Investors turn to gold as an alternative to financial instruments

Tag : base metals
 A gain in the dollar on reports showingbetter-than-expected U.S. home sales and orders for long-lastinggoods hurt oil and gold prices early Friday, but the improvedgrowth prospects implied by the data helped prices of base metalsused in manufacturing and homebuilding.
Later, investors drove gold prices higher when they chose theyellow metal as an alternative to falling U.S. equities.
Selling of U.S. financial shares increased after Standard & Poor'ssaid it may cut debt and preferred stock ratings of U.S. housingfinance agencies Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) . The news sent the Dow Jones industrial average and theStandard & Poor's 500 Index into negative territory shortly beforeCOMEX gold closed.
Investors sometimes turn to gold as an alternative to financialinstruments, especially in times of uncertainty.
U.S. gold futures for August delivery settled $4.50 higher at$926.80 an ounce on the COMEX metals division of NYMEX .
Crude oil futures dropped 1.78 percent by the close, pressured by astronger U.S. dollar after release of several upbeat economicgauges and an industry consultant's forecast for higher OPEC oiloutput this month.
On the New York Mercantile Exchange, September crude fell $2.23 tofinish at $123.26 a barrel.
"The rise in U.S. durable goods orders pushed the dollar up and thePetrologistics estimate of OPEC output rising both helped pull downcrude futures," said Phil Flynn, analyst with Alaron Trading inChicago.
Industry consultant Petrologistics said it sees a200,000-barrel-per-day rise in OPEC production for July.
U.S. orders for durable manufactured goods went up in June demandfor metals, machinery, electrical equipment and military needs, agovernment report showed.
"The overall pattern of business investment in the U.S. is holdingup pretty well. These numbers have been good for quite sometime ...and not indicative of the levels that you would normally associatewith a recession," said Shaun Osborne, chief currency strategist atTD Securities in Toronto.
Later, U.S. consumer sentiment came in higher in July, up from a28-year low last month and data from the struggling housing marketcontributed to a brighter outlook. New home sales fell less thanexpected in June and inventories of homes for sale fell to a3-1/2-year low.
The improved data lifted base metals, triggering a rebound in U.S.copper futures from the 6-week low hit Thursday.
The red metal is a key material in home construction, and copperfor September delivery gained 2.80 cents on the New York MercantileExchange's COMEX division to close at $3.5770 per lb.
Agricultural futures ended with strong gains as wheat paved the wayfor higher corn and soybean prices.
U.S. wheat soared 3 percent following news Iran may have bought upto 3.0 million tonnes of the 5.0 million it needs for the yearending March 2009.
Wheat's rally boosted corn and soybeans 1 percent.
"Wheat led everything up and the talk Iran bought 3 million tonneswith up to 500,000 coming from the U.S. got people's attention,"said Mario Balletto, analyst for Citigroup (nyse: C - news - people ).
U.S. wheat for September delivery finished up 23-1/4 cents at $8.11per bushel on the Chicago Board of Trade. U.S. corn for Septemberdelivery closed 4-1/4 cents higher at $5.77-1/4 per bushel and soyfor August delivery rose 13-3/4 to end at $13.98-3/4 per bushel.
(Reporting by Carole Vaporean; Editing by Christian Wiessner) Copyright 2008 Reuters, Click for Restriction
Oil, Gold Fly On Weak Data
The Billion Dollar Chocolate Industry