By Nicholas Larkin and Kim Kyoungwha Feb. 8 (Bloomberg) -- Gold gained for a second day in London as a halt in the dollar’s rally increased demand for the metal as an alternative investment. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell after last week climbing to the highest level in almost seven months. Gold, which usually moves inversely to the dollar, slid to a three-month low of $1,044.85 an ounce on Jan. 5. Equities climbed, reducing the chance that investors might have to sell bullion to cover losses. “The dollar is down and stock markets have recovered,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. Gold for immediate delivery gained $6.40, or 0.6 percent, to $1,072.70 an ounce at 9:30 a.m. local time. Prices declined 1.4 percent last week, a fourth consecutive drop. Bullion for April delivery was 1.9 percent higher at $1,073.20 on the New York Mercantile Exchange’s Comex unit. Spot gold’s relative strength index, a gauge of whether a commodity or security is overbought or oversold, plunged to 36.09 from 49.5 on Feb. 4 as bullion fell the most in 14 months. The gauge approached the level of 30 that some investors and analysts who scrutinize technical charts view as a signal of an impending climb. “From a technical perspective, gold was heavily oversold,” Fertig said. Budget Deficits The dollar index lost as much as 0.4 percent today. It posted a third straight weekly gain last week as the euro fell on concern that nations such as Greece may struggle to close budget shortfalls. European finance ministers said at the weekend they will help ensure that Greece tackles its deficit. “While gold’s longer-term investment credentials remain sound, the metal is temporarily caught up in the slipstream of uncertainty currently being generated,” said Gavin Wendt, a senior resource analyst with Mine Life Pty Ltd. in Sydney. Eight of 16 traders, investors and analysts surveyed by Bloomberg said bullion would fall this week. Six forecast higher prices and two were neutral. The metal should trade at $1,000 to $1,200 an ounce this year and may advance as high as $1,500 after that, Mark Bristow, chief executive officer of Randgold Resources Ltd., said today in a television interview. Fourth-quarter profit more than tripled on surging gold prices, the company said today. Metal holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 1.83 metric tons to 1,106.38 tons on Feb. 5, according to figures on the company’s Web site. Gold in ETF Securities Ltd.’s European and Australian exchange-traded products rose 1.2 percent to 7.803 million ounces on Feb. 5, its Web site showed. Silver for immediate delivery in London rose 0.7 percent to $15.2725 an ounce. Platinum gained 0.6 percent to $1,492 an ounce and palladium added 0.7 percent to $407.13 an ounce. To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

Source