Commodities Prices Slide As Dollar Jumps

The commodities markets moved broadly lower as the greenback gained strength, making prices appear more expensive to foreign buyers. Energy, metals and agricultural futures declined.

Gold prices have become extremely volatile as the market wrestles with a correction following the metal's climb to levels not seen since 1980. The big day-to-day moves of $20 to $30 an ounce seen this week should be expected, analysts say, after the price of gold ballooned $200 in fewer than three months. Although analysts described Thursday's move as partly technical in nature, a drop in energy prices and strength in the dollar added to the pressure.

An ounce of gold plummeted $27.40 to finish at $787.30 on the New York Mercantile Exchange. Gold climbed as high as $848 an ounce last week, not far from the all-time high of $875 an ounce reached in January 1980.

"I think you'll see $875 but there's going to be resistance," said Scott Meyers, senior trading analyst with Pioneer Futures, a division of MF Global. "People will be quicker to take profits," now that the risks of betting on higher prices have risen because of gold's steep ascent.

December silver fell 58.3 cents to $14.482 an ounce on the Nymex.

Energy prices fell after the Energy Information Administration reported a surprising increase in inventories of crude oil and gasoline. U.S. stockpiles of crude swelled by 2.8 million barrels; analysts surveyed by Dow Jones Newswires had forecast, on average, a draw of 300,000 barrels. Gasoline supplies rose by 700,000 barrels versus analysts' forecast for a decline of 100,000 barrels.

A barrel of light, sweet crude for December lost 66 cents to settle at $93.43 a barrel on the Nymex, while December gasoline futures shed 3.43 cents to settle at $2.3361 a gallon.

Inventories of distillates such as diesel fuel and heating oil declined more than analysts expected, but prices fell along with other energy products. December heating oil futures fell 1.47 cents to settle at $2.5587 a gallon.

Meanwhile, the Organization of Petroleum Exporting Countries on Thursday lowered its expectations for fourth-quarter oil demand to reflect expectations that consumers may use less energy because of record-high prices.

The dollar rose against the euro and British pound.

The greenback has been in long-term decline against currencies worldwide and has rendered raw materials priced in the dollar more attractive to foreign buyers. It has also raised the appeal of gold as a safe haven investment. But in turn, the dollar's periodic moves higher can heap pressure on commodities prices.

"The dollar is in a corrective phase," said Stuart Kaufman, senior market strategist with Lind-Waldock division of MF Global. "Obviously, when the dollar goes up, that puts a lot of pressure on gold and the crude market."

A Labor Department report showing a second straight monthly rise in consumer price inflation could give the Federal Reserve less reason to lower interest rates further -- and steady or higher rates would strengthen the dollar. The department on Thursday said its consumer price index increased 0.3 percent in October due to rapidly rising energy and food costs, the same as in September and on par with analysts' consensus estimate.

Industrial metals declined broadly in London and New York. Copper prices pulled back as miners reported that damages to mines in Chile after a major earthquake there Wednesday would not hamper production substantially. Chile is the world's largest copper producer, and news of the 7.7-magnitude quake sparked a rally in the copper market Wednesday amid concerns that supplies would be interrupted.

Copper for December delivery dropped 21.55 cents to close at $3.081 a pound on the Nymex, while prices fell 2.8 percent on the London Metal Exchange. Nickel, zinc, lead and tin prices also moved lower on the LME.

Elsewhere, agricultural futures ended mixed on the Chicago Board of Trade. December corn fell 8.25 cents to $3.7475 a bushel, while January soybeans lost 0.75 cent to $10.7875 a bushel. Wheat for December delivery rose 13 cents to $7.655 a bushel.