Gold, little changed in London, may rise as a renewed decline by the dollar boosts demand for the precious metal as an alternative investment. Silver gained. The dollar extended last week’s drop, the biggest since 1985, before U.S. Treasury Secretary Timothy Geithner announces details today of plans to expand the $700 billion rescue of the country’s financial system. The precious metal gained 2.4 percent last week as the Dollar Index, which tracks the currency against six other monies, lost 4.1 percent. “There’s a lot of pressure on the dollar, and that affects gold positively,” Bernard Sin, currency and metals trading chief at Swiss refiner MKS Finance SA, said today by telephone from Geneva. “We will start to see more correlation with the dollar” as central banks inject cash into economies through so- called quantitative easing, he said. Gold for immediate delivery fell 92 cents, or 0.1 percent, to $951.28 an ounce at 9:57 a.m. local time, erasing a gain of as much as 0.7 percent. April futures dropped 0.5 percent to $951.70 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division. Bullion may reach $1,000 by the end of the quarter, Sin said. Gold may advance for a second week as a slumping dollar boosts demand for bullion, according to 21 of 28 traders, investors and analysts surveyed from Tokyo to Chicago last week. Five respondents advised selling and two were neutral. Inverse Relationship The dollar index dropped as much as 1.1 percent today after climbing for the first time in nine sessions on March 20. For most of this year, gold and the U.S. currency have abandoned their traditional inverse relationship as investors bought both to hedge against turmoil in financial markets. Some analysts expect the correlation to resume after the Federal Reserve pledged last week to buy as much as $1.15 trillion of assets in an effort to revive the world’s biggest economy. Holdings of gold in exchange-traded funds have climbed to records this year as investors buy the metal to protect their wealth. Assets in the SPDR Gold Trust, the biggest ETF backed by bullion, expanded 1 percent to a record 1,114.6 metric tons on March 20, according to figures on the company’s Web site. Among other metals for immediate delivery in London, silver rose 0.6 percent to $13.83 an ounce. Platinum advanced 0.5 percent to $1,120.25 an ounce, and palladium added 1 percent to $209 an ounce.

Source