Aug. 9 (Bloomberg) -- Gold prices fell for a third straight session in New York on expectations the U.S. Federal Reserve would raise its benchmark lending rate, boosting the dollar and curbing the metal's appeal as an alternative investment.

``Higher rates are generally supportive for the dollar, and dollar strength is negative for gold,'' said Frank Lesh, a trader and analyst at Rand Financial Services Inc. in Chicago.

Gold gained 1.6 percent last week as the dollar dropped 1.9 percent against the euro. The Fed raised its rate by a quarter percentage point to 3.5 percent today, the 10th such increase since June 2004, after gold trading closed.

Gold futures for December delivery fell 50 cents, or 0.1 percent, to $439.80 an ounce on the Comex division of the New York Mercantile Exchange. Prices dropped $2.50 yesterday and 90 cents on Aug. 5. A futures contract is an obligation to sell or buy a commodity at a set price by a specific date.

The Fed restated its plan to carry out further increases at a ``measured'' pace. All 79 economists surveyed by Bloomberg had expected the quarter-point increase.

Gold declined even as the first industrywide gold strike in South Africa in 18 years entered a third day. The strikes have halted production at AngloGold Ashanti Ltd., Gold Fields Ltd., Harmony Gold Mining Co. and Placer Dome Inc. mines.

The strikes may cut production by 28,000 to 35,000 ounces a day, said Jeffrey Christian, managing director for New York-based CPM Group, a precious-metals research company.

`Standing Still'

``The mines are already standing still,'' Reint Dykema, a spokesman for the Solidarity union, said. About 12,000 Solidarity members joined 100,000 members of the National Union of Mineworkers in walking off the job.

Gold Fields and Harmony Gold Mining increased salary offers today, said Moferefere Lekorotsoana, a spokesman for the National Union of Mineworkers. AngloGold and Placer Dome already raised a joint offer.

Gold prices gained $82 an ounce in 1987, the year of the last major mining strike in South Africa. The country produces about a sixth of the world's gold.

``There's some concern about the South African mining strike,'' Lesh said. ``If it were to continue for a while it would be supportive for gold.''

To contact the reporter on this story: Jennifer Itzenson in New York at jitzenson@bloomberg.net.

Last Updated: August 9, 2005 15:13 EDT