Gold reinforced its status as a safe-haven investment on Friday, rallying to $900 an ounce on buying linked to investor concern over the faltering world economy. Other commodities, from base metals to grains, were up sharply as well. Crude oil prices ran up 7 percent on supply concerns that overshadowed the economy. Copper rose 6 percent, chasing the rally in gold and oil.
Corn prices rose 3.5 percent after a steep cut in Argentine production due to the ongoing drought in the world's second largest corn exporter. The combined surge pushed the Reuters-Jefferies CRB index, which tracks commodity prices across 19 mostly US traded futures markets, up 2 percent to a near 2-week high. Some analysts were skeptical that the gains, especially in oil, would hold, saying investors seemed to be taking output cuts by giant producer Opec more seriously than the recession wearing down most of the world's industries.
"We continue to believe that weak economic growth is likely to have a much greater impact on oil demand than is currently factored into consensus supply and demand forecasts," Deutsche Bank analyst Adam Sieminski said in a research note.
In gold, the spot price of bullion hit a session high of $902.50 an ounce by 1900 GMT, the highest since October 8. February gold futures on the COMEX metals division of the New York Mercantile Exchange jumped more than 5 percent, or $45, to peak at $903.80 an ounce. They settled at $895.80, up 4.3 percent, or $37.
The run-up in gold came despite the dollar's spike to a 23-year high against sterling and a six-week peak against the euro. Gold prices usually rise when the dollar is weak, prompting investors to consider the precious metal as an alternative. But worries about the health of the US and European banking sectors amid the recession has become a more dominant factor of late in trading gold, analysts said.
"The relationship between gold and the US dollar appears to be broken at present," said Fairfax analyst John Meyer. "Clearly, there is investment money flooding in due to the perceived security of gold." US crude oil settled up $2.80, or 6.4 percent, at $46.47 a barrel. It had risen $3.33 to a session high of $47 on evidence that Opec was complying with the bulk of record production cuts announced in recent months.A harsh winter in the US.