro hit a series of lifetime highs against the dollar, beating its previous record level from January 1999. The euro was last indicated at 1.1868, having hit a high of $1.1928 earlier.
Traders said gold's firm tone was also aided by an upcoming options expiry on COMEX gold futures later in the day, with OTC options expiring on Wednesday.
"There was some buying yesterday while we were away, and there has been a follow-through on that this morning," said Simon Weeks, bullion director with Scotiamocatta.
He added that volume remained relatively thin and said that he expected gold to trade in the short term between $370 and $375, unless it was able to break out above $375.
PALLADIUM SHARPLY HIGHER
Palladium found strength and regained the $200 level at one point after Japan's TOCOM benchmark April moved up by its daily 60-yen price limit at 750 in mid-afternoon, defying weak fundamentals and negative price forecasts.
The metal, used mainly in auto-catalysts to clean exhaust fumes, rallied after news reports last week thatwas poised to switch back to using palladium instead of platinum in its catalytic converters.
Spot palladium was last quoted at $192.00/197.00 an ounce, up from New York's last quoted $179.50/185.50.
Palladium recently set a six-year low at $140 due to oversupply and unhealthy demand prospects, but has recently gained ground due to the widening price gap with sister metal platinum.
Spot platinum was up sharply at $684.00/689.00 an ounce, against New York's late level of $666.00/671.00.
Silver was at $4.63/65 an ounce, unchanged from Friday's New York close.