By Nicholas Larkin and Pham-Duy Nguyen Nov. 5 (Bloomberg) -- Gold gained for a fourth day in New York on concern that a weaker dollar will boost the metal’s appeal as an alternative investment and that central banks may buy more bullion. Bullion futures, up 23 percent this year, rose to a record $1,098.50 an ounce yesterday after the Federal Reserve pledged to keep interest rates low for an “extended period,” weakening the dollar. The dollar lost 0.2 percent against the euro today. Gold also climbed this week as the Reserve Bank of India said it bought 200 metric tons from the International Monetary Fund. “The U.S. can’t afford to raise rates,” said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago. “That will weaken the dollar, and gold absolutely benefits from this scenario.” December gold futures climbed as much as $7.90, or 0.7 percent, to $1,095.20 an ounce on the New York Mercantile Exchange’s Comex division and were at $1,090.90 by 8:52 a.m. local time. Immediate-delivery bullion was little changed at $1,090.78 in London. The metal slipped to $1,088 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,090 at yesterday’s afternoon fixing. “I don’t see a substantial rebound in the dollar,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “Gold will still have a chance to move higher.” Ninth Full-Year Gain The precious metal is set for a ninth annual gain as the Dollar Index, which measures the greenback’s performance against the euro and five other currencies, has fallen 7 percent. The measure slipped 1 percent yesterday after the Fed kept the target rate for overnight bank lending at zero to 0.25 percent. The European Central Bank and the Bank of England today kept interest rates unchanged. Britain’s central bank raised the amount of bonds it will buy to 200 billion pounds ($332 billion), the smallest increase since the program began in March. That was less than the median forecast of 225 billion pounds in a Bloomberg News survey of 48 economists. The ECB will withdraw emergency liquidity measures introduced to fight the financial crisis in a “timely and gradual fashion,” President Jean-Claude Trichet said at a press conference in Frankfurt. “Gold’s support level is at $980 per ounce,” said Aaron Smith, managing director of Superfund Financial Singapore Pte. “However, any dips in prices will incite buying activity.” $2,000 an Ounce? Smith forecast last month that gold would rise to $2,000 an ounce in the next three years, citing “massive” inflation. The Indian central bank’s purchase from the IMF was made last month at an average price of $1,045 an ounce, and the $6.7 billion acquisition increased its holdings to about 557.7 tons. The IMF agreed in September to sell 403.3 tons to shore up its finances and provide more low-interest loans. “Despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves,” Eugen Weinberg, a senior analyst with Commerzbank AG, wrote in a note. “Investors who had previously given gold the cold shoulder are now returning to the market on the news of India’s gold purchase.” Prices may climb as high as $1,300 an ounce should inflation concerns increase in the next year, Weinberg said in a Bloomberg Television interview today. “At $1,100, gold is definitely not in a bubble yet,” he said. SPDR Holdings Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, were unchanged at 1,108.4 metric tons yesterday, its Web site showed. Assets increased the previous day by the most in almost a month. Gold held in ETF Securities Ltd.’s exchange-traded products slipped 1.4 percent to 7.838 million ounces yesterday, its Web site showed. Silver for December delivery in New York gained 0.6 percent to $17.50 an ounce. Platinum for January delivery was little changed at $1,369.10 an ounce, while palladium for December delivery was 0.8 percent higher at $331.30 an ounce. ETF Securities’ silver holdings added 0.1 percent to a record 21.438 million ounces yesterday, while palladium assets increased 0.1 percent to a record 580,762 ounces, its Web site showed. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

Source