The dollar lost ground again yesterday with much of the drop coming in New York on renewed predictions of lower interest rates. Gold rose slightly.

The dollar was lower in Asia and Europe in what dealers said was heavy selling from the Middle East and Europe and was trading in a narrow range in New York.

But it dropped sharply after Henry Kaufman, economist at Salomon Brothers, reiterated his prediction that the Federal Reserve would cut the discount rate in the next two or three weeks.

Many economists had been making similar predictions until last week but revised them after Fed Chairman Paul A. Volcker and other officials indicated there would be no change in policy at least until the central bank's policy committee meets later this month.

But one London dealer believes, as do many traders, that there "is no logic in the market at present. It's just a herd instinct."

The dollar was mixed abroad and finished lower against all currencies except the Japanese yen, ending a volatile week that saw it finish at 3.10 German marks compared with more than 3.25 marks Monday. In London, the pound, still under pressure from the prospect of lower oil prices, edged down to $1.2362 from Thursday's $1.2387. But in New York it rose to $1.2381 from $1.225.

The Canadian dollar rose to 72.61 U.S. cents from 72.47.