Gold futures capped the first weekly gain in three as a weaker dollar increased demand for the precious metal as an alternative investment. Palladium fell to the lowest in almost a month.

The Bloomberg U.S. Dollar Index dropped as much as 0.2 percent as industrial production in the U.S. fell 0.1 percent in October, the Federal Reserve said Friday. Janet Yellen, the nominee to head the U.S. central bank, said Thursday that monetary stimulus is needed to spur economic growth.

“The dollar continues to be a big influence,” Frank Lesh, a trader at FuturePath trading in Chicago, said in a telephone interview. “We will see gold remain largely range-bound today since there is very little interest.”

Gold futures for delivery in December rose 0.1 percent to settle at $1,287.40 an ounce at 1:39 p.m. on the Comex in New York. The metal gained 0.2 percent for the week, the first increase since Oct. 25.

Trading was 36 percent below average for the past 100 days for this time of day, data compiled by Bloomberg showed.

The precious metal has tumbled 23 percent in 2013 as signs of economic recovery spurred speculation that the Fed will start to cut its monthly bond buying, strengthening the dollar. Global bullion demand fell 21 percent in the third quarter as investors continued to dump holdings of the metal through exchange-traded funds and central banks slowed purchases, the World Gold Council said Thursday.

Gold could “take another hit” unless physical buying increases, VTB Capital said in a report today.

Billionaire investor John Paulson maintained his holdings in the SPDR Gold Trust, the largest bullion-backed exchange- traded product, after slashing it by more than half in the earlier quarter, a government filing said yesterday.

Palladium Slumps

On the New York Mercantile Exchange, palladium futures for December delivery retreated 1 percent to $732.65 an ounce after touching $722.50, the lowest since Oct. 17. Platinum futures for delivery in January lost 0.4 percent to $1,438.90 an ounce.

Palladium’s shortfall will narrow as consumption falls faster than supply, Johnson Matthey Plc said on Nov. 12.

A strike in South Africa called by the National Union of Mineworkers at Northam Platinum Ltd. over wages that began almost two weeks ago continues, said Ecliff Tantsi, chief negotiator for the NUM. The largest union at Anglo American Platinum Ltd.’s South African mines got permission to strike after a mediator failed to resolve a wage deadlock between the labor group and the world’s biggest producer of the metal.

South Africa accounts for about 72 percent of platinum mine supply and about 36 percent of palladium output, according to Barclays Plc.

Silver futures for December delivery rose less than 0.1 percent to $20.727 an ounce on the Comex.