Gold falls for 3rd straight day as dollar rises

AP News
Posted: Dec 08, 2009 3:13 PM

The price of gold fell for a third straight day Tuesday as a stronger dollar gave investors an excuse to take more profits.

Gold for February delivery dropped $20.60 to $1,143.40 an ounce on the New York Mercantile Exchange.

The dollar has been rising, pushing commodities lower, since late last week when a better-than-expected employment report gave investors a strong positive signal on the economy. That could mean an end to the record low U.S. interest rates that have weakened the dollar and driven up the price of commodities this year.

After surging to a new record of $1,227.50 last week, gold prices have fallen about $75 since Friday. Most analysts, however, see the decline in gold as temporary, saying there is enough investment demand for the metal to support higher prices over the long term.

"We haven't given up on the rally," said Dave Meger, director of metals trading at Vision Financial Markets. Meger said he's used the recent strengthening of the dollar as an opportunity to book some profits in gold, which had surged more than $200 in just three months.

Even with the decline over the past few days, gold prices are still up 29.3 percent for the year. That compares with a year-to-date gain of about 21 percent for the Standard & Poor's 500 index.

Stocks and commodities have rallied this year as record-low interest rates drive investors to look for alternative investments to the greenback. A weaker dollar makes commodities more attractive to foreign buyers. Gold has benefited from the greenback's decline more than some commodities because it is seen as a good hedge against a weak dollar.

Other metals also declined Tuesday as the ICE Futures US dollar index, which measures the dollar against other major currencies, rose 0.6 percent.

March silver tumbled 55.3 cents to $17.807 an ounce, while January platinum declined $4.20 to $1,440.40 an ounce.

March copper futures fell 4.4 cents to $3.165 a pound.

Elsewhere on the Nymex, oil prices fell for a fifth straight day, hurt by the stronger dollar, as well as reports from Britain and Germany showing manufacturing remains weak, a bad sign for energy demand.

Light, sweet crude closed below $73 for the first time in two months, falling $1.31 to $72.62 a barrel.

Gasoline futures fell 1.6 cents to $1.9246 a gallon, while heating oil futures fell 1.88 cents to $1.9909 a gallon.

On the Chicago Board of Trade, March wheat futures shed 8.25 cents to $5.3975 a bushel, while corn for March delivery added 1.25 cents to $3.85 a bushel.

January soybeans fell 9 cents to $10.44 a bushel.

Other soft commodities, including sugar, cotton and cocoa, fell.