Gold, Silver Gain as Dollar Drop Boosts Demand; Platinum Falls

July 22 (Bloomberg) -- Gold rose for the third time in four sessions as the dollar weakened, boosting the appeal of precious metals as a store of value. Silver gained while platinum fell.

The dollar slipped as much as 0.5 percent against a basket of six major currencies as Federal Reserve Chairman Ben S. Bernanke reasserted a plan to keep benchmark U.S. lending rates at historic lows for an “extended period.” Last week, gold prices jumped 2.7 percent as the dollar slumped.

“If the dollar starts to weaken significantly again, it will send gold off to the races,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

Gold futures for August delivery advanced $6.40, or 0.7 percent, to $953.30 an ounce on the New York Mercantile Exchange’s Comex division. The most-active contract has gained 7.8 percent this year.

Bullion for immediate delivery in London rose $2.42, or 0.3 percent, to $950.92 an ounce at 7:52 p.m. local time.

“The long-term future for gold is still very bullish,” brokerage firm GoldCore Ltd. in Dublin said today by e-mail. “There is still huge uncertainty regarding the value of paper currencies in light of various countries’ monetary and fiscal policies.”

Silver for September delivery rose 22.2 cents, or 1.6 percent, to $13.70 an ounce in New York.

Bernanke Testimony

“Limited inflation pressures” will let the Fed maintain target lending rates at near zero percent, Bernanke reiterated today in Senate testimony. He repeated testimony he delivered in the House of Representatives yesterday.

“We are looking for signs of inflation expectations that would cause us to respond,” Bernanke said. He said the central bank will look for the “right moment” and pace to tighten monetary policy to restrain inflation.

“If this were to materialize, it would certainly be bearish for gold in the long run,” Andrey Kryuchenkov, a VTB Capital analyst in London, said today in a note.

The Fed cut its target for bank lending rates to zero to 0.25 percent in December while expanding credit to the economy by $1.1 trillion over the past year to mitigate the effects of the deepest recession since World War II. Some investors say that will devalue the dollar and trigger faster inflation.

Platinum futures for October delivery fell $1.30, or 0.1 percent, to $1,175.70 an ounce on the Nymex. Palladium futures for September delivery slipped $1.35, or 0.5 percent, to $256.15 an ounce.