While you were sleeping: Gold hits record, oil gains, dollar falls, stocks rally

Wednesday 7th October 2009

The price of gold rose to a record high as a weakening US dollar spurred demand for the precious metal as an alternative investment.

Gold futures reached US$1,045 an ounce in New York. Futures for December delivery gained 2.1% to US$1,039.20 an ounce on the New York Mercantile Exchange. Traders said the metal has further to run.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.5% to 76.32. The currency fell after Australia yesterday became the first G-20 economy to raise interest rates following the global financial crisis, widening the gap with the Federal Reserve’s near-zero rate.

The Reserve Bank of Australia’s move to raise its benchmark interest rate to 3.25% stoked optimism for economic growth and demand for higher yielding, or riskier, assets.

The dollar fell to US$1.4712 per euro from US$1.4648. The greenback weakened to 88.75 yen from 89.53. The euro slid to 130.62 yen from 131.15.

The Australian dollar is up 1.3% to 88.88 US cents.

Helping weigh on the greenback, the UK’s Independent newspaper said Middle East states, Russia, China and Japan have discussed replacing the US dollar as the currency for trading oil.

The report was denied by Kuwaiti Oil Minister Sheikh Ahmed Al-Sabah.

Crude oil for November delivery rose 1.5% to US$71.48 a barrel on the New York Mercantile Exchange. The price of crude has soared 60% this year.

US stocks rose following the RBA’s rate hike and as investors anticipate better third-quarter earnings. The Dow Jones Industrial Average rose 1.4% to 9733.89 and the Standard & Poor’s 500 gained 1.3% to 1054.43. The Nasdaq Composite rose 1.6% to 2100.78.

Alcoa Inc. rose 3.7% to US$13.91, leading the Dow higher. The aluminium producer is the first company on the Dow to post earnings. Drugmaker Pfizer gained 2.4% to US$16.79 and Merck rose 2.2% to US$32.47.

Exxon Mobil advanced 1.7% to US$68.73 as the price of crude oil gained.

Stocks also rose after President Barack Obama indicated the US may broaden its stimulus measures, with tax cuts and spending programmes. Signs of stronger growth in emerging markets also stoked appetite for equities.

HSBC Emerging Markets Index of data from purchasing managers showed manufacturing in emerging markets had the biggest gain since the second quarter of 2008.

Newmont Mining, the biggest US gold producer, gained 6.4% to US$45.96 as the price of gold gained. Freeport-McMoRan Copper & Gold rose 3.1% to US$69.41 as the price of copper rose.

Mosaic rose 4.9% to US$48.22 after the fertilizer company said demand for potash will recover by the second quarter of 2010.

American International Group rose 5.1% to US$44.92 after Bloomberg reported it is close to agreement to sell its Taiwan life insurance unit to Primus Financial Holdings.

Boeing Co. fell 0.4% to US$52.08 after the plane maker said it would delay the first flight of its 747-8 Freighter for a second time and take a US$1 billion charge to cover increased production costs and weaker markets.

European shares rallied, led by financials and oil companies, after Australia raised interest rates, stoking optimism for global growth. The Dow Jones Stoxx 600 gained 2.2% to 241.17.

Among regional benchmarks, Germany’s DAX 30 gained 2.7% to 5657.64 and France’s CAC 40 gained 2.6% to 3770.21.

The UK’s FTSE 100 rose 2.3% to 5137.98, even after government figures showed factory output unexpectedly fell 1.9% in August.

France’s Credit Agricole rose 7.8%, leading financials higher. Royal Bank of Scotland gained 2.7%. Barclays climbed 2.2%

BHP Billiton climbed 4.6% as commodity prices gained. Xstrata jumped 6.5%.

Rio Tinto gained 6.9% after Mongolia gave the green light to a deal to exploit one of the world’s biggest untapped copper and gold resources, approving Rio’s Oyu Tolgoi mine venture with Ivanhoe Mines.

Businesswire.co.nz

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