LONDON (Bloomberg) -- Gold rose above $800 an ounce in London, heading for a weekly gain, as the dollar's decline against all but one of the 16 most active currencies boosted bullion's appeal as an alternative investment. Silver gained.

Gold is set for its biggest annual gain since 1979 after the dollar slid to a record against the euro and higher crude-oil prices spurred demand for the metal as an inflation hedge.
“The dollar's declined and oil has gone up overnight,” said David Thurtell, a metals analyst at BNP Paribas SA in London. “People will be pretty keen to keep gold around the $800 mark as we go into year's end.”
Gold for immediate delivery in London rose $8.3, or 1 percent, to $804.70 an ounce as of 1:28 p.m. local time. It climbed to within 0.5 percent of a record $850 on Nov. 7 and has advanced 26 percent this year. In comparison, the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities is up 19 percent this year.
New York gold futures gained $5.40 to $808 an ounce Friday.
“With traders still tracking the dollar, and players caught between locking in profits for year-end and increasing their safe-haven holding on dips, the yellow metal looks set to remain in a volatile mood,” James Moore, a precious metals analyst with TheBullionDesk.com, said in an e-mailed. Gold will trade between $785-812, he said.
Gold Fields Ltd., Africa's second-largest gold producer, said fiscal second-quarter production will fall about 3.5 percent. Output from South African mines will drop about 7 percent because of safety-related events including accidents and suspensions of operations ordered by the Department of Minerals and Energy.
--------------Mine supply
“A contributing factor to the long rally in gold prices is the lack of growth in new mine supply,” James Steel, an analyst at HSBC Securities in New York, wrote in a note e-mailed. “The problems faced by Gold Fields are widely shared by other producers across the industry.”
Assets in the StreetTracks Gold Trust, the largest fund backed by gold, were at a record 617.43 tons, an amount equal to about a quarter of annual global mine supply.
The cost of borrowing gold for one year is 0.3875 percent, compared with an average 0.255 percent in the past 12 months, according to data compiled by Bloomberg. Rates reflect expectations for the amount of metal available for borrowing.
Silver for immediate delivery climbed 16.5 cents, or 1.2 percent, to $14.385 an ounce.
Among other precious metals, platinum for immediate delivery climbed $1, or 0.1 percent, to $1,512.50 an ounce. It reached a record $1,523.50 on Dec. 18 and has climbed 33 percent this year, partly because of a spate of mining accidents and strikes in South Africa, the biggest producer.
Platinum “is susceptible to profit-taking ahead of year end,” Moore said. “However, given the current market tightness and the vulnerability to supply disruptions, platinum could easily eclipse Tuesday's high of $1,521 an ounce.”
Platinum may outperform other precious metals next year, Stephen Briggs and Stephanie Aymes, analysts at Societe Generale SA, said in a Dec. 19 report.
Palladium for delivery in London gained $1 to $355.