Gold dips back below $1,100 as dollar rises

AP News
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Posted: Dec 29, 2009 5:49 PM

Gold and other metals fell Tuesday in response to a stronger dollar, while energy futures eked out small gains.

The price of gold ended a three-day winning streak, falling back below $1,100 as the dollar rose against other currencies. Gold for February delivery lost $9.80 to settle at $1,098.10 an ounce on the New York Mercantile Exchange.

Gold is seen as a hedge against a weak dollar, so when the greenback rises, investors often sell the metal.

The ICE Futures U.S. dollar index, a widely used measure of the dollar against other currencies, rose 0.2 percent following reports showing an improvement in home prices and consumer confidence.

Investors have been buying dollars in recent weeks as optimism over the U.S. economic recovery grows. A stronger economy increases the likelihood that the Federal Reserve will raise interest rates. That in turn would boost the appeal of the dollar, which fell much of this year as investors went in search of assets with better returns.

The stronger dollar has led to a more than 10 percent drop in gold prices since the beginning of the month. Other metals have followed gold prices down.

On Tuesday, March silver dropped 45 cents to $17.11 an ounce, while January platinum fell $13.20 to $1,467.10 an ounce.

Among industrial metals, March copper futures slipped 2.3 cents to $3.3135 a pound.

Oil prices rose for a fifth straight day, adding 10 cents to $78.87 a barrel. Cold temperatures across the country have been driving energy prices higher in recent days. The stronger dollar on Tuesday kept crude's gains in check.

Heating oil futures rose 2.93 cents to $2.1028 a gallon, while gasoline futures declined less than 1 cent to $2.0106 a gallon.

On the Chicago Board of Trade, March wheat futures fell 9.75 cents to $5.41 a bushel, while corn for March delivery added a penny to $4.17 a bushel.

March soybeans rose 9 cents to $10.47 a bushel.

Prices for cotton, coffee and sugar fell.