By Nicholas Larkin and Kim Kyoungwha Oct. 20 (Bloomberg) -- Gold gained for a third day in New York as a weaker dollar fueled demand for the metal as an alternative investment. Platinum and palladium reached the highest prices in more than a year. The U.S. Dollar Index slid as much as 0.5 percent to a 14- month low. Hedge funds and other large speculators hold their most-bullish position ever in futures, helping to propel gold 21 percent higher this year as a weaker dollar and rising government debt spur concern that inflation may accelerate. Gold futures touched an all-time high of $1,072 an ounce on Oct. 14. “The dollar is weaker against other currencies,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “It’s still the dollar which is the main driver for gold.” December gold futures rose $7.50, or 0.7 percent, to $1,065.60 an ounce on the New York Mercantile Exchange’s Comex division by 6:50 a.m. local time. Immediate-delivery bullion added 0.1 percent to $1,065.15 in London. The metal climbed to $1,064 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,050.50 at yesterday’s afternoon fixing. Spot prices are heading for a ninth consecutive annual increase, the best performance since at least 1948. Oil Prices Gold typically moves inversely to the dollar, which has slipped 7.5 percent against a basket of six currencies this year. Oil futures, used by some investors as an inflation guide, climbed above $80 a barrel to a one-year high in New York. They were last down 0.5 percent at $79.23. “There are long positions building up,” said Darren Heathcote, head of trading at Investec Bank Ltd. in Sydney. “There’s a pretty good reason for it, as we continue to see the dollar weaken daily. The market is becoming more comfortable with diversification, and more people are looking to get gold.” So-called net-long positions, or bets prices will rise, increased 6 percent to 253,955 contracts in the week ended Oct. 13, according to data from the Commodity Futures Trading Commission. Hedge-fund manager David Einhorn, who runs New York-based Greenlight Capital Inc., said he’s buying gold to bet against the dollar and inflation. Buying bullion is better than investing in the metal through exchange-traded funds, he said. SPDR Holdings “Gold should do very well if there is a sovereign debt default or a currency crisis,” Einhorn said yesterday at a conference in New York. “Picking currencies is like choosing my favorite dental procedure.” Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for an eighth day at 1,109.31 metric tons yesterday, according to the company’s Web site. The fund’s holdings reached an all-time high of 1,134 tons on June 1. “Physical demand will remain relatively weak, with post- Diwali demand from India subdued at these prices,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. “The downside is limited as long as the greenback remains vulnerable.” The recent rally to a record may prompt some investors to make sales, according to Commerzbank AG. “While many speculators had rushed to jump onto the bandwagon, an expanding minority of short-term-oriented investors is betting on falling gold prices,” senior analyst Eugen Weinberg wrote in a note. Among other precious metals for immediate delivery in London, silver lost 0.5 percent to $17.745 an ounce. Platinum rose as much as 1 percent to $1,371 an ounce, the highest price since September 2008, and last traded at $1,366. Palladium gained as much as 1.1 percent to $337.25 an ounce, the highest price since August last year, and was last at $335. It’s the best-performing precious metal this year, adding 79 percent.

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