Gold rose to a three-week high in London, heading for its first weekly gain since March, after a report that China’s reserves of the precious metal increased 76 percent since 2003.

China holds 1,054 metric tons, the official Xinhua News Agency said, citing the head of the State Administration of Foreign Exchange. It also has the world’s largest foreign- currency reserves, at $1.95 trillion as of March 31. Bullion has added 4.7 percent this week, the most since the week of Feb. 20.

“The Chinese gold-reserve story and reports of strong physical demand in India, Dubai and other demand centers have propelled” prices, Pradeep Unni an analyst at Richcomm Global Services DMCC in Dubai, wrote in a note. The Chinese report raises “hopes of more purchases to diversify its massive foreign-exchange holdings,” he said.

The metal for immediate delivery gained as much as $8.90, or 1 percent, to $913.21 an ounce and traded at $909.39 by 12:54 p.m. local time. June futures climbed 0.5 percent to $910.80 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.

Bullion rose to $909 in the morning “fixing” in London, used by some mining companies to sell production, from $897.50 at yesterday’s afternoon fixing. Spot prices, which reached a record $1,032.70 in March 2008, gained today for a third straight day, the first such streak in six weeks.

Fifth-Biggest

China added 454 tons to its gold reserves through domestic purchases and refining scrap, Xinhua said. It now has the fifth- largest stockpile by country, behind Italy’s 2,451.8 tons, according to data from the producer-funded World Gold Council. The Asian nation’s gold association said in November that China should increase its holding to diversify its reserves.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 1.5 tons to 1,104.45 tons yesterday, according to the company’s Web site, the first drop since April 17.

“Prices had struggled to gain momentum as fresh exchange- traded product inflows stalled,” Barclays Capital analysts led by Gayle Berry wrote in a report. Still, “over the forthcoming weeks, a key gold-buying festival in India should offset a weaker economic outlook.”

JPMorgan Cazenove Ltd. today raised its forecast for gold’s price in 2009 by 21 percent to $850 an ounce.

Heading for $950?

“There may be more safe-haven interest in gold because of the current economic environment,” driving the metal higher to $950 an ounce by the end of June, David Moore, chief commodity strategist at Commonwealth Bank of Australia, said today by phone from Sydney. Prices may ease to $875 an ounce by the year’s end, “premised on the fact that ultimately investor interest in gold will start to subside,” he said.

Among other metals for immediate delivery in London, silver added 0.1 percent to $12.79 an ounce. Platinum lost 0.1 percent to $1,182.25 an ounce, and palladium was 0.4 percent lower at $232 an ounce.

JPMorgan Cazenove also raised its silver forecast for this year by 44 percent to $13 an ounce and boosted its estimate for platinum by 20 percent to $1,080 an ounce.

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