Oil, Gold Decline on Dollar Recovery; Wheat Rallies on Supply
By Glenys Sim
March 24 (Bloomberg) -- Crude oil and gold extended declines as the dollar rebounded on speculation the Federal Reserve's efforts to combat a housing slump and a shortage of funds in credit markets may restore investor confidence.
Wheat, corn and soybeans gained as low stockpiles attracted investors after a sell-off. The Fed lowered interest rates last week, agreed to accept a wider range of collateral on loans and extended credit to securities' firms for the first time.
``The dollar was oversold, commodities were overbought,'' said Hans Goetti, chief investment officer of LGT Bank in Liechtenstein AG in Singapore. ``We would not rule out the continuation of this for the next one or two weeks as the dollar rallies a little bit more.''
Gold for immediate delivery dropped as much as 1.4 percent to $906.79 an ounce in Asia and traded at $912.48 an ounce in Singapore at 3:30 p.m. today. Gold, which has plunged 12 percent from its record $1,032.7 an ounce on March 17, is still up 9.4 percent for the year.
``The bull market in commodities is not over; in any bull market you'll get these pullbacks, sharp pullbacks that tend to be relatively short-lived,'' Goetti, who oversees $10 billion in assets, said today in a Bloomberg Television interview.
The dollar gained today against 12 of the 16 most-active traded currencies, rising against commodity producing nations such as Canada and Norway as gold and oil fell.
Surfeit
``The recent loading up of commodity positions as a hedge against the dollar's weakness reached satiation,'' Emmanuel Ng, a currency strategist with Oversea-Chinese Banking Corp. in Singapore, said in a report today.
The dollar climbed to $1.5342 per euro, the highest since March 12, before trading at $1.5391 as of 3:35 p.m. in Singapore, from $1.5431 in New York on March 21. It also advanced to 99.91 yen from 99.58 yen.
Crude oil fell for a third day on concern the slowing U.S. economy will cut consumption and the dollar's gain will reduce demand for commodities as an inflation hedge.
Total implied fuel demand in the U.S. for the four weeks ended March 14 dropped 3.2 percent from a year earlier, according to the Energy Department.
``Fundamentals have been weak for some time now, so the recent trigger has definitely been the bottoming dollar,'' said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. Investors ``are still not convinced the downtrend has finished.''
More Declines
The contract for May delivery fell by as much as 1.8 percent to $100.02 a barrel on the New York Mercantile Exchange and traded at $100.94 at 3:38 p.m. Singapore time. Prices are still up 61 percent in the past year.
U.S. crude oil prices are likely to fall toward $90 a barrel this spring as the country's slowing economic growth encourages traders to exit commodity markets, Goldman Sachs Group Inc. said in a report on March 20.
Agricultural commodities in Chicago rose on speculation losses last week were excessive. Wheat, corn and soybeans gained for the first day in three on the Chicago Board of Trade.
``The heavy sell-off in the agricultural markets over the last two weeks has taken price levels back to areas more reflective of fundamentals,'' said Michael Coleman, managing director at Aisling Analytics Pte. in Singapore, who oversees about $2.6 billion in funds. ``The underlying issues of tight global inventory levels remain.''
Palm oil futures in Malaysia, the global benchmark, had their biggest gain in eight days after some investors deemed last week's 9.7 percent drop was overdone.
To contact the reporter for this story: Glenys Sim in Singapore at [email protected] Last Updated: March 24, 2008 03:43 EDT
GNL Price at posting:
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