Gold gained for the first time in five days in London after a fall to an almost three-month low and a weakening dollar spurred physical purchases and investment. Bullion yesterday tumbled to $1,322.75, the lowest price since Oct. 27, as holdings in exchange-traded products plunged by the most since October 2008. The dollar was little changed at a nine-week low against the euro as President Barack Obama called for a freeze on non-security discretionary spending. The metal typically moves inversely to the U.S. currency. “Gold hitting a three-month low makes it a bit attractive for bargain hunters, especially Asian jewelry buyers,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “The weakness in the U.S. dollar is also supporting gold.” Immediate-delivery bullion added $3.85, or 0.3 percent, to $1,336.18 an ounce at 12:03 p.m. in London. It reached a record $1,431.25 on Dec. 7. The metal for February delivery was 0.2 percent higher at $1,335.30 on the Comex in New York. Bullion gained to $1,335.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,324 at yesterday’s afternoon fixing. Gold jumped 30 percent last year after governments spent trillions of dollars and kept interest rates low to bolster economies. Europe’s sovereign-debt crisis also boosted the metal’s allure. The Federal Reserve, which is pumping $600 billion into the economy to spur the recovery through asset purchases, will keep interest rates unchanged at the end of its meeting today, according to economists in a Bloomberg survey. Gold to Get ‘Boost’ “The Fed will likely stick with the current easing policy since it takes time for the U.S. economy to recover, given the high unemployment rate and falling house prices,” said Park Jong Beom, a trader at Tong Yang Futures Trading Co. in Seoul. “That means the dollar will remain bearish. Although many investors may stay wary during the Fed meeting, it’s likely that gold will get a boost after the meeting is over.” Gold has dropped this month amid signs the global economic recovery is gaining traction. Assets in gold-backed ETPs dropped 31.02 metric tons, or 1.5 percent, to 2,043.09 tons yesterday, the lowest level since Aug. 10, according to data compiled by Bloomberg from 10 providers. That was the biggest decline since October 2008 in percentage terms. Holdings reached a record 2,114.6 tons on Dec. 20. Sovereign-Debt Concern Gold will benefit from concern about sovereign debts in Europe, said Nick Brooks, head of research at ETF Securities Ltd. “Those sovereign-risk issues are going to come back, most likely,” Brooks said today on a conference call. “Debt levels are continuing to rise. If you look at credit-default spreads, they’re all at extremely elevated levels. That sends signals that growth isn’t on as firm a footing as people think.” Gold may fall “modestly” below $1,300 an ounce over the next quarter before gains resume, Deutsche Bank AG said in a report. Prices may rise for the next two years at least, climbing to $2,000 an ounce, analyst Daniel Brebner said in the report e-mailed today. Silver for immediate delivery in London rose 1 percent to $27.1125 an ounce after yesterday dropping to $26.565, the lowest price since Nov. 29. The metal is down 12 percent this month after jumping 83 percent in 2010. Palladium gained 2.1 percent to $798 an ounce after yesterday slipping 3.8 percent, the most since November. Platinum was 1 percent higher at $1,804.75 an ounce. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Sungwoo Park in Seoul at spark47@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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