July 9 (Bloomberg) -- Gold rose, rebounding from a two- month low reached yesterday, as the dollar weakened for the first time in six sessions, increasing the metal’s appeal as an alternative investment. Silver also gained.

The U.S. Dollar Index, a six-currency measure of the greenback’s value, slid as much as 1.3 percent, almost erasing a 1.4 percent gain in the previous five sessions. Gold, which typically moves in the opposite direction of the dollar, dropped 3.4 percent in the same period, touching the lowest since May 6.

“We are seeing an impressive recovery in metals, as a weaker dollar and an oversold bounce in oil markets (after six days of declines), is lifting the group,” Edward Meir, an MF Global Ltd. analyst in Darien, Connecticut, said today in a report. “Equity markets are also breathing easier.”

Gold futures for August delivery gained $6.90, or 0.8 percent, to $916.20 an ounce on the New York Mercantile Exchange’s Comex division. Bullion for immediate delivery in London rose $7.49, or 0.8 percent, to $916.99.

Silver for September delivery advanced 8.3 cents, or 0.6 percent, to $12.935 an ounce in New York, after dropping yesterday to the lowest for a most-active contract since May 4.

Crude oil, used by some investors as an indicator of the outlook for inflation, rose as much as 2.5 percent in New York before erasing the gain. Oil slid 16 percent in the previous six sessions.

Equities Advance

U.S. equity indexes rose, with the Standard & Poor’s 500 climbing as much as 0.7 percent, halting two days of declines.

Gold slipped to $911.75 in the afternoon London “fixing,” the price used by some mining companies to sell their output, from $914.75 in the morning fixing.

“A weak economy should negate the need for inflation hedges and also hurt demand from the physical side,” Tom Pawlicki, an MF Global Inc. analyst in Chicago, said in a note. “Gold prices should fall below the $900 an ounce level, as pressure is exerted by technical factors and from worries over the health of the economy. Yesterday’s break below $915 support implies a further move down toward $865,” he said.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 10.38 metric tons yesterday to 1,120.19 tons, the company’s Web site showed. That’s the steepest decline since April.

“Investor confidence in bullion has taken a back seat, and that has been reflected in receding demand,” Pradeep Unni, a Richcomm Global Services analyst in Dubai, wrote today in a note. “Bargain-hunting above $900-$903 may prevent an aggressive selloff in the metal. It’s most likely that gold could slowly climb back to levels above $920-$924.”

ETFs added about 29 tons of gold to their holdings in the second quarter through late June, David Wilson, a Societe Generale analyst, said today in a report. That’s down from 440 tons in the first three months of the year, he said.

To contact the reporters on this story: Halia Pavliva in New York at hpavliva@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

Last Updated: July 9, 2009 14:06 EDT