Gold Advances for First Time in Four Sessions as Weak Dollar Spurs Demand

Gold gained for the first time in four sessions in New York as a weaker dollar spurred demand for the metal as an alternative investment.

The dollar declined versus the euro after ECB President Jean-Claude Trichet said policy makers are in “strong vigilance mode,” signaling they intend to raise interest rates next week.

“Today, it’s definitely the U.S. dollar that helps the gold price,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.

Gold futures for August delivery gained $3.80, or 0.3 percent, to settle at $1,500.20 an ounce at 1:38 p.m. on the Comex in New York.

Prices are up 5.5 percent in 2011 after climbing the past 10 years. Europe’s debt crisis pushed gold to a record $1,577.40 on May 2. The metal is unlikely to top $2,000 without another round of so-called quantitative easing from the Federal Reserve, Francisco Blanch, the head of global commodities research at Bank of America Merrill Lynch, said today at a conference in New York.

“At current prices, there is an expectation that physical demand should help support the market,” Edel Tully, a London- based analyst at UBS AG, said in a report. “Indian buying has picked up since late on Friday, but a move down to $1,485, where many orders are sitting, is likely required to bring this market out in force.” India is the world’s largest buyer of bullion.

Holdings in exchange-traded products backed by gold rose for a third day yesterday, gaining 2.7 metric tons to 2,065.7 tons. That’s the highest level since May 4, according to data compiled by Bloomberg.

Silver futures for September delivery rose 5.5 cents, 0.2 percent, to $33.652 an ounce in New York.

Palladium futures for September delivery gained $10.55, or 1.5 percent, to $735.15 an ounce on the New York Mercantile Exchange. Platinum futures for October delivery were up $18.90, or 1.1 percent, at $1,693.50 an ounce on the Nymex.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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