December 28, 2010, 10:59 AM EST

By Pham-Duy Nguyen

Dec. 28 (Bloomberg) -- Gold rose the most in a month after the dollar’s retreat boosted demand for the precious metal as an alternative investment. Silver also gained.

The dollar fell for a fourth consecutive day against a basket of six major currencies on speculation that the Federal Reserve will keep interest rates near zero percent to help bolster the economy. Before today, gold gained 26 percent this year, touching a record $1,432.50 an ounce on Dec. 7.

“A weaker dollar is driving demand for gold,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Investment demand for hard assets is going to continue to go up.”

Gold futures for February delivery gained $20.90, or 1.5 percent, to $1,403.80 at 10:29 a.m. on the Comex in New York. A close at that price would be the biggest gain for a most-active contract since Nov. 23.

Gold is headed for the 10th straight annual gain as governments keep borrowing costs low to revive their economies. The metal, priced in British pounds, touched a record today. Gold priced in euros reached an all-time high on Dec. 7 on speculation that Europe’s sovereign-debt crisis will spread.

Bullish Advice

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, advised clients to buy gold priced in dollars. He had advocated selling euros and other currencies to buy gold this past year.

“We’ve been well-served being long of gold in non-U.S. dollar terms, and that shall remain our largest exposure, but it is time to gain exposure to gold in dollar terms,” Gartman said in his newsletter today.

The dollar remained lower after a report showed U.S. property values declined more than forecast in October and consumer confidence unexpectedly fell in December. The Fed has kept the benchmark lending rate at zero percent to 0.25 percent for two years.

Silver futures for March delivery rose 56.5 cents, or 1.9 percent, to $29.82 an ounce on the Comex. The metal for immediate delivery may jump to as high as $40 next year, leading gains in the 15 commodities covered in a Bloomberg survey of more than 100 analysts, traders and investors.

Before today, silver advanced 74 percent in 2010.

Palladium futures for March delivery gained $11.90, or 1.6 percent, to $779 an ounce on the New York Mercantile Exchange. Earlier, the metal reached $785.80, the highest since April 2001. The price was up 88 percent this year before today.

Platinum futures for April delivery rose $14.40, or 0.8 percent, to $1,755.40 an ounce. Before today, the price gained 18 percent this year.

Both metals are used for jewelry and pollution-control devices in vehicles.

--Editors: Daniel Enoch, Patrick McKiernan.

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

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

Source:http://www.businessweek.com/news/2010-12-28/gold-rises-most-in-a-month-as-dollar-s-drop-boosts-demand.html