Gold, Silver Advance As Dollar Drops
Monday, December 10, 2007; 5:06 PM
NEW YORK -- Gold prices climbed Monday to their highest levels so far this month as expectations for lower U.S. interest rates weighed on the dollar and boosted the appeal of precious metals.
The Federal Reserve meets Tuesday, and investors widely expect the central bank to cut its benchmark federal funds rate by at least a quarter point; some expect a sharper half point reduction. Those expectations undercut the dollar, and gave investors reason to shift funds to hard assets like oil and gold.
Futures for precious metals and agricultural products rose, while the industrial metals market weakened. Energy prices ended lower.
An ounce of gold settled at $813.50, up $13.30 on the New York Mercantile Exchange. The metal rose as high as $818 an ounce in earlier trading, the highest since Nov. 29.
March silver futures added 34.5 cents to $14.85 an ounce, while January platinum futures gained $4.10 to $1,466.30 an ounce.
The Fed is "on pace to keep lowering rates," said MF Global gold trader Kevin Grady. "I think the subprime situation is going to last another two years, in my opinion. The economy needs this (rate cut). The stock market is really receptive to this and the gold market, as well."
There was more evidence of subprime fallout on Monday. Swiss bank UBS AG said Monday it will write down $10 billion in losses on deteriorating U.S. mortgage investments and warned it would book a loss in the fourth quarter as a result. Losses from the mortgage market downturn, particularly on loans made to those with poor credit, have continued to mount at major financial institutions worldwide.
But UBS eased some market worries about the losses with news that it has sold a $9.75 billion stake to Singapore Investment Corp. and smaller $1.77 billion stake to an unnamed strategic investor in the Middle East _ a confidence booster for Wall Street and investors in the financial sector.
"The news are helping stocks and overall risk appetite," at the expense of the dollar, said Ashraf Laidi, chief currency analyst with CMC Markets U.S., in a report.
The 13-nation euro bought $1.4713, up from the $1.4655 it bought in New York late Friday.
A weak greenback can lure investors to the commodities markets, as products priced in dollars look cheaper to buyers abroad.
Energy futures finished lower, despite the dollar's dip and news that two Texas supply channels were temporarily closed because of fog. Concerns have shifted to the health of oil demand in a slowing economy, as prices continue to hover just below $90 a barrel. Analysts expect that the Energy Information Administration will report increasing stockpiles of crude oil, gasoline, heating oil and other distillates in its weekly inventory report, due Wednesday.