Aug. 9 (Bloomberg) -- Gold may climb in London on increased demand for a protector of wealth as the dollar weakens and on speculation that the Federal Reserve will step up buying of bonds to prop up the U.S. economy. The dollar traded near a three-month low against the euro amid speculation that the Fed may announce more bond purchases at its meeting tomorrow. Gold usually moves inversely to the greenback. U.S. nonfarm payrolls fell by 131,000 positions last month, more than economists had expected, a report showed on Aug. 6. “Friday’s payrolls and a lack of ammunition by the government may push the Fed closer toward” buying securities, said Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago. “Purchases would be positive for gold prices, as traders would assume that they will eventually have to be monetized and thus become inflationary. Gold may benefit from both low interest rates and safe-haven demand.” Immediate-delivery bullion added $3, or 0.2 percent, to $1,208.40 an ounce at 9:29 a.m. in London. Prices gained 2.1 percent last week, the first weekly climb since the five days ended June 18. The metal for December delivery was 0.4 percent higher at $1,210.60 on the Comex in New York. Futures are up for a ninth day, the longest rally since November. The Fed resorted to direct bond purchases, also known as quantitative easing, as part of its response to the world financial crisis. The central bank in March ended its emergency purchases of $1.425 trillion of housing debt after completing purchases of $300 billion in Treasury securities in October. Its benchmark interest rate is at a record low. Chinese Exports Goldman Sachs Group Inc. cut its growth outlook for the U.S. and Japan, and economists said a report tomorrow will show China’s exports rose at a slower pace. Bullion may remain supported by a weaker dollar, Hussein Allidina, New York-based head of commodity research with Morgan Stanley, wrote in an Aug. 8 report. The U.S. currency has dropped 9.9 percent against the euro in the past two months. Gold reached a record $1,265.30 an ounce on June 21. Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at 1,282.75 metric tons on Aug. 6, according to the company’s website. Holdings have been little changed since dropping 18.55 tons on July 28, the most in more than two years. Silver for immediate delivery in London added 0.3 percent to $18.515 an ounce. Platinum lost 0.8 percent to $1,561.93 an ounce. Palladium fell 0.4 percent to $489.83 an ounce. --With assistance from Sungwoo Park in Seoul and Jae Hur in Tokyo. Editors: Dan Weeks, Claudia Carpenter. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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