Gold Rises as Dollar's Drop Spurs Demand; Platinum Extends Gain

By Claudia Carpenter

Aug. 28 (Bloomberg) -- Gold rose in London as the dollar's decline may increase demand for the precious metal as an alternative investment. Platinum climbed for a second day.

Gold may climb to $900 in three months, about 8 percent higher than today's price, as the dollar ``appears to have topped out for now,'' UBS AG said in a report today. European customers of Hanau, Germany-based Heraeus Holding GmbH are waiting as long as two weeks for deliveries of small bars.

``People are searching for an investment that is a long-term store of value,'' said Ben Davies, who helps manage the Hinde Gold Fund in London. Gold ``supply is not readily available at these prices.''

Gold for immediate delivery rose $7.90, or 1 percent, to $834.80 an ounce as of 8:38 a.m. in London. Prices have climbed 1.6 percent in three days.

Silver for immediate delivery increased 24.5 cents, or 1.8 percent, to $13.74 an ounce and platinum gained $3 to $1,446.50 an ounce. Palladium fell 75 cents to $291.25.

The dollar fell as much as 0.5 percent against the euro today on speculation higher interest rates in Europe will draw investment from the U.S. currency. Last week, the dollar fell 0.7 percent against the euro, the first weekly decline in six weeks. Gold rose 4.5 percent last week, the most in six months.

Demand was ``unprecedented'' by jewelers and other so-called physical buyers of the actual metal in the past three weeks, in areas including Europe and Asia, including India, UBS said. India is the world's largest buyer of gold.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net