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Gold prices drop on rising dollar, grains end mixed

Gold prices dropped on Tuesday for the eighth straight session, as speculative funds kept liquidating their holdings given a stronger dollar.

Energy prices also moved lower, while grains finished mixed.

Gold — regarded earlier this year as a hedge against a weakening US dollar — is now down 21 percent since its March record of US$1,033.90 an ounce.

“August has thus far been a one-way staircase for bullion prices,” wrote Jon Nadler, a precious metals analyst with Kitco Bullion Dealers Montreal, in a research note on Tuesday. “The recent volatility in most of these metals and currency markets appears to indicate a shift in the long-term trends of the dollar, the euro and the precious metals.”

On Tuesday, gold for December delivery lost US$13.70 to settle at US$814.60 an ounce on the Nymex, after dipping as low as US$808.60.

Other metals also declined, as the dollar held steady against the euro but reached new 20-month highs against the pound.

Silver for delivery next month fell US$0.135 to settle at US$14.485 an ounce on the Nymex, after sinking as low as US$14.01.

Copper for delivery next month fell US$0.064 to settle at US$3.2275 a pound.

Oil prices also fell because of a stronger dollar, as well as a lowered forecast for developed countries’ energy use by the International Energy Agency.

On the Nymex, light, sweet crude dipped by US$1.44 to settle at US$113.01 a barrel, after dropping to a new three-month low of US$112.31 during trading. Heating oil fell US$0.0414 to US$3.0781 a gallon, while gasoline futures slipped US$0.0234 to US$2.8432 a gallon.

Meanwhile, grains finished mixed on Tuesday after the US Department of Agriculture (USDA) lifted its production estimates for corn and wheat but lowered its forecast for soybeans.

On Tuesday, the USDA estimated that farmers would harvest 12.3 billion bushels of corn — still down 6 percent from last year’s crop, but better than previously believed thanks to the improvement in the weather. It estimated that the soybean crop will be 2.97 billion bushels, and the wheat crop will be 2.462 billion bushels.

If those forecasts are correct, this year’s corn crop will be the second-largest ever and the soybean crop will be the fourth-largest.

The figures were largely in line with agriculture analysts’ expectations, but surprisingly positive given the storms that devastated Midwest farmland earlier this year, said Elaine Kub of commodities research firm DTN in Omaha, Nebraska.

“In ideal years, farmers will harvest 90 percent and lose 10 percent to the usual factors ... nonetheless, the USDA says they will harvest more than 91 percent. So that’s perplexing,” she said.

Kub said the predictions could have a “wide margin of error.”

Because grains prices have fallen so far so fast, it appears that supply to the market is waning a bit while demand is recovering, said Christian Mayer, an analyst with Northstar Commodity in Minneapolis.
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