Metals prices fall on Euro worries after rally

AP News
Posted: May 16, 2011 4:20 PM
Metals prices fall on Euro worries after rally

Precious metals prices closed lower Monday after a midday rally, reflecting uncertainty as investors weigh the potential fallout from Europe's debt crisis.

European finance ministers signed off on $110 billion in rescue loans to Portugal on Monday, and debated giving Greece a second rescue package to avoid a disastrous default. Such economic turmoil generally boosts gold prices as investors pour money into hard assets rather than European currencies that might be devalued through inflation.

Gold initially rallied Monday, but fell on worries that Greece might have to post collateral on its debt. The country might post gold as collateral, which could drive down gold prices if the collateral payments are cashed in, said George Gero, vice president at RBC Global Futures.

"If traders have concerns about gold being used as collateral, there is always the possibility of some gold being sold to get dollars," Gero said.

Gold for June delivery fell $3 to settle at $1,490.60 an ounce. July silver fell 88.1 cents to settle at $34.132.

Gero said the markets are essentially in "wait and see" mode as traders follow the fast-developing events in Europe.

Prices were also down in other metals trading, with the exception of palladium. July copper fell 0.7 cents to $3.9905 a pound, July platinum fell $9.30 to $1,760 an ounce and June palladium gained $7.05 to close at $713.50 an ounce.

Energy prices also fell. Oil dropped as investors seemed more optimistic that Mississippi River flooding will not seriously interfere with operations at Gulf Coast refineries. The Army Corps of Engineers opened two massive gates at the Morganza spillway last weekend in an effort to protect Baton Rouge, La., and New Orleans from floodwaters.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, noted that gasoline futures are lower with demand down because of high pump prices.

Benchmark oil for June delivery dropped $2.28 to $97.37 a barrel on the New York Stock Exchange.

In other Nymex contracts for June, heating oil fell 6.78 cents to settle at $2.8744 per gallon, gasoline fell 14.33 cents to $2.9311 a gallon and natural gas rose 6.8 cents to $4.379 per 1,000 cubic feet.

Grains rose while soybeans fell slightly.

In contracts for July delivery, wheat jumped 8.75 cents to settle at $7.365 a bushel, corn rose 15.5 cents to $6.975 a bushel and soybeans fell 3 cents to $13.265 a bushel.