Mumbai, Dec 17: Oil, gold and copper declined as the dollar advanced to its highest level in three months against the euro on signs the U.S. economic recovery is gaining momentum.
Wheat and soybeans reversed gains as the U.S. currency increased against 15 out of 16 of its most-traded counterparts, advancing 0.9 percent against the euro and 0.4 percent versus the yen. Investors turned bullish on the dollar for the first time since March, a survey of Bloomberg users showed. The U.S. economy is strengthening, the Federal Open Market Committee said.
“If we see strong gains in the dollar, it will weigh on all commodities,” Shanghai Tonglian Futures Co. analyst Shi Hai said in a phone interview today.
Commodities, measured by the Standard & Poor’s GSCI index of 24 futures, advanced 44 percent this year by yesterday’s close as the dollar’s value against six major currencies dropped 5.3 percent. Investors bought raw materials to protect their wealth amid the worst global recession since World War II and as governments spent at least $12 trillion in economic stimulus.
The world’s primary reserve currency will climb in the next six months, according to 1,934 participants in the Professional Global Confidence Index. The deterioration in the labor market is abating and household spending appears to be expanding at a moderate rate, the Open Market Committee said.
Crude oil for January delivery fell as much as 0.7 percent to $72.16 a barrel in New York and traded at $72.33 at 2:09 p.m. Singapore time. Gold for immediate delivery dropped as much as 0.8 percent to $1,128.60 an ounce and traded at $1,129.63.
‘Poor’ Asset Class
“In times of crisis where you don’t trust paper money, where you don’t trust the financial system, then people like the physical aspect of holding gold,” Adrian Mowat, JPMorgan’s chief Asian and emerging markets strategist, told Bloomberg Television. “As we get a recovery I think gold is going to look like a very poor asset class to own as we go into next year.”
Copper for delivery in three months fell as much as 1 percent to $6,970.25 a metric ton on the London Metal Exchange and traded at $7,000 a ton at 2:11 p.m. in Singapore.
Wheat for March delivery dropped 0.8 percent to $5.33 a bushel in Chicago after earlier trading as high as $5.3925. Soybeans fell 0.6 percent to $10.61 a bushel after gaining to $10.71 a bushel.
–Agencies