Aug. 3 (Bloomberg) -- Gold prices rose to a five-week high in New York as the euro climbed to the highest against the dollar in almost two months, increasing the appeal of precious metals as an alternative investment.

The euro jumped to $1.23 for the first time since June 8 after a survey showed growth in European service industries grew at a faster pace in July. Gold has gained 1.6 percent this week as the euro climbed 1.7 percent against the dollar.

``Gold has been following the price of the euro,'' said Marty McNeill, a trader and analyst at R.F. Lafferty & Co. in New York. ``They've been going pretty much hand in hand.''

Gold futures for December delivery rose $5, or 1.1 percent, to $442.70 an ounce on the Comex division of the New York Mercantile Exchange, the highest since June 23. The percentage gain was the most since June 16.

A futures contract is an obligation to sell or buy a commodity at a set price by a specific date.

The services report was at least the fourth in a week that indicates growth is accelerating in Europe. The gauge of expansion in areas such as banking and airlines rose to 53.5 from 53.1, according to the survey of 2,000 purchasing managers by NTC Research Ltd. for Reuters Group Plc. A reading above 50 indicates growth.

``The euro really started it off'' for gold, said Robert Cameron, a precious-metals trader in New York at Mitsubishi International Corp., a unit of Japan's largest trading company.

Speculator Buying

Speculators and other large investors increased their purchases after the price of gold rose above its 200-day moving average of $440.40 an ounce, Cameron said. The moving average is watched by traders who follow historic price patterns, he said.

``You always see some technical-related buying when that happens,'' he said.

Gold reached a 16-year high in December as the dollar fell to a record against the euro. In the past two years, gold sold in dollars has moved almost in lockstep with the euro against the dollar, with a correlation coefficient of 0.83. The maximum reading is 1. The coefficient measures to what degree two variables move in unison.

Gold may be poised for a rally this month because of increased jewelry demand. Prices climbed 4.8 percent in August last year as manufacturers prepared for increased jewelry buying during year-end holidays and the wedding season in India, the world's biggest purchaser of gold.

The metal has rallied an average $26 an ounce to its high in August from a seasonal low in July in the previous four years. Prices fell 0.3 percent last month.

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

Last Updated: August 3, 2005 14:02 EDT