Gold, metals give away gains from rally as corn rises before crop report

Thursday, October 7, 2010

Gold, metals give away some gains

Gold and other metals prices sank Thursday as investors worried that Japan’s central bank might soon take action to weaken the yen. That could strengthen the value of the dollar and make gold a less attractive hedge against inflation.

Gold for December delivery fell $12.70 to settle at $1,335 an ounce Wednesday, falling from the record high of $1,347.70 it hit Wednesday. Silver prices also fell, with December silver losing 45.9 cents to settle at $22.584 an ounce.

Investors are worried Japan’s central bank could act as soon as this weekend to intervene in currency markets, said George Gero, vice president of global futures at RBC Capital Markets.

Gold has become the go-to hedge against inflation. If Japan’s actions strengthen the dollar, it could change the investment calculus in gold, Gero said. It appears traders are already backing off gold’s record high, which had become a sort of self-fulfilling prophecy as higher prices helped stoke demand.

“It’s natural for ‘momentum’ traders to keeping adding (gold) to their positions as long as you make new contract highs every day,” Gero said. “The recent momentum traders are going to be sellers.”

Other metals also fell. Copper lost 7.35 cents to $3.6795 a pound. October palladium lost $2.55 to settle at $587.10 an ounce and platinum lost $7 to settle at $1,700 a pound.

Grain and bean prices rallied, a day before a U.S. Department of Agriculture report will give the latest estimate on the U.S. corn crop.

Corn prices rose 9.75 cents to settle at $4.9825 a bushel. Soybeans for November delivery rose 3 cents to $10.65 a bushel. Wheat for December delivery rose 1 cent to settle at $6.5925 a bushel.

Oil prices fell as a new government report showed supplies were higher than last year.

Oil supplies remain high and demand does not show signs of a significant pickup. The Energy Information Administration said Wednesday the nation’s crude inventories rose and are 7 percent above year-ago levels.

Benchmark crude for November delivery fell $1.56 to settle at $81.67 a barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil fell 5.6 cents to settle at $2.2518 a gallon, and gasoline fell 3.79 cents to settle at $2.1180 a gallon. Natural gas 24.8 cents to settle at $3.617 a gallon.

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