MC:Gold surges to record; dollar's loss is oil's gain
Gold surged to a record on Friday to seal its biggest two-week gain since 2008 while oil and copper also rose as a dip in the US dollar offset another mild bout of investor jitters.
Commodity traders shifted their focus from the sliding US stock market, which has largely dictated the direction for prices throughout an exceptionally volatile August, to the dollar, whose inverse correlation with raw material markets had waned in recent weeks as markets vacillated.
But the return of the once-popular dollar/commodity trade may be short-lived as investors refocus on euro zone credit woes and weak US economic data that has caused gold to rise more than 12% this month while risk assets slump.
"Investors are really worried. Confidence is at its lowest ebb for some time and the more data disappoints, the more upside lies ahead for gold," analyst Edel Tully at UBS said in a note.
The Reuters-Jefferies CRB, a global benchmark for commodities, rose 0.9%, reversing half the previous
day's losses and ending the week up 0.9% -- its biggest gain in six weeks. Most markets had already settled before the S&P index deepened losses to end 1.5% lower.
The dollar index initially fell after Spain said it would temporarily cut the sales tax on new house purchases in a
move aimed at stimulating the construction sector. The dollar later hit a record low against the yen on a newspaper report suggesting Japan did not plan to intervene often.
The rebound in industrial commodities and grains helped shore up prices after another deep selloff on Thursday, spurred by data showing factory activity in the U.S. Mid-Atlantic region fell to the lowest level since March 2009, when the world's top economy was in recession.
Investors are now looking for any sign of Federal Reserve action when bankers gather in Jackson Hole, Wyoming, late next week, one year after Chairman Ben Bernanke launched a second phase of quantitative easing to revive the economy.
Whether the Fed really has more viable options now, having already committed last week to keep interest rates at near zero for the next two years, is an open question.
"We think the markets will be disappointed," Capital Economics said in a research note. "Bernanke will probably emphasise that the Fed has the tools to boost the economy if deemed appropriate. But the big difference between now and last year is the higher rate of core inflation."
"That means more policy stimulus will probably be a story for next year, once core inflation has fallen back, not this year," it added.
Gold leads, others follow
After rallying around 3% to a record USD 1,877 an ounce earlier in the session, bullion sharply pared initial gains as Wall Street held up better than European stocks. Rising oil and commodity prices also sapped some safety bids.
After touching its ninth record high of August, spot gold was up 1.2% at USD 1,846.40 an ounce by 3:36 p.m. EDT (1936 GMT). New York gold futures rose 1.7% to settle at USd 1,850.10 an ounce, up 30 percent this year.
ICE Brent crude for October delivery rose USD 1.63 to settle at USD 108.62 a barrel, eking out a 59 cent weekly gain to snap three straight weeks of losses. U.S. front-month September crude slipped 12 cents to settle at USD 82.26 a barrel, blowing out the Brent/WTI spread to a new record.
London Metal Exchange (LME) benchmark copper closed up USD 51 at USD 8,825 a tonne, recovering from an earlier slide to $8,700, its lowest level since August 11.
The industrial metals complex was partly supported by supply threats in Latin America.
Workers at Chile's Collahuasi, the world's No. 3 copper mine, have threatened a one-day stoppage on September 2 if the company does not hire back workers fired after a previous disruption.
"Setting aside the weak macro environment, copper's fundamentals remain well-supported. Risks of short-term
disputes and potential supply outages remain," ANZ said in a note.
US wheat futures rose 3% on Friday, rallying on production worries and a setback in the dollar that also
boosted corn and soybeans. Next week's summer crop tour may set the tone for another test of recent highs.
"Today is a relief recovery. It's diminished European debt worry as we close and go into the weekend," said Dan Basse, president of AgResource Co in Chicago.
