By Nicholas Larkin and Kim Kyoungwha Dec. 3 (Bloomberg) -- Gold may rise after climbing to a record in New York for a third day as investors sought protection from a weakening dollar. The dollar fell as much as 0.6 percent against the euro on speculation the European Central Bank will announce plans to scale back emergency lending after keeping its main interest rate at a record low. Gold futures, which usually move inversely to the greenback, have added 38 percent this year as the U.S. Dollar Index has lost 8.4 percent, sparking inflation concern. “Momentum is very positive for gold,” Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich, said today by phone. “Weakness in the dollar is expected to go on until the end of the year. Gold could have a strong year-end rally.” Bullion futures for February delivery on the New York Mercantile Exchange’s Comex unit were up $2.80, or 0.2 percent, at $1,215.80 an ounce by 9:07 a.m. local time after rising as high as $1,227.50. Gold for immediate delivery in London was 0.1 percent lower at $1,214.53 an ounce after reaching a record $1,226.56. The metal rose to a record $1,218.25 an ounce in the morning “fixing” in London from $1,212.50 at yesterday’s afternoon fixing. Some mining companies use fixings to sell production. Spot prices gained 13 percent in November, the biggest monthly increase in a year. Newmont Forecast Bullion may rise as high as $1,500 within two years because of the declining dollar and renewed investment demand, Richard O’Brien, Newmont Mining Corp.’s chief executive officer, said yesterday. Standard Chartered Plc raised gold-price forecasts. “Gold is rising to records because investors want to hold it to hedge against inflation,” said Hwang Il Doo, head of the trading team at KEB Futures Co. in Seoul. “Other metals are getting a boost from rising gold.” Bullion may rise to $1,350 an ounce next year, according to O’Brien, who runs the biggest U.S. gold producer. Standard Chartered now expects gold to average $1,150 in 2010 and $1,300 in the following year. Gold may reach $1,300 an ounce next year, UBS AG said. The dollar has sunk as the Federal Reserve kept benchmark U.S. interest rates near zero since December 2008 in a bid to revive lending after the worst financial crisis since World War II. Fed officials acknowledged last month that the record-low borrowing costs might fuel “excessive” financial-market speculation and perhaps dislodge expectations for low inflation. Scrap Sales ECB President Jean-Claude Trichet is holding a press conference in Frankfurt today. Spot gold’s rally has pushed its 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, to 81.56, above the level of 70 viewed by some investors and analysts who scrutinize technical charts as signaling a drop. “One needs to be careful, as any strong rebound in the dollar would result in an even stronger selloff in gold,” Andrey Kryuchenkov, a VTB Capital analyst in London, said in a report. With prices above $1,200 an ounce, “much fewer market participants will be willing to go long, and we think scrap selling will intensify,” he said. Last month’s jump was helped by speculation that central banks may buy more bullion. Since the end of September, India, Mauritius and Sri Lanka bought more than half of the 403.3 metric tons that the International Monetary Fund plans to sell to bolster its balance sheet and boost lending. Some analysts have speculated that China might buy part or all of the rest. SPDR Holdings Hu Xiaolian, a deputy governor at the People’s Bank of China, said the price of gold is at a very high level, Apple Daily reported today. The central bank will be wary of investments in “bubble” assets, the Hong Kong newspaper cited Hu as saying at an event in Taipei. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased for a third day, adding 0.6 metric ton to 1,131.21 tons yesterday, according to the company’s Web site. The fund’s holdings reached a record 1,134 tons on June 1. Silver for March delivery in New York rose as much as 0.9 percent to $19.50 an ounce, the highest price since July 2008, and last traded down 0.5 percent at $19.235 an ounce. Platinum for January delivery lost 0.2 percent to $1,503.90 an ounce. Palladium for March delivery fell 0.1 percent to $389.50 an ounce. Silver held in ETF Securities Ltd.’s exchange-traded commodities products rose 3.2 percent to a record 23.858 million ounces yesterday, according to the company’s Web site. Palladium holdings added 0.1 percent to a record 632,847 ounces, while platinum assets increased 0.4 percent to 428,899 ounces. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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