Oct. 8 (Bloomberg) -- Gold, trading at a record for a third consecutive day, will keep rising as a weaker dollar and concern that inflation will accelerate bolsters investor demand, a survey showed.

Bullion will advance to $1,150 an ounce by the end of the year, 9 percent higher than today, according to the median estimate in a survey of six analysts and investors at a commodities conference in London yesterday. Estimates ranged from $1,300 to $1,050. Gold already rose 20 percent this year and is heading for a ninth consecutive annual gain, the best performance since at least 1948.

The dollar slumped 6.5 percent against a basket of six major currencies this year, as the U.S. kept interest rates near zero and government debt surged on spending aimed at ending the worst economic slump since the 1930s. U.S. consumer prices will expand 1 percent this quarter and 1.8 percent in each of the following two quarters, according to the median estimate of 49 economists surveyed by Bloomberg.

“The dollar weakening is the main driver at the moment,” Francisco Blanch, head of commodity research at Bank of America Merrill Lynch, said in an interview. The “next step” in the rally “will be driven by commodity markets. It will be a commodity supercycle story and inflation story.”

Gold is often bought as a hedge against a weaker dollar and higher inflation. Bullion holdings in exchange-traded funds have jumped to records. The biggest, the SPDR Gold Trust, has passed Switzerland as the world’s sixth-largest gold holding.

Gold Record

Gold for immediate delivery traded at $1,054.26 an ounce by 12:30 p.m. in London, while December gold futures on the New York Mercantile Exchange’s Comex division climbed as high as $1,059.60 an ounce.

Bullion will probably top $2,000 an ounce in the next decade, investor Jim Rogers said yesterday in an interview. Rogers didn’t participate in the survey. Bullion will end the year at $1,050 an ounce and rise as high as $1,500 in the next two years, Blanch said.

The U.S. Dollar Index slid to a 13-month low on Sept. 23. Deutsche Bank AG on Oct. 1 said the U.S. currency will fall to $1.60 per euro in 2010, a drop of as much as 8.3 percent from yesterday’s $1.4772, because of “rising fiscal deficits and loose monetary policy.”

The Fed has kept its target rate for overnight loans among banks between zero and 0.25 percent since December to help stimulate the economy. President Barack Obama increased the nation’s marketable debt to an unprecedented $7.1 trillion as the government borrows to revive growth. Goldman Sachs Group Inc. predicts the U.S. will sell about $2.9 trillion of debt in the two years ending next September.

‘The Very Best’

“We haven’t had inflation yet and I think we will have it,” Ross Norman, a director at researcher Fastmarkets Ltd. who expects gold to reach $1,250 by the end of the year, told the conference. “We’re yet to see the very best.”

Prices may also be bolstered by demand for jewelry.

The October-December period is the busiest season for jewelry sales in India, spurred by the wedding season and the Diwali holiday. India’s gold demand from jewelers and retail investors is “starting to recover” and will maintain the country as the world’s largest buyer of the metal this year ahead of China, the World Gold Council predicted yesterday.

Hedge-fund managers and other large speculators increased their bets on rising New York futures to a record in the week ended Sept. 22, U.S. Commodity Futures Trading Commission data showed. Those bets were trimmed by 2.3 percent the week after.

“We will see a correction before we go up further,” Barclays Capital analyst Suki Cooper said in an interview. “Those simply tracking currency movements might be edged out quite quickly.”

Spot gold’s 14-day relative strength index is at 74. That’s above the level of 70 viewed by some investors as an indication of an impending decline.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

Last Updated: October 8, 2009 07:40 EDT