Gold Rises, Halts 2-Session Drop as Dollar Falls; Silver Steady

Dec. 22 (Bloomberg) -- Gold rose, halting a two-session slide, as a decline in the dollar revived the appeal of the precious metal as an alternative investment. Silver was little changed.

The dollar dropped as much as 1.2 percent against a weighted basket of six major currencies following a 3 percent gain in the previous two sessions. Gold’s rebound from a 13- month low in October has left the metal up 1.1 percent for the year and heading for an eighth straight annual gain.

“Gold’s trading off the dollar,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “A weak economy and all-time low interest rates don’t call for a strong dollar.”

Gold futures for February delivery rose $9.80, or 1.2 percent, to $847.20 an ounce on the New York Mercantile Exchange’s Comex division. The metal gained 11 percent in the previous two weeks.

Silver futures for March delivery rose 1 cent to $10.86 an ounce. The metal has dropped 27 percent this year.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose to a record 775.3 metric tons last week. The Federal Reserve cut its benchmark interest rate to the lowest ever on Dec. 16, to between zero and 0.25 percent, in a bid to revive the economy.

Interest-Rate Cuts

Gold reached a record $1,033.90 on March 17 as rate cuts sent the dollar to an all-time low against the euro in July. The federal-funds rate was at 5.25 percent in September 2007 when policy makers began cutting their benchmark as the economy headed into a recession.

“We’re not going to get any revelations on the economy soon,” Lesh said. “Those who want to hold gold are still looking at a shaky equity market worldwide.”

Gold is the fourth-best performer on the Reuters/Jefferies CRB Index of 19 raw materials this year behind cocoa, hogs and sugar. The Standard & Poor’s 500 Index has dropped 41 percent in 2008.

Gold may finish the year around $850, Societe Generale said in a report on Dec. 19. The metal faces selling around $915 and support around $800, the bank said.