Gold Rises as Euro Holds Gains Versus Dollar After Fed Decision

By Feiwen Rong

June 26 (Bloomberg) -- Gold rose in Asia as the euro traded near the highest against the dollar in more than two weeks, boosting the appeal of the precious metal as an alternative asset.

The dollar fell yesterday after the Federal Reserve gave no indication it will start reversing the most aggressive series of interest-rate cuts in two decades. Gold has gained 6.5 percent this year while the dollar has fallen 6.9 percent versus the euro.

``Gold could firm on a stronger euro,'' Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report yesterday.

Bullion for immediate delivery was up 0.2 percent to $887.74 an ounce at 10:32 a.m. in Singapore. Silver was little changed at $16.79 an ounce at the same time.

``A choppy to weak oil price will hold back stronger gains,'' Pervan said. Crude oil in New York was little changed at $134.47 a barrel at 10:21 a.m. in Singapore. It fell yesterday on unexpected rise in the U.S. inventories which gained for the first time in six weeks because record fuel prices cut demand.

The dollar traded at $1.5666 against the euro at 10:33 a.m. in Singapore, after falling to $1.5686 yesterday, the weakest since June 9.

European Central Bank President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again after July to contain accelerating inflation.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net