By Pham-Duy Nguyen Dec. 2 (Bloomberg) -- Gold rose, rebounding from the biggest decline in eight months, as the dollar dropped, boosting the appeal of the precious metal as an alternative investment. Silver also gained. The dollar fell as much as 0.5 percent against a weighted basket of six major currencies. Gold and other metals often move in the opposite direction of the U.S. currency. Gold is headed for an annual decline after seven straight yearly gains, while the dollar is poised for the first advance in three years. “Gold is seeing a bit of a bounce because the dollar is weaker,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Gold looks good to keep going higher as long as we don’t have the panic selling we saw yesterday.” Gold futures for February delivery rose $4.70, or 0.6 percent, to $781.50 an ounce at 11:10 a.m. on the Comex division of the New York Mercantile Exchange. The metal tumbled 5.2 percent yesterday, the most since March. Silver futures for March delivery climbed 27 cents, or 2.9 percent, to $9.65 an ounce. The dollar fell on speculation that central banks will cut borrowing costs to spur economic growth. Federal Reserve Chairman Ben S. Bernanke said yesterday he may use less conventional policies, such as buying Treasury securities, to revive the economy. The Fed’s benchmark interest rate is 1 percent. Borrowing Costs Central bankers will lower rates this week by 1.5 percentage points to 5 percent in New Zealand, 1 percentage point to 2 percent in the U.K. and a half-percentage point to 2.75 percent in the euro region, according to the median forecast of analysts surveyed by Bloomberg. The dollar rose 9.6 percent in the third quarter against the basket of currencies, while gold fell 5.1 percent. “The dollar has been strong over the past quarter as capital is repatriated back to the U.S.,” analysts at UBS AG said in a report yesterday. “As risk perceptions ease, we could expect to see a deceleration of capital moving into Treasuries. This could put renewed pressure on the dollar and result in higher commodity prices.” Still, a global recession may damp demand for all raw materials, and some investors will be forced to sell precious metals to raise cash and cover losses in other markets, some analysts said. “All commodities in general are moving together,” Zeman of LaSalle Futures said. “A lot of people hear the word ‘recession’ and get spooked and just want to be in cash.” On Nov. 21, the Reuters/Jefferies CRB Index of 19 raw materials touched the lowest level since April 2003. Before today, gold dropped 7.3 percent in 2008. “The price remains weak,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. “New and lower lows lie ahead.” To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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