AP News, June 1st, 2007
Gold prices rose Thursday as the U.S. dollar fell in response to the government's weaker-than-expected reading on first-quarter gross domestic product.
Elsewhere in the commodities markets, industrial metals and agriculture prices climbed while gasoline prices fell.
The gold market reacted to a falling dollar, which lost ground to other major currencies amid concerns about sluggish growth in the U.S.
The Commerce Department slashed its estimate of first-quarter GDP to 0.6 percent from an earlier estimate of 1.3 percent, below economists' average forecast for 0.8 percent growth. Slower-than-expected growth in the U.S. has raised some analysts' expectations that the Fed will cut interest rates this year, although forecasts for the Fed's next move remain mixed.
"Gold and metals will be the beneficiary if the Fed cuts rates, which will make the dollar weaker," said Neal Ryan, commodities analyst with New Orleans-based bullion dealer Blanchard & Co.
Gold for June delivery rose $7.90 to settle at $661 an ounce on the New York Mercantile Exchange. The August contract, which now carries the heaviest open interest, added $7.40 to close at $666.70 an ounce. Open interest refers to the number of futures contracts that haven't yet been exercised, expired or fulfilled by delivery.
July silver edged up 25 cents to settle at $13.47 an ounce.
Meanwhile, industrial metals prices mostly firmed on the London Metal Exchange, nickel being the day's lone loser. Copper rose more than 2 percent as inventories dwindled further, while zinc followed with a gain of nearly 3 percent.
In the energy markets, gasoline futures fell after the government reported a larger-than-expected increase in inventories for the week ended May 25. The Energy Information Administration reported the nation's gasoline stockpiles swelled by 1.3 million barrels, while crude oil inventories shrank by 2 million barrels. The drawdown helped boost crude prices.
The June contract for gasoline, which expires Thursday, shed 2.13 cents to end at $2.2512 a gallon on Nymex. July gasoline futures closed a fraction of a penny higher at $2.2032.
Light, sweet crude for July delivery added 52 cents to settle at $64.01 a barrel.
In Chicago, corn and wheat futures extended their sharp gains from a day earlier. July wheat jumped 6.2 cents on the Chicago Board of Trade to settle at $5.17 a bushel, while July corn added 8 cents to close at $3.902 a bushel.
There is a tight enough global situation in grains, and wheat in particular, that the markets are not in the mood to tolerate any kind of stress on supply, said Richard Feltes, director of Man Financial Global Research.
A drought in the Black Sea wheat-producing region, the world's lowest-cost supplier, has curbed expectations for global supplies and prompted buyers to look to turn elsewhere. The U.S. Department of Agriculture reported Thursday that Spain _ which sources much of its wheat in the Black Sea region, Feltes noted _ has bought 120,000 metric tons of soft, red winter wheat from private exporters.
DTN analyst Gary Wilhelmi also attributed the volatility in the grains market this week to heavy fund buying and selling.
