Gold Rises From Two-Week Low on Dollar Drop; Silver Rallies

June 11 (Bloomberg) -- Gold rose from a two-week low in New York and London on speculation that a slide in the dollar will spur demand for the precious metal as a currency alternative. Silver also gained.

The U.S. Dollar Index, which measures the currency against six others, including the euro and yen, fell as much as 1.4 percent, after a gain in U.S. retail sales and a drop in initial jobless-benefit claims encouraged investors to buy higher- yielding assets. Some investors buy gold when the dollar drops.

“Gold is now heading back up as the U.S. dollar is losing ground against the euro,” said Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York.

Gold futures for August delivery rose $7.30, or 0.8 percent, to $962 an ounce on the New York Mercantile Exchange’s Comex division. The most-active contract erased an earlier 1.3 percent loss, rising to the highest settlement this week. Bullion for immediate delivery advanced $1.85, or 0.2 percent, to $956.35 an ounce at 8:36 p.m. in London.

“Gold has reasons to rally,” said Stephen Platt, an Archer Financial Services Inc. commodity analyst in Chicago. “The dollar is pretty risky to be in,” he said. “Chinese demand for gold seems to be better than expected.”

The metal probably will trade at “$990 in a couple of weeks,” he said.

Silver futures for July delivery increased 26.8 cents, or 1.8 percent, to $15.493 an ounce on the Comex. Silver for immediate delivery gained 20 cents, or 1.3 percent, to $15.385 an ounce in London. The most-active silver futures have surged 37 percent on Nymex this year, while gold is up 8.8 percent.

ETF Holdings

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged for a third straight day at 1,132.15 metric tons, the company’s Web site showed yesterday. The total reached a record 1,134.03 tons on June 1.

Retail sales rose in May for the first time in three months, increasing 0.5 percent, as forecast, after a 0.2 percent drop in April, the Commerce Department said in Washington.

Initial applications for unemployment insurance dropped to 601,000 last week from 625,000 in the previous week, the Labor Department reported.