Gold futures rise as dollar falls, oil hits record high

By Joyce Koh, MarketWatch
Last Update: 9:37 AM ET Jun 27, 2008

NEW YORK (MarketWatch) -- Gold futures rose to trade above $920 an ounce early Friday, propelled by a new record high in crude oil and persistent weakness in the U.S. dollar.

Gold for August delivery gained $6.40 to $921.50 an ounce on the New York Mercantile Exchange.

"Fund money seems again to be leaving the imploding equity markets and heading into commodities, with energy and precious metals in the lead, while base metals are a distant third as a group," said Edward Meir, an analyst at MF Global, in a research note.

On Thursday, gold futures closed up $32.80 at $915.10 an ounce.

Crude-oil futures surged to yet another record high on Friday -- this time above $142 a barrel. See Futures Movers.

"Record oil prices encourage ongoing investor demand as a hedge against inflationary pressure, which sees the $930 resistance as a potential near-term target," said analysts at Action Economics.

Gold, like crude oil, has been boosted by persistent weakness in the U.S. dollar.

The greenback dipped lower after a report showing a measure of inflation came in lower than forecast, reducing speculation that the Federal Reserve will have reason to raise interest rates this year.

The dollar index (DXY), which tracks the performance of the U.S. currency against other major counterparts, edged down 0.1% to 72.45. See Currencies.

With the Federal Reserve leaving its key interest rate unchanged at 2%, market watchers say this increases gold's value as a hedge against inflation.

On Wall Street, U.S. stock futures stock futures struggled to recover from Thursday's plunge, when the Dow Jones Industrial Average (DJIA) skidded nearly 400 points. See Indications.

Also on the Nymex, September silver gained 28 cents to $17.50 an ounce, while July platinum fell $10.80 to $2,058.0 an ounce.

September palladium edged down $1.20 to $470.05 an ounce. September copper rose 2 cents to $3.84 a pound.

Joyce Koh is a MarketWatch intern in New York.