By Pham-Duy Nguyen Nov. 19 (Bloomberg) -- Gold rose for the first time this week in New York on speculation that the dollar's rally will stall, boosting the appeal of the precious metal as an alternative investment. Silver and platinum declined. The dollar was little changed against a weighted basket of six major currencies after climbing 1.2 percent in the previous two sessions. Gold and other metals often move in the opposite direction of the U.S. currency. Bullion fell 18 percent last month as the U.S. Dollar Index rallied 7.8 percent. ``The buck is definitely running out of steam, so gold bulls will soon do plenty of dollar bashing,'' said Ralph Preston, an analyst at Heritage West Futures Inc. in San Diego. Gold futures for December delivery rose $3.30, or 0.5 percent, to $736 an ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery fell 24 cents, or 2.5 percent, to $9.31 an ounce on Comex. Platinum futures for January delivery slid $13.30, or 1.6 percent, to $823.70 an ounce on Nymex. Palladium for December delivery dropped $21.45, or 10 percent, to $193.85 an ounce. The dollar tumbled as much as 1.4 percent against the basket of currencies before erasing losses. Gold earlier gained as much as 4.4 percent. ``For any big move in gold, we would need the dollar to come down drastically,'' said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. The Dollar Index, which includes the euro and yen, has risen 14 percent this year. Recession Concern Gold's gains were limited on speculation that the global recession will damp demand for all commodities. ``Big losses in equity markets are going to weigh on gold and commodities across the board,'' Zeman said. Since the second quarter of 2007, banks worldwide have posted $967.4 billion in losses and writedowns related to the credit crisis. The Standard & Poor's 500 Index of equities fell 41 percent this year before today, while the Reuters/Jefferies CRB Index of 19 commodities dropped 32 percent. Investment demand fell 58 percent to 85.3 metric tons in the third quarter compared with a year earlier, the World Gold Council said today. Institutional investors sold 296.8 tons even as demand for bars, coins and exchange-traded funds gained 382.1 tons. ``People were selling gold to take a profit,'' said George Milling-Stanley, a director at the council. ``Investors were selling to meet margin calls. Hedge funds liquidated because they were facing redemptions. There was a good deal of selling out of commodity indices. That's why we saw a downturn in the price of gold even though demand grew. A lot of investors will go back into gold once they have the money to do so.'' Central Bank Sales Gold sales also have slowed from central banks, the world's largest holders. Sales plunged 87 percent to 23 tons in the third quarter, the council said. Banks covered by the Central Bank Gold Agreement sold 357 tons of gold through September this year, the lowest since 1999. That year, several central banks signed a five-year accord limiting gold sales to help stabilize the market. A second agreement, which runs to Sept. 26, permitted a quota of 500 tons a year. ``You may find that some of those central banks are done with the selling,'' Milling-Stanley said. The People's Bank of China is considering increasing its gold reserves by 4,000 tons from 600 tons, Guangzhou Daily reported, citing unidentified industry participants in Hong Kong. The move by China's central bank is designed to diversify the risk of holding massive foreign-exchange reserves, the newspaper reported today on its Web site. China surpassed Japan in September to become the biggest foreign holder of U.S. Treasuries. The country now has close to $600 billion. China is the ninth biggest holder of gold reserves among central banks. To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

Source