Energy, Metals Surge As Dollar Tumbles

The weak greenback bolstered other commodities, as well. Investors shifted into energy futures, agricultural products and precious metals amid a belief that raw materials will hold their value relative to all currencies. As the dollar slides, commodities also become more attractive to foreign buyers, whose currencies can essentially buy more in the U.S. market for less.

The dollar's sharp drop Tuesday was rooted in poor news from the housing sector. The Commerce Department posted an unexpectedly low level of building permit applications, an indicator of future housing construction. Meanwhile, Freddie Mac, the nation's second-largest buyer and guarantor of home loans, posted its most severe quarterly loss ever. The housing sector has been one of the economy's sorest spots, and worries that the pain could spread to other industries and hurt economic growth has pressured the dollar lower.

The Federal Reserve released the minutes of its Oct. 30-31 meeting, when the central bank lowered interest rates for the second time in as many months. The central bank also provided its first quarterly economic outlook, forecasting moderating inflation next year and slower economic growth -- a combination that could make for lower interest rates in the future, which would further pressure the dollar.

"No amount of rhetoric from the Fed right now is going to convince the markets that more rate cuts aren't in the offing," said Joseph Trevisani, chief market analyst for FX Solutions LLC.

While heating oil prices peaked Tuesday, the weak dollar put prices at a moderate discount for buyers abroad and buyers rushed to lock in supplies with the Northern Hemisphere winter just weeks away. Only about 8 percent of Americans, mostly in the Northeast and Mid-Atlantic states, use heating oil to warm their homes; demand for the distillate comes mainly from Europe and Asia.

A gallon of heating oil jumped 8.59 cents to settle at $2.6901 on the New York Mercantile Exchange, after trading at an all-time high of $2.6909. The last time heating oil traded near this level was in September 2005, when a gallon fetched about $2.20; prices have never been this high.

The heating oil futures contract also serves as a proxy for other, so-called "middle of the barrel" products such as kerosene, diesel and jet fuel. Those are typically cheaper to refine and used to fuel homes, cars, trucks and trains in other countries.

"As the economy grows abroad and the dollar is weak, you're seeing pretty strong demand for the distillate part of the barrel," said Andrew Lebow, senior vice president of MF Global.

Robust heating oil demand supported higher crude prices, as did dollar weakness and news of an outage at a refinery in Canada. Royal Dutch Shell PLC temporarily shut down its Alberta oil sands plant due to a fire.

Light, sweet crude for January delivery jumped $3.39 to settle at a record $98.03 a barrel, resuming its trek toward $100. Oil had traded as high as $98.62 a barrel earlier this month before retreating to the low $90 range.

Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $96 to $103 or more today, depending on how the adjustment is made.

December gasoline futures rose 6.99 cents to $2.4515 a gallon on the Nymex.

Meanwhile, gold regained safe-haven status Tuesday as investors sought to shield themselves from higher energy prices and the dollar's decline to an all-time low against the euro. Gold's rally follows several losing sessions -- a downward correction that many analysts had expected after the metal's run to the highest levels since 1980.

The December gold contract gained $20.30 to $798.30 an ounce in post-market trading on the Nymex following the release of the Fed minutes and forecast. Gold settled up $13.40 at $791.40 an ounce before the Fed's release, off its intraday peak of $848 reached Nov. 7.

December silver added 34 cents an ounce to $14.50, while January platinum rose $12.60 to $1,469.70 an ounce on the Nymex.

The Commerce Department said Tuesday that housing construction rebounded in October. But applications for building permits -- an indicator of future activity -- fell for the fifth straight month in October. Permit applications are down 24.5 percent from a year ago.

Freddie Mac on Tuesday reported a $2 billion loss in the third quarter and said it must raise capital to meet regulatory requirements. The mortgage lender, like many financial companies, has suffered from rising defaults on home loans.

The dollar declined against most major currencies, with the steepest move lower versus the euro. The 13-nation euro bought a record $1.482 late Tuesday, up from $1.4667 late Monday.

Industrial metals prices ended mixed on the London Metal Exchange. Nickel and lead prices edged higher, while copper, zinc and tin prices slipped. In New York, copper followed the other, Nymex-traded metals higher, rising 4.35 cents to close at $3.027 a pound.

Agricultural futures finished higher. December wheat rose 17.25 cents to $7.735 a bushel, and December corn closed up 3.75 cents to $3.8125 a bushel on the Chicago Board of Trade. January soybeans gained 16.5 cents per bushel to close at $10.87 on the CBOT.