By Pham-Duy Nguyen

March 23 (Bloomberg) -- Gold futures rose from a three-week low on speculation that the dollar will weaken, boosting the appeal of the precious metal as an alternative asset.

The greenback pared gains after climbing as much as 0.5 percent against a basket of six major currencies following a report showing sales of previously occupied U.S. homes fell in February for a third straight month. Gold rallied 24 percent last year as the dollar fell 4.2 percent.

“The dollar looks less attractive after the housing numbers,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “You’ve got the bargain hunters out to buy gold after the recent slide.”

Gold futures for April delivery gained $4.20, or 0.4 percent, to $1,103.70 an ounce on the Comex in New York. Yesterday, the metal touched $1,092.10, the lowest price for a most-active contract since Feb. 25.

Purchases of existing homes dropped 0.6 percent from January to a 5.02 million annual pace, the lowest rate in eight months, the National Association of Realtors said in Washington. The median price fell 1.8 percent from a year earlier.

“Loss of confidence in economic growth -- and economic policies -- is expected to rekindle investor demand for gold as the year wears on, especially if a double-dip recession develops,” Rhona O’Connell, the managing director of GFMS Analytics, said today in a report.

In 2009, gold rallied for a ninth straight year, touching an all-time high of $1,227.50 on Dec. 3 as record-low U.S. borrowing costs pushed the dollar down.

Inflation Driver

“Gold rallied to a record based on the idea that inflation is coming,” said Tom Hartmann, an AltaVest Worldwide Trading analyst in Mission Viejo, California. “Right now it’s a race between inflation and when interest rates are going to rise. Interest-rate hikes are coming, but inflation looks very tame.”

Also in New York, silver futures for May delivery rose 9.2 cents, or 0.5 percent, to $17.027 an ounce on the Comex.

Platinum futures for April delivery rose $7.20, or 0.4 percent, to $1,608.50 an ounce on the New York Mercantile Exchange. June palladium futures rose $3.95, or 0.9 percent, to $464.55 an ounce on the Nymex.

--With assistance from Shobhana Chandra in Washington. Editors: Ted Bunker, Steve Stroth.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.