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Surging dollar takes sheen off gold
Gold fell below $800 an ounce Friday, capping the biggest weekly slide in 25 years, as the dollar surged against the euro, reducing the appeal of the metal as an alternative investment. Silver dropped as much as 14 percent.
The dollar headed for a fifth straight weekly gain against the euro as economies in Europe slow. Gold generally moves in tandem with the euro as an alternative to the dollar. The metal plunged into a bear market this week, declining as much as 25 percent from a record $1,033.90 an ounce reached on March 17.
“There’s just a lot of long liquidation,” said Joel Crane, a metals strategist at Deutsche Bank AG in New York. “Commodities are priced in U.S. dollars. There’s no getting around that.”
Gold futures for December delivery fell $22.40, or 2.8 percent, to $792.10 an ounce on the Comex division of the New York Mercantile Exchange. The metal fell 8.4 percent this week, the biggest decline for a most-active contract since Feb. 25, 1983.
Earlier, gold touched $777.70, the lowest for a most-active contract since Nov. 20 and the first time the price dropped below $800 since Dec. 21. Gold has fallen every day this month except for a 2.1 percent gain on Wednesday.
Silver futures for December delivery fell $1.43, or 10 percent, to $12.93 an ounce on the Comex, the biggest decline for a most-active contract since June 13, 2006, when the metal shed 13 percent. Earlier the price touched $12.305, the lowest since Sept. 5.
The Reuters/Jefferies CRB Index of 19 commodities tumbled as much as 2.7 percent to 379.07, the lowest since March 20, as silver, soybeans and corn lead the drop. The index has dropped as much as 20 percent since reaching a record July 3, descending into a bear market.
Silver is the third-biggest loser on the CRB this year, down 13 percent, and gold was the fourth biggest after dropping 5.5 percent.
The dollar touched the highest against the euro in almost six months and climbed to an eight-month high versus the yen. Investors sold commodities and bought U.S.-denominated assets on speculation the slowdown that began in the U.S. will spread to other countries, analysts said.
A housing slump and a credit crisis that threatened to push the U.S. economy into a recession spurred the Federal Reserve to cut the benchmark interest rate 3.25 percentage points between September and April. The federal funds rate is now at 2 percent.
While the U.S. cut rates, the European Central Bank held its main rate steady at 4 percent from June 2007 to July 2008 to fight inflation as commodities such as oil, corn and gold soared to records. After raising the rate by 25 basis points to 4.25 percent in July, policymakers kept the rate unchanged at their August meeting.
The euro traded as low as $1.4659 Friday. It reached a record $1.6038 on July 15.
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