By Claudia Carpenter July 24 (Bloomberg) -- Gold, little changed today in New York and London, may rise on speculation a drop in the dollar will spur demand for the metal as an alternative investment. Bullion for immediate delivery has added 1.5 percent this week, heading for a second weekly climb, as the dollar has dropped against the euro. The metal surged to an 11-month high in February as investors sought to protect their wealth during the worst global recession since World War II. The U.S. currency declined as much as 0.8 percent against the euro today. “Short-term drivers such as the dollar, oil and inflation expectations are becoming more important again,” said Suki Cooper, an analyst at Barclays Capital in London. “Currency movements are becoming key.” Gold futures for August delivery slipped $2.80, or 0.3 percent, to $952 an ounce by 8:39 a.m. on the New York Mercantile Exchange’s Comex division, rebounding from a slide of as much as 0.9 percent. Immediate-delivery gold added $2.88, or 0.3 percent, to $952.03 an ounce in London. Investment demand for gold exceeded usage by jewelers in the first quarter for the first time since at least 2004, according to the World Gold Council. In India, the world’s largest gold buyer last year, jewelry purchases were the lowest in at least 20 years and Chinese demand was six times that of India, the council said in May. China to Pass India? “There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. The displacement may take closer to five years, John Reade, an analyst at UBS AG in London, said in an e-mailed report today. The dollar’s negative correlation to gold has increased to about 0.8 in the past month and has been above 0.5 over the past three months, Cooper said. A reading of 1 would indicate the two always move in lockstep. Bullion and the greenback tend to move inversely. “Our expectations are for the dollar to strengthen over the next month,” Cooper said. Investors sold a net 9 metric tons of gold out of 15 exchange-traded funds tracked by Barclays Capital this month, heading for the biggest monthly outflow since August, Cooper said. That’s left the market more influenced by speculative traders, and “in the short term, we could see a bit more volatility” as a result, she said. ETF Holdings Investment in ETF Securities Ltd.’s exchange-traded gold products fell 0.1 percent to about 7.5 million ounces, the second consecutive decline and the lowest since May 28, according to figures from the company’s Web site. Gold was little changed at $949.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from yesterday’s afternoon fixing of $950. Platinum was fixed at $1,180 an ounce, compared with $1,176 yesterday afternoon. Platinum for immediate delivery rose 0.5 percent to $1,184.50 an ounce, palladium gained 0.1 percent to $258.80 an ounce and silver added 0.6 percent to $13.80 an ounce. To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

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