By Nicholas Larkin and Kim Kyoungwha Feb. 19 (Bloomberg) -- Gold, little changed in London today, may fall after the dollar strengthened on an increase in the Federal Reserve’s discount rate, curbing the metal’s appeal as an alternative investment. The dollar climbed to a nine-month high against the euro after the Fed raised the rate it charges banks for direct loans for the first time in more than three years. Gold, which is heading for a second weekly gain, typically moves inversely to the U.S. currency. The rate increase “is sending the dollar firmer, and that’s not favorable for precious metals,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. “Pressure still remains on gold.” Gold for immediate delivery fell as much as $9.29, or 0.8 percent, to $1,099.41 an ounce and was at $1,107.30 at 10:14 a.m. local time. The metal is up 1.3 percent this week. Bullion for April delivery was 1 percent lower at $1,107.50 on the New York Mercantile Exchange’s Comex unit. The Fed, taking another step to withdraw from the unprecedented measures it used to halt the financial crisis, increased its discount rate to 0.75 percent from 0.50 percent. No Policy Change Fed Bank of St. Louis President James Bullard said the financial markets’ view that borrowing costs will increase later this year is “overblown.” Atlanta Fed President Dennis Lockhart said yesterday’s decision to raise the discount rate doesn’t signal a tightening of policy. Bullion was little changed yesterday after dropping 1.1 percent on Feb. 17 as the International Monetary Fund said it would extend sales of some of its gold reserves to the open market. The IMF sold 212 metric tons to central banks last year in private deals. “Future sales will have limited impact” on prices because the IMF has said it will avoid disrupting the market and sales will be phased over time, Standard Chartered Plc analysts including David Barclay wrote today in a report. Ten out of 20 traders, investors and analysts surveyed by Bloomberg said that bullion would drop next week. Five forecast higher prices and five were neutral. Silver for immediate delivery in London added 0.5 percent to $15.925 an ounce. Platinum dropped 0.9 percent to $1,504 an ounce and palladium declined 1.3 percent to $426.50 an ounce. --With assistance from Yasuhiko Seki in Tokyo and Ron Harui in Singapore. Editors: Dan Weeks, Claudia Carpenter. To contact the reporters on this story: Kyoungwha Kim in Singapore at +65-6212-1895 or Kkim19@bloomberg.net; Nicholas Larkin in London at +44-20-7673-2069 or nlarkin1@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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