Nov. 4 (Bloomberg) -- Gold climbed to an all-time high after the Federal Reserve pledged to keep borrowing costs low for “an extended period,” sending the dollar lower and boosting the appeal of the metal as an alternative asset.

The dollar slipped as much as 1 percent against a basket of six currencies after the Fed’s statement on rate policy. The central bank kept the target rate for overnight bank lending at zero to 0.25 percent. Gold has soared 24 percent this year, heading for a ninth annual gain, as the dollar fell 6.9 percent.

“With interest rates so low, money is seeking markets that have an upside,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “Momentum is crucial, and right now gold has a lot of momentum.”

Gold futures for December delivery rose $2.40, or 0.2 percent, to $1,087.30 an ounce at the close of floor trading on the Comex division of the New York Mercantile Exchange. Prices later touched a record $1,098.50 in electronic trading.

The dollar slid for the second time in three days. After gold had settled on the Comex, Fed policy makers restated their intent to keep interest rates “exceptionally low,” a stance they have maintained since December.

India’s central bank said this week that it bought 200 metric tons of gold from the International Monetary Fund last month at market prices. Yesterday, holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, rose by the most in almost a month.

Market Price

“India buying at the market price really showed people that gold is not in a bubble and the dollar is continuing to lose its status as the reserve currency,” said Michael Pento, the chief economist at Delta Global Advisors Inc. in Huntington Beach, California. “The dollar has negative interest rates. People are going to look to gold for safety and as a way of preserving their purchasing power.”

The European Central Bank and the Bank of England have also kept borrowing costs low to revive growth.

“It’s not just dollars that are in trouble,” said Matt Zeman, a LaSalle Futures Group LLC metals trader in Chicago. “People are afraid of all paper currencies.”

Gold priced in euros and U.K. pounds also reached records earlier this year. Gold for immediate delivery in London jumped to a record $1,097.72 in London after the Fed statement.

India’s Purchase

The Reserve Bank of India paid an average of $1,045 an ounce for the IMF gold, according to a fund official. The $6.7 billion purchase increased its holdings to about 557.7 tons.

India’s stockpile is the 10th-largest official amount, behind Russia, according to figures from the producer-funded World Gold Council. The U.S. is the biggest holder.

The IMF agreed in September to sell 403.3 tons of gold to shore up its finances and provide more low-interest loans to poor countries. The lender said it would conduct the sales in a manner designed to avoid market disruptions.

Jim Rogers, the investor who predicted the start of the commodities rally in 1999, today reiterated his forecast that bullion will surge to at least $2,000 in the next decade. Rogers, the chairman of Singapore-based Rogers Holdings and a consultant to the Dalian Commodity Exchange, said in a Bloomberg Television interview that he may buy more gold.

“Private investors are unlikely to ignore major central banks’ implicit vote against the dollar and medium-term concerns about global inflation risks,” said Nicholas Brooks, the head of research and investment strategy at ETF Securities Ltd., which sells exchange-traded products backed by precious metals.

Bullion held in the SPDR Gold Trust increased 4.88 tons to 1,108.4 tons yesterday. The holdings reached a record 1,134 tons on June 1.

Some investors may sell gold for a profit as prices approach $1,100, analysts said.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net;

Last Updated: November 4, 2009 16:19 EST