Gold Futures Gain on Demand for Alternative to Slumping Dollar

April 30 (Bloomberg) -- Gold in New York rose, erasing earlier losses, as the euro gained against the dollar, boosting the appeal of the precious metal as an alternative investment. The price of silver was unchanged.
Gold is sold in dollars, and five of the past six bear markets in the U.S. currency have led to a higher gold price. Gold has gained 7.1 percent this year, while the euro had risen 3.5 percent against the dollar.
``The only driver gold has today is the dollar, and sentiment on the dollar is certainly negative,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.
Gold futures for June delivery rose $1.70, or 0.3 percent, to $683.50 an ounce on the Comex division of the New York Mercantile Exchange. The price earlier fell as much as $3 to $678.80.
Consumer spending in the U.S. rose less than forecast in March, fueling speculation that the Federal Reserve will keep interest rates steady. The Fed has maintained rates at 5.25 percent since June. Higher rates tend to attract investment in the U.S. dollar.
``The trend is still against the dollar,'' said Walter Otstott, a senior broker at Dallas Commodity Co. in Dallas. ``I can't see the Fed raising rates and that would tend to weaken the dollar.''
Gold's gains were limited as some investors bet on short- term declines in the euro. The 14-day relative-strength index for the currency rose above 70 twice last week, an indication prices may be poised to fall.