LONDON, June 3: Gold climbed on Tuesday as the dollar softened on worries over the deteriorating health of the US economy, boosting the precious metal’s appeal as an alternative investment.

Gold is often bought as a hedge against a weakening dollar, and also becomes cheaper for holders of other currencies when the greenback loses value.

Spot gold was at $893.60/894.65 an ounce at 1020 GMT versus $891.25/892.65 late in New York on Monday. Earlier it touched an intraday high of $897.10.

This is basically a reaction to the (stronger) euro, said Fortis Bank precious metals director Gerry Schubert. The weakening dollar is supporting gold at this time.

The US currency slipped against the euro after news US investment bank Lehman Brothers was seeking to raise up to $4 billion in new capital triggered concern about global financial stability.

Investors also use gold as a hedge against equity market volatility.

Stock markets in Europe, the United States and Asia were knocked lower yesterday after Standard & Poor’s downgraded a number of investment banks and the UK’s Bradford & Bingley issued a profit warning, reigniting fears over the scope of the credit crunch.

The gold market is now awaiting comment from Federal Reserve chief Ben Bernanke for clues to future direction in currency and precious markets recent days are still lending good support to the euro, said Schubert at Fortis Bank.

In other news, data from the Istanbul Gold Exchange showed Turkey’s gold imports reached 19.4 tons in May after dropping off sharply in the two previous months as high prices hit sales.

Platinum rose to $2,015.00/2,025.00 an ounce from $2,000/2,020 in New York.

The metal is underpinned by supply concerns, after Aquarius Platinum said on Monday that a strike at its Everest mine would cost the producer some 1,300 ounces of metal.

Palladium was at $432.50/437.50 an ounce versus $431/439.

Silver was a touch lower at $16.76/16.82 an ounce versus $16.81/16.87 late in New York.

—Reuters