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 Posted - 11/30/2007 : 19:59:08
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Gold Pulls Back As Oil Prices Fall
By LAUREN VILLAGRAN – 4 hours ago
NEW YORK (AP) — Gold retreated from $800 on Friday as oil prices pulled back sharply and the dollar gained a little muscle — moves that helped calm investor concerns about inflation.
Other energy futures sagged, as did agricultural futures. Silver slipped, while industrial metals made gains.
Gold climbed to the highest level in 27 years earlier this month, driven mainly by oil's ascent toward $100 and steep declines in the U.S. dollar. But with those trends stalling or in reverse, at least temporarily, investors shifted funds out of the safe-haven metal. Investors, meanwhile, warmed up to equities as the Dow Jones industrial average extended its gains into a fourth session.
"Speculative minded individuals banking on $1,000 (per ounce gold) are feeling jittery and we've seen some of those exit," said Jon Nadler, senior analyst with Kitco Bullion Dealers. "For the smaller investor, it presents a challenge. They now see it's a two-way street and then some."
February gold dropped $13.20 to finish at $789.10 an ounce on the New York Mercantile Exchange.
The metal has become prone to sharp swings, however, as volatility in the market has increased markedly as gold has gotten more expensive. Daily moves of $5 to $10 have been replaced by $15 to $30 swings.
Such volatility, as measured by the size of the trading range and swiftness of moves, could double or triple before year end as large investment funds shuffle their portfolios to eke out the best return for investors, Nadler said.
Silver for March delivery fell 28 cents to $14.165 an ounce on the Nymex.
Oil gave up another $2.30 a barrel, pushing the January contract to a closing price of $88.71 — the lowest level in a month — on expectations that OPEC will raise output when the group meets next week. Crude has fallen more than $10 from its all-time peak of $99.29 a barrel last week.
Several officials among the Organization of Petroleum Exporting Countries have hinted that an increase to production quotas will be discussed, given oil's surge toward $100 a barrel — although that level hasn't been breached. Although producer nations benefit from high prices, they worry that persistently high energy costs will crimp demand.
December gasoline futures fell 0.57 cent to settle at $2.2591 a gallon, and December heating oil futures fell 4.75 cents to settle at $2.5296 a gallon.
Meanwhile, the dollar's bounce higher this week hasn't helped gold or oil prices, or commodities generally, as it has made raw materials appear more expensive to buyers abroad. The greenback rose against major currencies on Friday.
The dollar's rebound comes even as market expectations for further interest rate cuts have solidified. Federal Reserve Chairman Ben Bernanke said late Thursday the credit squeeze and slumping housing market will "create headwinds for the consumer" in coming months. He pledged the central bank will stay "exceptionally alert and flexible" in its monetary policy.
Bernanke's comments, and similar comments earlier in the week from Fed Vice Chairman Donald Kohn, were taken as a suggestion that lower interest rates could be in the offing when the bank meets on Dec. 11. Lower rates would tend to undermine a currency.
Still, some analysts have said the dollar's 12 percent decline this year versus the euro has been overdone. The euro bought $1.4632 late Friday and is more than 2 percent off its high of $1.4966 a week ago.
Agricultural futures ended mixed. Wheat for March delivery fell 2.75 cents to $8.85 a bushel; December corn rose 1 cent to $3.86 a bushel; and January soybeans dropped 1.8 cents to $1.80 a bushel.
Industrial metals rose broadly, with zinc, copper and lead prices up on the London Metal Exchange. Nymex copper for March delivery rose 9.05 cents to $3.1845 a pound.
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Gold Pulls Back As Oil Prices Fall
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