Oil, Gold Surge to Highs As Dollar Falls

By LAUREN VILLAGRAN – 1 day ago

NEW YORK (AP) — The commodities markets rallied Friday as the dollar skidded to fresh lows, driving investors to seek an inflation hedge in holdings of crude oil, gold and other raw materials.

The greenback tumbled to a low against the euro as investors looked past the Labor Department's stronger-than-expected reading on jobs growth in October. Although the total jobs added to payrolls this month topped expectations, suggesting the overall job market remains robust, investors appeared wary of the jobs erosion in the key construction, retail and manufacturing sectors.

Among traders, "there is a belief there is a little bit of fudging that goes on" in the jobs report, given the huge size of the U.S. job market, said Alan Lammey, energy analyst with EIG Inc. "You have to take some of that with a grain of salt."

Oil and gold prices climbed as the dollar fell and made commodities more attractive to buyers abroad.

Light, sweet crude for December delivery gained $2.44 to settle at a record $95.93 a barrel on the New York Mercantile Exchange, after earlier topping $96 for the second time this week. December gold surged $14.80 to settle at $808.50 ounce on the Nymex — the first time gold has settled over $800 an ounce since 1980.

The euro bought $1.4527, an-all time high for the 13-nation currency, before easing back to $1.4515.

This week brought mixed economic news that contributed to investors' uncertainty.

The Commerce Department said Friday factory orders rose 0.2 percent in September, bucking analyst expectations for a 0.4 percent decline. But reports earlier this week showed consumers curbing their spending in September, while the manufacturing sector grew at the slowest rate since March. To further confuse matters, the government's initial estimate of third-quarter economic growth was surprisingly strong at 3.9 percent — even as the housing and credit market turmoil rocked Wall Street.

Although economic readings were less than consistent, the Federal Reserve's decision Wednesday to cut its benchmark interest rate by a quarter point to stimulate economic growth also helped ensure the dollar would extend its decline. Lower rates can undercut a currency's value.

A weaker dollar also tends to add to the appeal of commodities as an alternative investment.

Energy futures also rose on word that the U.N. Security Council could draft a new sanctions resolution if Iran doesn't improve its cooperation with the International Atomic Energy Agency. There are concerns that any conflict between the West and Iran would disrupt oil supplies from the Middle East.

December gasoline futures jumped 9.63 cents to settle at $2.4395 a gallon, while December heating oil rose 6.14 cents to settle at $2.5737 a gallon on the Nymex.

Elsewhere, December silver futures rose 27.4 cents to close at $14.599 an ounce, while platinum for January delivery gained $11.90 to $1,462.70 an ounce on the Nymex. Copper futures for December slipped 3.75 cents to close at $3.325 a pound.

Agriculture futures notched gains on the Chicago Board of Trade, meanwhile, helped in part by the rally in the energy market. The prices of corn and soybeans — which are used in making ethanol and biodiesel, respectively — both climbed.

"They're related markets because of alternative fuels," said DTN analyst Gary Wilhelmi. "When you get something sensational happening, like this week in the crude, that's going to lop over into the agriculture markets."

December corn rose 8.25 cents to $3.77 a bushel, while January soybeans jumped 10.25 cents to $10.1675 a bushel.