July 19 (Bloomberg) -- Gold rose for the second day in three after a decline in the dollar yesterday against the euro boosted the appeal of gold as an alternative investment.

The euro gained against the dollar yesterday after a European Union report showed inflation in the region accelerated last month, damping speculation policy makers will cut interest rates. Gold has risen 20 percent in the past two years as the euro rallied against the dollar.

``We saw slight strength in the euro last night, and any strength in the euro is going to boost gold prices,'' said Charles Dowsett, head of precious metals trading at ABN Amro Holding NV in Sydney. ``Trading is very quiet at the moment though and we expect that to continue into August.''

Gold for immediate delivery rose as much as 80 cents, or 0.2 percent, to $421.85 an ounce, compared with the 5 p.m. close in New York yesterday. The metal traded at $421.60 at 11:42 a.m. Sydney time. Yesterday, gold fell 0.1 percent.

The dollar traded at $1.2048 against the euro at 11:13 a.m. Sydney time, from $1.2052 late yesterday in New York according to EBS, an electronic currency dealing system. The euro gained 0.1 percent yesterday.

Euro-region consumer prices rose 2.1 percent in the year to June, the EU statistics office said yesterday, exceeding the 2 percent ceiling set by the European Central Bank.

Gold for August delivery rose 70 cents, or 0.2 percent, to $421.70 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 11:41 a.m. Sydney time

To contact the reporter on this story: Matt Chambers in Melbourne at mchambers1@bloomberg.net

Last Updated: July 18, 2005 21:47 EDT