MELBOURNE, Sept 16 — Gold gained as the dollar dropped to the lowest level in a month after Lawrence Summers withdrew from consideration as the next Federal Reserve chairman before the central bank meets this week to decide on stimulus. Silver rallied from its worst week since June.

Bullion for immediate delivery climbed as much as 0.8 per cent to US$1,336.40 (RM4,396) an ounce and traded at US$1,329.38 by 8:19am in Singapore. Prices dropped 4.7 per cent last week, the biggest decline since the period ended June 28. Gold for December delivery rose 1.6 per cent to US$1,329.70 an ounce on the Comex in New York, rallying from a 5.6 per cent loss last week.

President Barack Obama had mentioned Summers and Fed Vice Chairman Janet Yellen as potential candidates to lead the central bank after Ben S. Bernanke’s term as chairman expires on January 31. The Fed is forecast to reduce its bond-purchase programme, called quantitative easing, this week, according to a Bloomberg News survey. Summers, a former Treasury Secretary, would tighten Fed policy more than Yellen, a Bloomberg Global Poll showed last week.

The Bloomberg Dollar Index, a gauge against 10 major trading partners, fell as much as 0.5 per cent to the lowest since August 12. The index gained 3.4 per cent this year while gold tumbled 21 per cent as investors lost faith in the metal as a store of value and the Fed indicated it may buy fewer bonds.

The metal rose 70 per cent from December 2008 to June 2011 as the US central bank pumped more than US$2 trillion into the financial system by buying debt. Policymakers will cut monthly purchases by US$10 billion at their September 17–18 meeting to US$75 billion, a survey of 34 economists on September 6 showed.

Silver for immediate delivery was little changed at US$22.22 an ounce. Prices slumped 6.9 per cent last week, the most since June 21. The metal for December delivery surged as much as 3.6 per cent to US$22.49 an ounce in New York before trading at US$22.23.

Palladium advanced 1 per cent to US$707.55 an ounce while platinum was little changed at US$1,452.90 an ounce. — Bloomberg