Oct. 5 (Bloomberg) -- Gold futures touched the highest price in more than a week as the dollar weakened, boosting the appeal of the precious metal as an alternative investment.

The greenback fell as much as 0.5 percent against a basket of six major currencies. Gold has gained 15 percent this year, while the dollar declined 5.7 percent.

“The dollar is moving a little lower, and that’s giving gold a pop,” said Matt Zeman, a LaSalle Futures Group metals trader in Chicago.

Gold futures for December delivery climbed $13.50, or 1.3 percent, to $1,017.80 an ounce on the New York Mercantile Exchange’s Comex division, the highest settlement price for a most-active contract since Sept. 16. Earlier, the metal reached $1,018.90, the highest price since Sept. 24.

The U.S. Dollar Index, which includes the euro and yen among the currencies of six U.S. trading partners, has dropped 14 percent from a three-year high of 89.624 on March 4.

“Gold is finding support out of dollar weakness,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Hard breaks have found nothing but buying. Gold is building stamina to take out the old record.”

Futures reached $1,033.90 on March 17, 2008, the all-time high in New York.

In London, gold for immediate delivery climbed $13.80, or 1.4 percent, to $1,016.60 an ounce at 7:06 p.m. local time.

Fund Holdings Rise

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, rose 1.22 metric tons to 1,096.55 tons as of Oct. 2, data on the company’s Web site shows.

Hedge-fund managers and other large speculators trimmed their bets on rising New York futures in the week ended Sept. 29, the U.S. Commodity Futures Trading Commission said last week. Net-long positions fell 2.3 percent to 231,386 contracts.

A decline in open interest may have attracted investors, said Chip Hanlon, the president of Delta Global Advisors in Huntington Beach, California.

“Gold was overbought a few weeks ago and some of that has been relieved,” Hanlon said. “The fundamentals are clearly bullish for gold.”

Still, gold may be too expensive to lure buyers when it rises past $1,000, LaSalle’s Zeman said.

“If investors can’t push the dollar much lower, then gold’s rally is dead in its track,” Zeman said. “No one wants to step in and buy above $1,000.”

Silver futures for December delivery rose 30.5 cents, or 1.9 percent, to $16.535 an ounce on the Comex. The metal is up 46 percent this year.

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

Last Updated: October 5, 2009 14:09 EDT