Twenty-three of 39 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on Oct. 26 and Oct. 27 advised buying gold, which rose 0.8 percent last week to $601 an ounce in New York. Seven respondents said to sell, and nine were neutral.
Gold has rebounded after a 4.7 percent drop in September that was the second-biggest monthly decline in two years, and the dollar has fallen for two consecutive weeks against the world's major currencies. U.S. economic growth slowed in the third quarter to the slowest pace since 2003 as the housing market slumped and the trade deficit widened.
``It's finally sinking in that this economy is slowing down,'' said Axel Merk, founder of Palo Alto, California-based Merk Investments LLC. ``The housing market is deteriorating sharply. Our clients are concerned that the dollar is no longer a safe asset, and that's why they flee to gold.''
Gold futures for December delivery rose $4.60 an ounce last week on the Comex division of the New York Mercantile Exchange. The gain was predicted by a majority of analysts surveyed on Oct. 19 and Oct. 20. The Bloomberg survey has forecast prices accurately in 79 of 131 weeks, or 60 percent of the time.
The appeal of bullion over the dollar has increased as the outlook for growth dimmed. The U.S. economy expanded at a 1.6 percent annual rate last quarter, the Commerce Department said on Oct. 27. The first estimate of the period's gross domestic product, the value of all goods and services produced, compares with a 2.6 percent gain in the second quarter.
Housing Slump
Residential housing construction fell at an annual rate of 17.4 percent, the biggest decline in 15 years, after shrinking at an 11.1 percent pace in the second quarter. The trade deficit widened to $639.9 billion from $624.2 billion as consumers bought more foreign-made goods.
The U.S. currency lost 1 percent last week against the euro and the yen.
``The dollar is starting to crumble, and gold has found its feet again,'' said Merk, whose fund invests in gold futures and currencies in Western Europe. The Merk Hard Currency Fund has climbed to $42 million from $10 million in March and $1 million at its May 2005 inception.
Federal Reserve policy makers kept their benchmark lending rate at 5.25 percent for a third straight month at their meeting last week and predicted a ``moderate'' pace of expansion.
``Fed officials' latest comments on the U.S. economy and interest rates will cause some weakness in the dollar'' and support gold, said Rowan Menzies, chief commodity analyst at Commodity Warrants Australia in Sydney.
Energy Costs
Rising energy costs may boost gold's appeal as a hedge against inflation, analysts said. Crude oil may rise for the second straight week as the Organization of Petroleum Exporting Countries reduces output and cold weather spurs fuel demand in the northern U.S., according to a separate Bloomberg survey of 46 analysts and traders.
Some investors buy gold to preserve purchasing power in times of accelerating inflation. Gold futures surged to $873 in 1980, when a jump in the cost of oil led to a 13 percent annual rise in U.S. consumer prices.
Tracking Oil
Gold has tumbled 18 percent from a 26-year high of $732 on May 12, partly because of a decline in energy costs from a record. Prices still are up 26 percent in the past year.
Oil jumped 6.9 percent last week after touching $56.55 a barrel on Oct. 20, the lowest since November. In mid-July, prices reached $78.40, the highest ever.
Hedge-fund managers and other large speculators reduced their net-long position in Comex gold futures in the week ended Oct. 24 to the lowest in more than a year, data from the Washington-based Commodity Futures Trading Commission show.
Speculative long positions, or bets that prices will rise, outnumbered short positions by 56,050 contracts, down 9.3 percent from a week earlier.
