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Updated Tuesday, February 2, 2010 11:39 am TWN, Bloomberg

Gold may rise for first time in week as dollar spurs demand

LONDON -- Gold, little changed in London Monday, may rise for the first time in a week as a pause in the dollar's rally spurs demand for the metal as an alternative investment.

The dollar lost as much as 0.4 percent against the euro after earlier gaining to a six-month high. Gold, which typically moves inversely to the greenback, fell 1.1 percent last week, a third consecutive decline, as the dollar climbed 2 percent.

“The U.S. currency is the key at the moment,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said Monday in a report. Still, “clear evidence of renewed and persistent physical buying” is needed for prices to rally, he said.

Gold for immediate delivery added US$2.10, or 0.2 percent, to US$1,082.95 an ounce at 9:46 a.m. local time. Prices declined 1.5 percent last month. Bullion for April delivery was 30 cents lower at US$1,083.50 on the New York Mercantile Exchange's Comex unit.

Among other precious metals for immediate delivery in London, silver added 0.7 percent to US$16.3125 an ounce. Platinum rose 1 percent to US$1,520 an ounce and palladium was 0.5 percent higher at US$419.50 an ounce.

The metal advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, helping to send the U.S. Dollar Index, a six-currency gauge of the greenback's strength, down 4.2 percent. The metal, which reached a record US$1,226.56 an ounce on Dec. 3, declined for a second month in January as the dollar index rallied 2.1 percent.

The index advanced for a fourth day on Jan. 29 as government figures showed that the U.S. economy expanded by 5.7 percent in the fourth quarter, the fastest pace in six years.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for an eighth day at 1,111.92 metric tons on Jan. 29, according to the company's Web site.

Still, gold prices near the lowest level in three months may help attract some buyers.

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