July 3 (Bloomberg) -- Gold in London rose to the highest in almost a month as oil prices approached a record high, raising concern inflation will accelerate.

Gold gained 21 percent this year as oil climbed 25 percent, stoking concern that inflation will quicken. U.S. core inflation was up at an annual rate of 2.9 percent over the past three months, matching the year-over-year increase in April 2004 as the biggest in a decade, according to Bloomberg calculations. Oil traded today at the highest since May 2.

``Inflation is one of the drivers of gold in the longer term,'' said Simon Toyne, an analyst at Numis Securities Ltd. in London. ``Expectations of a stronger euro'' are also supporting gold, he said.

Gold for immediate delivery rose $7.28, or 1.2 percent, to $623.13 an ounce at 5:03 p.m. in London. Earlier, prices reached $625.28. Markets are closed in New York today and tomorrow for the U.S. Independence Day holiday.

Gold had its biggest one-day gain since 2001 on June 30 after the U.S. Federal Reserve indicated it may take a break from raising rates, curbing demand for the dollar and boosting the appeal of gold.

The median of 23 forecasts in a Bloomberg survey shows economists expect the European central Bank to raise its benchmark rate to 3 percent on Aug. 31 to curb inflation, adding to three increases since December.

``There is a little bearishness for the dollar and that translates into support for gold,'' said Bernard Sin, chief trader at Geneva-based MKS Finance, one of Switzerland's four gold refiners. ``There is nothing to stop gold from running.''

UAE Reserves

The United Arab Emirates may place up to 10 percent of its foreign currency reserves in gold to help protect the value of its assets, the Khaleej Times reported, citing central bank Governor Sultan Bin Nasser al-Suwaidi.

``There has been talk about it for a while but it may not happen for a while at such high prices,'' Sin said today.

Twenty-three of 32 traders, investors and analysts surveyed by Bloomberg News on June 28-29 advised buying gold, the most in seven weeks. Three suggested selling, and six were neutral. The precious metal rose 4.8 percent last week to $616 an ounce in New York.

Oil Prices

An end to the cycle of interest-rate increases by the Fed would leave the ECB set to outpace its American counterpart. At least six ECB council members in the past two weeks signaled concern faster economic expansion is stoking inflation. The Fed increased rates for the 17th straight time last week to 5.25 percent.

``The Fed is unlikely to take action at the next meeting, meaning it is negative for the dollar and positive for gold,'' said Michael Lewis, head of commodities research at Deutsche Bank AG in London.

Brent crude for August settlement rose 12 cents to $73.63 a barrel on the Intercontinental Exchange at 5:22 p.m. London time after reaching $73.99.

``Higher oil prices and news of possible central bank buying are also supporting gold,'' James Moore, a Kettering, U.K.-based analyst at TheBulllionDesk.com, said. ``We are bullish.''

To contact the reporter on this story: Julie Tay in London at jtay1@bloomberg.net

Last Updated: July 3, 2006 12:23 EDT