Gold prices rebound as dollar resumes decline

AP News
Posted: Nov 30, 2009 6:02 PM

Gold and other metals rebounded Monday, rising as fears over a Dubai debt crisis eased and the dollar resumed its decline.

Energy and agriculture futures also rose.

Trading marked a reversal from Friday, when worries about a possible debt default by the Middle Eastern city-state of Dubai and its impact on the rest of the world drove demand for safe harbors like the dollar and Treasurys.

On Monday, though, investors sold the dollar and waded back into riskier assets like commodities as it appeared the U.S. had little exposure to Dubai's debt. Over the weekend, the United Arab Emirates, where Dubai is located, said it will make extra funding available to all banks there, including foreign banks.

The ICE Futures U.S. dollar index, which tracks the dollar against other major currencies, fell 0.3 percent in afternoon trading, helping to lift stocks and commodities moderately.

Gold for February delivery gained $6.80 to settle at $1,182.30 an ounce on the New York Mercantile Exchange. Last week, prices surged to a record of $1,196.80 an ounce before tumbling on a stronger dollar and concerns over Dubai's debt problems.

Gold prices rose 13.6 percent in November. Year to date, gold has gained 33.7 percent.

The dollar has been falling steadily this year as record-low interest rates encourage investors to buy assets like stocks and commodities that have the potential for better returns. Gold is seen as a good hedge against a weak U.S. currency. A weaker greenback also makes commodities less expensive for foreign buyers.

Though analysts warn that gold prices could be due for a near-term correction because of their rapid ascent, most see the long-term trend as higher.

"We've not seen the end of the all-time highs for gold," said Marshall Berol, co-portfolio manager of San Francisco-based Encompass Fund, which invests in a number of commodity-related companies.

March silver rose 19 cents to $18.525 an ounce, while December platinum rose $12.60 to $1,459.50 an ounce.

March copper futures gained 5.15 cents to $3.177 a pound.

Elsewhere on the Nymex, oil prices climbed on worries over a possible confrontation between Iran and Britain, one of the countries demanding an end to Iran's nuclear program. The British government said Monday that Iran is holding five British sailors after stopping their racing yacht in the Persian Gulf last week. Iran is one of the world's biggest oil producers.

Light, sweet crude for January delivery rose $1.23 to $77.28 a barrel.

Heating oil for December delivery rose 5.59 cents to $2.0181 a gallon, while gasoline added 7.46 cents to settle at $2.0008 a gallon.

Natural gas, which has been hammered by weak demand, tumbled nearly 7 percent, or 34.4 cents, to $4.848 per 1,000 cubic feet.

On the Chicago Board of Trade, March wheat futures jumped 19 cents to $5.8875 a bushel, while March corn added 4 cents to $4.175 a bushel.

January soybeans rose 7.5 cents to $10.605 a bushel.

Among other soft commodities, December coffee rose 3.8 cents to $1.4175 a pound, while December cocoa dipped $18 to $3,214 a ton.