August 27, 2008 > US commodities down on stronger dollar
US commodities down on stronger dollar
By Stevenson Jacobs, AP Business Writer
NEW YORK (AP), Aug 22 _ Commodities fell sharply Friday, dragged down by a stronger dollar and a plunge in crude oil prices that led investors to dump hard assets in favor of equities.
Crude tumbled more than $6 a barrel in the biggest one-day percentage drop in almost four years, sparking a sell-off in everything from copper to corn to heating oil.
The dollar gained ground against the euro after Federal Reserve Chairman Ben Bernanke, speaking Friday at an economic conference, said he would ``act as necessary'' to control inflation.
The euro fell to $1.4806 in early New York trading Friday from $1.4772 late in New York the night before. A stronger dollar encourages investors to sell commodities like gold and silver, which are traditionally bought as hedges against inflation.
Gold for December delivery dropped $5.50 to settle at $833.50 an ounce on the New York Mercantile Exchange, after earlier falling as low as $826.10.
December silver lost 25.3 cents to settle at $13.59 an ounce on the Nymex, while September copper shed 7.9 cents to settle at $3.4595 a pound.
Jon Nadler, analyst with Kitco Bullion Dealers Montreal, said Bernanke's comments suggested to jittery investors that the Fed will aggressively tackle inflation, possibly by through an interest-rate hike that would likely bolster the dollar and further weaken demand commodities.
``Gold looks like it could well retest $800-$815 again,'' Nadler said in a note.
The pullback in commodities helped spark a rally on Wall Street. The Dow Jones industrial average rose nearly 200 points.
The stronger dollar sent crude prices sharply lower, halting a three-day rally. A long-awaited Russian troop pullback in Georgia also pressured prices.
Light, sweet crude for October delivery fell $6.59, or 5.43 percent, to settle at $114.59 a barrel on the New York Mercantile Exchange. It was crude's largest single-day price drop percentage-wise since Dec. 27, 2004, when prices dropped 6.47 percent. In dollar terms, it was oil's steepest one-day slide since Jan. 17, 1991, just after the start of the Gulf War.
Other energy futures also fell. Heating oil fell 16.95 cents to settle at $3.1311 a gallon, while gasoline futures fell 17.66 cents to settle at $2.8686 a gallon.
In agriculture markets, the stronger dollar weighed on grain prices.
Wheat for September delivery fell 31.75 cents to settle at $8.655 a bushel, while December corn slid 11 cents to settle at $6.065 a bushel. November soybeans dropped 21 cents to $13.27 a bushel.