GOLD TOPS $900 AS DOLLAR DROPS

By Pham-Duy Nguyen

Jan. 24 (Bloomberg) -- Gold topped $900 an ounce in New York for the first time in a week after the dollar dropped against the euro, boosting the appeal of the precious metal as an alternative investment. Platinum futures surged to a record.

European Central Bank officials signaled interest rates would remain steady to cap inflation. The Federal Reserve on Jan. 22 slashed the benchmark U.S. rate by 0.75 percentage point in an emergency move. Gold surged 31 percent last year as reductions in borrowing costs sent the dollar 9.5 percent lower against the euro.

``The biggest factor fueling the rally is going to be continued easing by the Fed while the ECB stands pat,'' said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. ``The dollar should keep on losing ground against the euro, so we should see another record in gold in the next two weeks, if not sooner.''

The dollar fell to the lowest ever against the euro last year as a housing slump and losses in the subprime mortgage market forced the Fed to reduce borrowing costs 1 percentage point. In 2007, the ECB raised rates 0.5 percentage point to 4 percent.

The euro rose as much as 0.8 percent to $1.4742 today, and European equities had the biggest gain since 2003 after U.S. stocks rebounded yesterday.

``Clear expectations that the Fed will cut once again next week, and cut until some signs of stabilization emerge, continue to fuel the precious metal,'' said Jon Nadler, an analyst at Kitco Minerals & Metals Inc. in Montreal.

China reported its economy expanded more than 11 percent for the fourth straight quarter, easing concerns global economies may sag.

 ``The markets sense more stability,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``The Fed is going to drop rates again, and that's going to hurt the dollar and help gold.''