Gold prices fall flat, other commodities decline
By SARA LEPRO, AP Business Writer
Wednesday, November 26, 2008 3:33 PM CST
NEW YORK 11/26/08 - Gold prices were largely unchanged Tuesday, but other commodities, including energy and agriculture futures, declined as investors were hit with more discouraging economic news.
The Commerce Department said third-quarter gross domestic product declined at a 0.5 percent annual rate, out-pacing the 0.3 percent first estimated a month ago. While analysts had expected the number to decline, it was still the worst reading since growth fell at a 1.4 percent pace in the third quarter of 2001, during the last recession.
Commodities prices have been pummeled in recent months by signs of a faltering economy that investors believe will sharply curtail demand for energy, base metals and other raw materials.
Meanwhile, BHP Billiton Ltd., the world’s biggest mining company, abandoned a hostile $68 billion takeover bid for rival Rio Tinto Ltd., blaming the global economic downturn and plunging commodities prices.
Jon Nadler, senior analyst at Kitco Bullion Dealers Montreal, said the move “speaks volumes” about the health of the commodities sector. “They simply walked away because they don’t see the benefits here,” he said.
Wall Street, however, largely overlooked some of the dismal economic news and showed some signs of stability Tuesday. Investors, heartened by new government initiatives to spur lending, sent the Dow Jones industrials and Standard & Poor’s 500 index higher for the third straight session.
The Treasury Department and the Federal Reserve said Tuesday they planned to provide $800 billion to help un-freeze the market for consumer debt and to make mortgage loans cheaper and more available.
The moves by the federal government to pump money into the financial system and increase lending among banks and to consumers could feed inflation, which ultimately bodes well for commodities. Investors often use commodities as a hedge against a weakening dollar.
The prospect of inflation and a weakening U.S. currency helped offset some of investors concerns about the econ-omy, Nadler said.
“Right now it’s this tug-of-war between deflationary sources and the health of the economy, versus the other side where people see inflation,” he said.
Gold for February delivery added 10 cents to settle at $820.50 an ounce on the New York Mercantile Exchange.
March silver fell 7.3 cents to $10.305 an ounce, while March copper futures dipped 1.75 cents to $1.6540 a pound.
The dollar fell against the euro and the British pound, but rose against the Japanese yen. The yield on the bench-mark 10-year Treasury note, which moves opposite its price, fell to 3.10 percent from 3.33 percent late Monday.
Energy prices declined on the Nymex in response to the gloomy economic reports.
Light, sweet crude for January delivery tumbled $3.73 to settle at $50.77 a barrel.
In other Nymex trading, gasoline futures dropped 4.76 cents to settle at $1.0949 a gallon, and heating oil slid 8.56 cents to settle at $1.6988 a gallon.
Grain prices fell on the Chicago Board of Trade. March wheat futures dipped 4 cents to $5.5275 a bushel, while corn for March delivery fell 0.5 cent to $3.705 a bushel.
January soybeans slipped 1 cent to $8.83 a bushel.
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