By Nicholas Larkin and Kim Kyoungwha Feb. 1 (Bloomberg) -- Gold gained in New York and London as a pause in the dollar’s rally may spur demand for the metal as an alternative investment. The dollar lost as much as 0.4 percent against the euro after earlier gaining to a six-month high. Gold futures, which typically move inversely to the greenback, fell 0.5 percent last week, a third consecutive drop, as the dollar climbed 2 percent. “The U.S. currency is the key at the moment,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in a report. Still, “clear evidence of renewed and persistent physical buying” is needed for prices to rally, he said. Gold futures for April delivery added $5.40, or 0.5 percent, to $1,089.20 an ounce on the New York Mercantile Exchange’s Comex unit at 8:16 a.m. local time. Prices declined 1.1 percent last month. Gold for immediate delivery in London was 0.8 percent higher at $1,088.98. The metal increased to $1,082 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,078.50 at the afternoon fixing on Jan. 29. Spot prices slipped to a 12-week low of $1,073.85 on Jan. 28. Gold advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, helping to send the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, down 4.2 percent. Futures, which reached a record $1,227.50 an ounce on Dec. 3, declined for a second month in January as the dollar index rallied 2.1 percent. U.S. Economy The index advanced for a fourth day on Jan. 29 as government figures showed that the U.S. economy expanded by 5.7 percent in the fourth quarter, the fastest pace in six years. “The dollar’s sustained rally is spooking sentiment for gold,” said Hwang Il Doo, a senior trader at KEB Futures Co. in Seoul. “Signs of an improving U.S. economy are raising speculation that an interest-rate hike could come earlier than anticipated.” Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for an eighth day at 1,111.92 metric tons on Jan. 29, according to the company’s Web site. Still, gold prices near the lowest level in three months may help attract some buyers. “We’re seeing some bargain-hunters active as physical buyers, and that’s supportive,” said Kate Harada, a trader at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo. “The dollar index is still the key.” Silver for March delivery in New York added 1.4 percent to $16.42. Platinum for April delivery gained 1.2 percent to $1,524 an ounce and palladium for March delivery rose 2.8 percent to $424.05 an ounce. ETF Securities Ltd.’s platinum holdings in its U.S. exchange-traded product rose to 244,941 ounces on Jan. 29, according to the company’s Web site. The company’s European and Australian platinum assets declined 1.2 percent to 415,458 ounces on Jan. 29. To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

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