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Gold Rises as Dollar Decline May Revive Demand; Silver Advances

By Claudia Carpenter

April 22 (Bloomberg) -- Gold rose for the first time in four days in London on speculation the dollar's decline will revive demand for the metal as an alternative investment. Silver also gained.

Gold has risen 10 percent this year as lower U.S. interest rates sent the dollar to a record low against the euro. The U.S. currency weakened as interest-rate futures show a 94 percent chance the Federal Open Market Committee will reduce rates by 25 basis points on April 30, up from a 58 percent chance a week ago.

``The U.S. economy is still weak, and indirectly that's positive for gold,'' said Bernard Sin, chief gold trader at MKS Finance, a Geneva-based precious metals refinery. ``People are pre-empting next week's FOMC meeting.''

Gold for immediate delivery climbed $3.53, or 0.4 percent, to $920.27 an ounce as of 1:04 p.m. in London. Prices dropped 2.9 percent the previous three days. New York gold futures gained $5.40 to $923 an ounce and the London morning gold ``fixing'' price used by some mining companies increased $5 to $920.75.

Gold has traded between about $954 an ounce and $874 an ounce this month after falling 5.9 percent last month, the biggest decline since April 2004.

``It's just moving around with no direction,'' said Mario Innecco, a futures broker at MF Global Ltd. in London. ``I wouldn't be involved in gold right now.''

The metal has climbed for the past seven years as the dollar fell to a record against the euro and rising commodity prices spurred demand for the metal as a hedge against inflation. The UBS Bloomberg index of 26 raw materials climbed today, led by gains in zinc, aluminum and lead.

Gold Assets

Assets in the StreetTracks Gold Trust, the biggest fund holding gold, were little changed at about 642 tons all month. They had climbed 5.7 percent this year to a record 663.83 tons on March 17, the day gold rose to a record $1,032.70 an ounce.

Gold is ``teetering on the edge of looking very bad,'' said Robin Wilkin, London-based head of commodities and currency technical analysis at JPMorgan Chase & Co.

Spot silver gained 18 cents to $17.62 an ounce, platinum declined $19 to $1,995 an ounce and palladium rose $5 to $458 an ounce. Platinum and palladium are used in jewelry and auto catalysts to reduce vehicle pollution.

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