March 15 (Bloomberg) -- Gold traded near the highest in a week on expectations U.S. economic data this week will weaken the dollar against the euro, making the metal more attractive as an alternative investment.

The dollar had the biggest drop in almost three weeks against the yen yesterday after a government report showed the U.S. current-account deficit widened to a record in the fourth quarter. The U.S. currency may decline for a third day before manufacturing and housing confidence reports that economists expect will point to slower growth.

``This is an important week for the dollar, and consequently for gold,'' said Michael Widmer, an analyst with Macquarie Bank Ltd. in London, in an interview today. ``The market is looking for direction; it's been quite volatile lately.''

Gold for immediate delivery rose as much as $1.43, or 0.3 percent, to $552.48 an ounce, the highest in a week. It traded at $551.47 an ounce as of 11:59 a.m. in London. The dollar traded at $1.2028 against the euro compared with $1.2012 late yesterday. The U.S. currency was at 117.60 yen, from 117.60 yen.

A report due for release today that may show foreign investment in U.S. assets in January was below the average for last year may boost gold prices, Widmer said. ``Any shortfall in foreign capital inflow will pressure the dollar,'' he said. The metal may rise as high as $560 by the end of the week, Widmer forecast.

A decline in the dollar may lift gold's appeal as an alternative asset to investments such as equities denominated in the U.S. currency.

Reports Due

The Fed Bank of New York's Empire index, due for release today, was 18.9 this month, down from February's 20.3, according to the median estimate of 46 economists in a Bloomberg News survey. Readings above zero indicate expansion.

The Philadelphia Fed's factory index, due tomorrow, also probably slipped to 13.1 from 15.4, according to the median estimate of 48 economists in a separate survey.

A number greater than zero means a higher percentage of the area's factories surveyed reported business was improving than deteriorating.

Among other precious metals for immediate delivery in London, platinum gained $5.25, or 0.5 percent, to $1,027.75 an ounce. Palladium rose $3.50, or 1.2 percent, to $306, and silver advanced 3 cents, or 0.3 percent, to $10.26.

To contact the reporters on this story: Chia-Peck Wong in Singapore at cpwong@bloomberg.net; Danielle Rossingh in London drossingh@bloomberg.net.

Last Updated: March 15, 2006 07:44 EST