Nov. 3 (Bloomberg) -- Gold prices in New York rose the most in almost three weeks after U.S. President George W. Bush won a second term, sending the dollar down against the euro on expectations of increased government spending and inflation.

The dollar fell on speculation that Bush will be unable to reduce the current-account and budget deficits. Gold, sold in dollars, rose to a 15-year high of $433 an ounce on April 1 as the U.S. currency fell to a record on concern more dollars will have to be converted to other currencies to pay for imports. The budget deficit swelled to a record $412.6 billion in September on costs related to the war in Iraq and domestic security.

Gold is responding to ``a combination of dollar weakness and crude-oil strength,'' said Daniel Vaught, an analyst at A.G. Edwards & Sons Inc. in St. Louis. ``The dollar weakness is based on ideas that with Bush, he's likely to be more aggressive on the fight on terror.''

Gold futures for December delivery rose $4.60, or 1.1 percent, to $425.40 an ounce on the Comex division of the New York Mercantile Exchange, the biggest gain for a most-active contract since Oct. 14. A futures contract is an agreement to buy or sell a commodity at a specified price and date.

Bush received at least 274 electoral votes, four more than needed for victory. He also won the popular vote, 51 percent to 48 percent, with 99 percent of the precincts counted, according to CNN.

The need to finance a record current-account deficit may force the U.S. dollar lower, two Federal Reserve Bank of New York economists said in a report last week.

Oil Gains

Higher oil prices also helped contribute to a wider U.S. trade gap, causing the current-account deficit to reach a record $166.2 billion in the second quarter.

``There seems to be a sense in Washington that lots of monetary and fiscal stimulus has been applied to the economy that is now fading away and that economic performance is still not as strong as policy makers would like it to be,'' Barclays Capital in London said in a report today. ``A weaker dollar might be an appealing policy tool.''

``The current account deficit is very likely to widen significantly further in the near term,'' Barclays said. ``With the re-election of President Bush, if a weaker dollar is part of the plan, it would not be surprising to hear more about it soon.''

Oil prices rose after Senator John Kerry conceded the presidential race to Bush, who is less likely to release government-held supplies to reduce prices.

``People in the crude industry think Bush is going to be bullish for crude in the sense that you are not going to see any withdrawal from strategic petroleum reserves,'' Vaught said.

Some investors buy gold in times of inflation, which erodes the value of fixed-income assets, such as bonds. Gold futures surged to $873 an ounce in 1980, when U.S. consumer prices rose 12.5 percent from the previous year.

Kerry said in October that he would suspend deliveries to the U.S. emergency crude stockpile. The Bush administration has refused to release supplies, unless there is a supply disruption.

To contact the reporter on this story: Choy Leng Yeong in Seattle at clyeong@bloomberg.net

Last Updated: November 3, 2004 14:06 EST