July 11 (Bloomberg) -- Gold may rise on speculation the bombings in London last week will boost the appeal of the precious metal as a haven for investment, a Bloomberg survey showed.

``The world is not as safe as we thought, and in such an environment, it is good to have gold in your portfolio,'' said Frederic Panizzutti, senior vice president at MKS Finance in Geneva.

Twenty-six of 43 respondents to the survey conducted between July 7 and July 8 said gold will climb this week. Eleven said prices will fall and six forecast little change. Gold declined $5 last week to $423.80 an ounce on the Comex division of the New York Mercantile Exchange.

Gold rose as much as $5.60 on July 7 after blasts killed about 50 people, the worst attack on London since World War II. Prices ended the day down 30 cents on speculation the attack was an isolated event, and dropped 50 cents July 8 as the dollar rose against the euro. Traders say more attacks are possible. A group calling itself the al-Qaeda Organization in Europe has claimed responsibility for the bombings and warned Italy and Denmark may be next.

``If there is another attack soon, gold will go up and stay there,'' said Carlos Perez-Santalla, president of Hudson River Futures in New York, a metals trading company. ``The London attacks would be seen as not just a one-shot deal, but the start of something bigger.''

The U.S. has raised its terror threat level to ``high'' from ``elevated'' for public transit systems. Italy has stepped up security at tourist sites, and France increased border patrols and quadrupled military forces patrolling public areas.

Safe Haven

Gold's 1.2 percent drop last week surprised the majority of analysts in a survey June 30 and July 1, who had expected a gain. Bloomberg's survey has forecast the direction of prices in 35 of 63 weeks, or 56 percent of the time. Perez-Santalla, who expects prices to rise this week, has been right 54 percent of the time.

Gold typically rises during times of increased tensions as some investors seek a haven for their financial assets. Gold futures jumped 4.4 percent on Sept. 14, 2001, as trading resumed after the Sept. 11 terrorist attacks in the U.S. The metal rose 4.3 percent in the week after the March 11, 2004, bomb attack in Madrid.

``A revival of international political crises from the London bombings'' will boost gold prices, said Alec Kim, manager at Korea Exchange Bank Futures Co.'s international marketing division in Seoul.

Hedge funds and other large speculators with 200 or more New York gold futures bought 104,874 more contracts than they have sold as of July 5, compared with 129,931 a week earlier, the U.S. Commodity Futures Trading Commission said July 8. Traders had sold 41,859 contracts expecting prices to fall, compared with 45,589 contracts a week earlier.

Inflation Concern

Any rise in prices may force those traders to buy back the contracts to limit their losses, accelerating a rally, said Jim Pogoda, an independent gold trader in New Jersey.

Gold also may get a boost from the surge in crude-oil, which reached a record $62.10 a barrel in New York on July 7 and is up 48 percent from a year ago. Higher energy costs have fueled concern about an acceleration of inflation.

The ``black gold ratio,'' which measures how much gold it would take to buy a barrel of oil, rose to a record 0.13451 last week, said Patrick Chidley, an analyst in New York with South Africa-based brokerage Barnard Jacobs Mellet LLC. A ratio of 0.0624 has been the average since 1970.

``If oil continues upwards, inflation must begin to filter in more to actual economic numbers and perceptions,'' Chidley said. ``This could be the catalyst for gold to outperform, after a period of underperforming oil and many other metals.''

Energy Prices

Oil may extend gains this week as Hurricane Dennis threatens to disrupt U.S. supplies in the Gulf of Mexico, a separate Bloomberg survey showed.

U.S. producer prices probably rose 0.4 percent in June after dropping 0.6 percent in May, according to the average estimate of economists surveyed before a Labor Department report July 15. Gold ``seems technically oversold and I am expecting the June PPI data to show inflationary signs'' that would boost gold prices, said John Licata, an independent analyst in New York.

Some analysts say gold won't get much benefit from terrorism concerns.

The drop in gold on the day of the London bombings signals that the metal ``is off the list of safe havens for anything more than three or four hours,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois.

The dollar remains the biggest influence on gold, and as the dollar climbs because of rising U.S. interest rates, gold will continue to fall, slipping below $400 by the end of this year and to $380 next year, Kaplan said.

``Only another terror incident in a high profile area could ignite some short covering and fresh buying in the near term,'' said Pogoda, the independent gold trader. ``I believe the dollar will remain gold's key driver.''

To contact the reporter on this story: Claudia Carpenter in New York ccarpenter2@bloomberg.net

Last Updated: July 10, 2005 13:44 EDT