By Nicholas Larkin and Glenys Sim Nov. 4 (Bloomberg) -- Gold climbed to a record in London and New York on a weaker dollar that boosted the metal’s appeal as an alternative investment and on speculation that central banks may buy more bullion. The Dollar Index slipped as much as 0.4 percent. India’s central bank purchased 200 metric tons of gold from the International Monetary Fund last month, raising speculation that more governments will follow suit as the dollar slides. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose by the most in almost a month yesterday. The Indian purchase “could give rise to further diversification into gold in coming sessions as investors shy away from the dollar and fiat currencies and turn toward physically backed assets,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note. Gold for immediate delivery climbed as much as $8.70, or 0.8 percent, to $1,093.10 an ounce in London and was at $1,091.28 by 9:18 a.m. local time. The metal surged 2.4 percent yesterday. December gold futures were at $1,092.30 an ounce on the New York Mercantile Exchange’s Comex division after climbing as high as $1,093.70. “Everything is pointing to the price of gold going higher,” Mike Sander, an investment adviser at Seattle-based Sander Capital Advisors, wrote in an e-mailed report. He pointed to “a whopping budget deficit continuing to balloon, a Federal Reserve in no place of raising rates, and central banks all over the world diversifying away from the dollar.” ‘Psychological Impact’ Gold has risen 24 percent this year in London as the Dollar Index, which measures the greenback’s performance against the euro and five other currencies, dropped 6.4 percent. “India’s purchase had a psychological impact on investors,” said Ellison Chu, Hong Kong-based manager of precious metals at Standard Bank Asia Ltd. “They think other central banks will also buy gold for their reserves.” India now holds 557.7 tons of gold, the 10th-largest stockpile by country and behind Russia’s 568.4 tons, according to the producer-funded World Gold Council. The IMF agreed in September to sell 403.3 tons of metal to shore up its finances and lend at reduced rates to low-income countries. “Gold will probably hang on to these high levels,” said Chu. “We’re seeing good seasonal demand ahead of Christmas and the Chinese New Year.” Holdings in the SPDR Gold Trust increased 4.88 tons, the most in almost a month, to 1,108.4 tons yesterday, its Web site showed. The fund’s holdings reached a record 1,134 tons on June 1. Gold held in ETF Securities Ltd.’s exchange-traded products slipped 0.6 percent to 7.948 million ounces yesterday, its Web site showed. Among other precious metals for immediate delivery in London, silver gained 0.5 percent to $17.30 an ounce. Platinum added 0.2 percent to $1,361.25 an ounce, while palladium rose 1.2 percent to $330.50 an ounce. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

Source