By Nicholas Larkin and Kim Kyoungwha Feb. 23 (Bloomberg) -- Gold, little changed in New York today, may decline for a second day as a rebounding dollar curbs demand for the metal as an alternative investment. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, added as much as 0.4 percent, erasing a drop. Gold typically moves inversely to the U.S. currency. Last week’s increase in the Federal Reserve’s discount rate wasn’t intended to drive up borrowing costs, Fed Chairman Ben S. Bernanke may tell Congress tomorrow. “The gold price weakness is mainly induced by the U.S. dollar strength,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Gold is retesting the support level at $1,110 an ounce.” Gold futures for April delivery fell $1.60, or 0.1 percent, to $1,111.50 an ounce at 8:38 a.m. on the New York Mercantile Exchange’s Comex unit, rebounding from a drop of as much as 0.6 percent. The metal reached $1,131.50 yesterday, the highest price since Jan. 20. Gold for immediate delivery in London was 0.3 percent lower at $1,111.35. The metal slipped to $1,112 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,115.25 at yesterday’s afternoon fixing. Target Rate The dollar gained today as the Ifo institute in Munich said German business confidence unexpectedly fell for the first time in 11 months in February. Bernanke is likely to reassure U.S. lawmakers that the target rate for federal funds will remain in the range of zero to 0.25 percent. “Markets are likely to remain in limbo ahead of Bernanke’s testimony, as investors are nervous of further fiscal tightening following last week’s hike in the discount rate,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. The Fed last week raised its discount rate to 0.75 percent from 0.50 percent, the first increase since June 2006. The U.S. economy still needs low interest rates to gain strength, Fed Bank of San Francisco President Janet Yellen said yesterday. Gold may slip below $1,000 an ounce in March, historically the “worst month of the year,” because of slowing jewelry demand and likely interest-rate increases, according to Credit Suisse Group AG. Monthly spot price data since 2000 show the metal dropped 70 percent of the time in March. Gold has posted gains in 58 percent of the months over the last decade, data compiled by Bloomberg show. November was the best month to buy, with increases at 80 percent. Silver for May delivery in New York lost 0.3 percent to $16.20 an ounce. Platinum for April delivery added 0.1 percent to $1,533.40 an ounce. Palladium for June delivery was little changed at $444 an ounce. --Editors: John Deane, Stuart Wallace. To contact the reporters on this story: Nicholas Larkin in London at +44-20-7673-2069 or nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at +65-6212-1895 or kkim19@bloomberg.net. To contact the editor responsible for this story: Stuart Wallace at +44-20-7673-2388 or swallace6@bloomberg.net.

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