Sept. 3 (Bloomberg) -- Gold and silver touched three-month highs as the dollar weakened, boosting demand for the precious metals as alternative investments. Gold surged 2.3 percent yesterday, the biggest gain since March 19, as equities and the dollar slid. The U.S. currency fell as much as 0.6 percent against the euro today before rebounding. Gold, up for a third day, tends to rise when the dollar drops. “The euro has picked up again,” David Barclay, a metals analyst at Standard Chartered Plc in London, said by phone. “The dollar is going to be the main driver for gold strengthening for the rest of the year.” Gold futures for December delivery advanced $9.10, or 0.9 percent, to $987.60 an ounce at 11:33 a.m. on the New York Mercantile Exchange’s Comex division, after earlier reaching $989.50, the highest price since June 3. “Gold looks poised to make a real run at the $1,000 mark,” Miguel Perez-Santalla, a Heraeus Precious Metals Management sales vice president in New York, said in a note. He said there are several reasons for gold’s gains, including rising demand in China, weaker equities and “a major hedge fund had a mandate to buy 500,000 ounces of gold.” In London, bullion for immediate delivery climbed 0.8 percent to $986.80 an ounce after touching $987.85 earlier. Spot prices last topped $1,000 on Feb. 20, and reached a record $1,032.70 in March 2008. Trending Higher “The next trending step higher is under way” in gold price, SEB AB analysts in Stockholm said today in a report. The metal may rise to $1,112 an ounce, according to the report. Silver for December delivery jumped 47.5 cents, or 3.1 percent, to $15.84 an ounce in New York, after reaching $15.855 earlier, the highest price since June 5. Silver for immediate delivery in London climbed 2.3 percent to $15.75. “Gold prices continue to surge higher as safe-haven buying pushes prices,” Suki Cooper, a Barclays Capital analyst in London, said in a report. Gold rose to $983 in the London afternoon “fixing,” the price used by some mining companies to sell their output, from $982.50 in the morning fixing. “Gold remains supported and could look to extend its gains to challenge the June high” of $990 an ounce, James Moore, an analyst at TheBullionDesk.com in London, said in a report. Before today, gold climbed 11 percent this year as the U.S. Dollar Index, a six-currency gauge of the greenback’s value, slipped 3.6 percent. The MSCI World Index of developed-country equities jumped as much as 0.7 percent today after yesterday falling to the lowest level in almost two weeks. Market Risks “Investors are still worried about a potential correction in the stock market,” London-based broker ODL Securities Ltd. wrote today in a report. The European Central Bank left interest rates at a record low 1 percent today and signaled no quick withdrawal of emergency stimulus measures. ECB President Jean-Claude Trichet, at a press conference in Frankfurt, said the euro region’s recovery will be “rather uneven.” A private report showed U.S. service industries shrank at a slower pace in August than forecast, adding to signs that an economic recovery is emerging. Yet U.S. unemployment continues to rise, and research firm Retail Metrics said sales at U.S. retailers probably dropped 3.4 percent last month at stores open at least a year, a sign of weak consumer spending. More U.S. workers filed first-time claims for jobless benefits last week than forecast, government figures show, indicating companies remain focused on curbing costs. Initial unemployment claims declined to 570,000 last week, the Labor Department said today in Washington. That topped the 564,000 median forecast of economists surveyed by Bloomberg News. ETF Record Holdings of bullion in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, increased 1.53 metric tons to 1,063.36 tons as of yesterday, data on the company’s Web site showed. Gold held in ETF Securities Ltd.’s exchange-traded commodities added 3,283 ounces to a record 7.99 million ounces yesterday, according to its Web site. “A good deal” of gold’s move higher “is technical, with models likely to be chasing the break of a recent tight range,” Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc strategist, said today in a note. “The ability of gold to continue to rise perhaps tells us that investors are far from calm about the longer-term global economic outlook and the policy response to it.” To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net.

Source