Nov. 3 (Bloomberg) -- Gold climbed to a record, most U.S. stocks rose and the dollar rallied to the strongest level against the euro in a month. Treasuries fell before the Federal Reserve issues its policy statement tomorrow.

The U.S. currency appreciated on speculation Fed officials are discussing the outlook for record-low borrowing costs at their two-day meeting. U.S. stocks pared earlier losses after Warren Buffett’s Berkshire Hathaway Inc. agreed to buy railroad Burlington Northern Santa Fe Corp. for $26 billion. Crude oil rebounded from a two-week low and neared $80 a barrel.

Gold futures for December rallied $34.50, or 3.3 percent, to a record $1,088.50 in after-hours trading as the Reserve Bank of India bought 200 metric tons of the metal for $6.7 billion from the International Monetary Fund. Central banks, the biggest holders of gold, may diversify out of the dollar and buy bullion as surging U.S. debt and low interest rates weaken the currency.

“This is safe-haven buying,” said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago. “Gold is decoupling from the dollar, which can make it even more bullish.”

The metal outperformed stocks and bonds this year, rising 22 percent as it heads for a ninth straight annual gain. The Standard & Poor’s 500 Index rose 17 percent in 2009, while returns on the benchmark 10-year U.S. Treasury note are down 7.4 percent, according to a Merrill Lynch index.

‘Difficult Taskmaster’

About five stocks gained for every two that fell on the New York Stock Exchange. The Standard & Poor’s 500 Index added 0.2 percent to 1,045.41 at 4:11 p.m. in New York after falling as much as 0.9 percent. The Dow Jones Industrial Average decreased 17.53 points, or 0.2 percent, to 9,771.91. Stocks in Europe slid after UBS AG posted a wider-than-estimated loss.

“The market’s clearly trying to decide, the market being this really difficult taskmaster, where it wants to go,” said Michael Vogelzang, chief investment officer of Boston Advisors LLC, which manages $1.8 billion. “You have all kinds of conflicting problems and currents, the best of which is huge down markets overseas today, followed by Warren Buffett buying Burlington Northern.”

Fort Worth, Texas-based Burlington Northern jumped 28 percent to $97. The takeover is the largest ever for Berkshire. Railroad stocks Union Pacific and CSX gained more than 7.3 percent, while Norfolk Southern advanced 5.4 percent.

A group of 10 transportation stocks in the S&P 500 jumped 5.8 percent, the most since April. An index of industrial shares, which includes railroads, rallied 1.4 percent for the biggest advance among 10 industries.

Black & Decker

Black & Decker surged 31 percent to $62. The maker of DeWalt power drills and Price Pfister faucets agreed to be purchased by Stanley Works for $3.5 billion in stock. Stanley Works rallied 10 percent to $49.69.

Crude oil for December delivery climbed as much as 2.1 percent to $79.77 a barrel on the New York Mercantile Exchange after falling as much as 2 percent to $76.55 a barrel, the lowest level since Oct. 15. Prices rose 78 percent this year.

The dollar touched the strongest level versus the euro in a month as evidence that banks are struggling to shake off the effects of the financial crisis reduced demand for higher- yielding assets.

“When risk appetite falters, the dollar still catches a bid,” said Steven Pearson, the London-based head of G-10 currency strategy at Bank of America Corp., in a Bloomberg Television interview. “That is likely to remain the case for the foreseeable future as the dollar remains the defensive currency of choice.”

Volatility Climbs

The greenback appreciated 0.4 percent to $1.4724 per euro and touched $1.4626, the strongest since Oct. 5. The dollar gained 2.4 percent since reaching a 14-month low on Oct. 26.

Implied volatility on major currencies climbed to 14.27 percent, the highest level since July 13, according to data compiled by JPMorgan Chase & Co., indicating traders predict wider price swings in coming months.

“This is a huge, huge week,” said Lauren Rosborough, a foreign-exchange strategist at Westpac Banking Corp. in London. “Higher volatility reflects the uncertainty in the market and suggests potential for downside in risky currencies.”

Treasuries fell on speculation the Fed will highlight the strengthening economy at the conclusion of tomorrow’s policy meeting and maintain its pledge to keep interest rate at record lows for an extended period.

Yield Gap

The difference between 2- and 10-year Treasury note yields widened to the most in almost three months as investors sought higher returns as compensation against the risk of inflation. The Treasury is also scheduled to announce tomorrow how much it plans to raise in note and bond sales next week.

“There’s a small percentage of people that believe the Fed could change their wording tomorrow,” said Thomas Tucci, head of U.S. government bond trading at RBC Capital Markets New York, one of the 18 primary dealers that trade with the central bank. “At these levels of interest rates, people don’t want to take chances and they are taking money out of the market.”

The Federal Open Market Committee was forecast to leave its benchmark rate at a range of zero to 0.25 percent, according to all 96 economists in a Bloomberg survey. The FOMC will release its monetary policy statement around 2:15 p.m. tomorrow in Washington.

To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

Last Updated: November 3, 2009 17:59 EST