DY: Gold, other commodities soar as dollar tumbles
NEW YORK -- Commodity prices soared across the board Friday as a sinking dollar stoked fears of inflation.
The Reuters/Jefferies CRB index, a widely used measure of the global commodities markets, rose 1.3 percent. The index jumped 13.8 percent in May -- the biggest monthly jump since at least 1975, the farthest back data is available on Thomson Reuters.
"Commodities are definitely in vogue again," said Rob Kurzatkowski, futures analyst with OptionsXpress.
Prices for gold, oil and grains moved higher as the dollar sank to its lowest level in months against the euro and the British pound.
The dollar has weakened considerably since March as investors move out of cash holdings and into riskier assets like stocks on hopes for an economic recovery. Investors are also worried that the massive amounts of money the government has been pumping into the system could lead to inflation.
That has been a boon for commodities like gold and oil. Demand for gold tends to rise when the dollar is weak as investors seek protection against inflation, which can be triggered by a falling greenback. And oil is priced in dollars, so when the U.S. currency falls it becomes cheaper for foreign buyers.
Other commodities, like grains, have been on an upswing too, benefiting from improving economic data and a brighter outlook on demand.
"It seems like all the government spending and bailouts are finally starting to catch up and we're seeing that spill over" into commodities markets, Kurzatkowski said.
Mixed signals on the economy on Friday did little to deter investors from buying commodities.
The government reduced its estimate for the decline in first-quarter gross domestic product to an annual rate of 5.7 percent from an earlier estimate of 6.1 percent. However, the revision wasn't as big as analysts had expected.
Meanwhile, a group of Chicago-area purchasing executives reported a much steeper drop in Midwest business activity than expected. But another report showed an increase in consumer sentiment in May.
Gold for August delivery jumped $17.10 to settle at $980.30 an ounce on the New York Mercantile Exchange. The precious metal shot up 10 percent in May, after two straight months of declines. Its year-to-date gain stands at 10.9 percent.
July silver rallied 45 cents to $15.61 an ounce, while July copper futures rose 6.05 cents to $2.1975 a pound.
On Wall Street, stocks fluctuated in a narrow range throughout the day as investors sifted through the mixed economic data. Investors have been concerned that the market's stunning three-month rally may have been overdone and that the economic recovery might not be as robust as previously believed.
Oil prices continued their tear on the Nymex, rising above $66 a barrel for the first time in six months, as investors continued to bet on a rebound in demand. Prices are now nearly double the lows reached in March, when oil dropped below $35 a barrel.
On Friday, the secretary general of the Organization of the Petroleum Exporting Countries said he believes oil prices will continue to rise through the end of the year.
Light, sweet crude for July delivery rose $1.23 to $66.31 a barrel. Crude prices spiked 30 percent in May.
Gasoline futures rose 2.12 cents to $1.8953 a gallon, while heating oil futures rose 4.71 cents to $1.6776 a gallon.
Grain prices rose on the Chicago Board of Trade.
July wheat futures added 6.75 cents to $6.3725 a bushel, while corn for July delivery rose 7.5 cents to $4.3625 a bushel.
