Gold and silver fall as stock market rallies

AP News
Posted: Aug 29, 2011 5:51 PM
Gold and silver fall as stock market rallies

Metals prices closed lower Monday as increasingly confident investors move money out of hard assets and into stocks.

Gold and silver fell as the Standard & Poor's 500 index rose 2.8 percent. Investors often buy gold as a last resort when they're fearful of holding stocks. The reverse also holds true: investors often dump gold once stocks start looking promising again.

Gold prices also fell because investment managers sold contracts to lock in gains made over the last month, said George Gero, vice president of global futures at RBC Capital Markets. Gold is still up 9.8 percent this month on fears about inflation and uncertainty over the economy.

Traders feel that gold and silver are a safer bet than stocks or currencies during times of weak economic growth. By selling appreciated gold contracts at the end of August, traders can take their profits and put them into other investments to make their portfolios look more diverse.

Gold for December delivery fell $5.70 to settle at $1,791.60 an ounce. September silver lost 40.6 cents to $40.546 per ounce.

Other metals also fell. September copper fell 1 cent to $4.089 per pound, October platinum fell $1.90 to $1,825 an ounce and September palladium dropped $2.40 to $753.95 an ounce.

While industrial metals often rise with the stock market, trading was weak in part because London exchanges were closed because of a bank holiday there. Gero said demand was higher for stocks, so metals contracts mostly stagnated in weak trading.

Grains were mixed. December wheat lost 2 cents to finish at $7.95 a bushel. December corn increased 3 cents to $7.70 a bushel and November soybeans rose 23.5 cents to $14.47 a bushel.

Oil prices rose after the government said consumers spent more in July, easing concerns about another recession. It was the latest in a series of reports that indicated the economy improved last month, which could strengthen demand for oil and gasoline.

Benchmark crude rose $1.90 to end at $87.27 per barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil rose 0.15 cents to $3.0173 per gallon, gasoline fell 1.65 cents to finish at $2.7695 per gallon and natural gas lost 8.2 cents to settle at $3.83 per 1,000 cubic feet.