Oil, Gold Prices Surge As Dollar Tumbles

Dollar's Decline to Another Low Versus Euro Boosts Appeal of Commodities; Oil, Gold Rally.

The commodities markets rallied Friday as the dollar skidded to a fresh low, driving investors to seek an inflation hedge in holdings of crude oil, gold and other metals.

The greenback tumbled to a low against the euro as investors looked past the Labor Department's stronger-than-expected reading on jobs growth in October. Although the total jobs added to payrolls this month topped expectations, suggesting the overall job market remains robust, investors appeared wary of the jobs erosion in the key construction, retail and manufacturing sectors.

The Labor Department said employers increased their payrolls by 166,000 versus the 85,000 new positions analysts had forecast; the unemployment rate stood pat at 4.7 percent, in line with September's level and analyst expectations. However, the jobs report is often revised, and investors appeared unconvinced by the positive news.

Among traders, "there is a belief there is a little bit of fudging that goes on" in the jobs report, given the huge size of the U.S. job market, said Alan Lammey, energy analyst with EIG Inc. "You have to take some of that with a grain of salt."

Oil and gold prices climbed as the dollar fell, making commodities more attractive to buyers abroad. Light, sweet crude for December delivery jumped $1.24 to $94.73 a barrel on the New York Mercantile Exchange. December gold surged $9.30 to $803 an ounce in mid-afternoon trading, topping the $800 mark for the second time this week.

The euro bought $1.4525, an-all time high for the 13-nation currency, before easing back to $1.4487. It was third time in five days that the euro soared to a new record versus the dollar.

This week brought mixed economic news that contributed to investors' uncertainty. The Commerce Department said Friday factory orders rose 0.2 percent in September, bucking analyst expectations for a 0.4 percent decline. But reports earlier this week showed consumers curbing their spending in September, while the manufacturing sector grew at the slowest rate since March. To further obfuscate matters, the government's initial estimate of third-quarter economic growth was surprisingly strong at 3.9 percent -- even as the housing and credit market turmoil rocked Wall Street.

Although economic readings were less than consistent, the Federal Reserve's decision Wednesday to cut its benchmark interest rate by a quarter point to stimulate economic growth also helped ensure the dollar would extend its decline. Lower rates can undercut a currency's value.

A weaker dollar also tends to add to the appeal of commodities as an alternative investment. December gasoline futures jumped 8.27 cents to $2.4259 a gallon, while heating oil futures rose 5.05 cents to $2.5628 a gallon on the Nymex. December silver futures rose 7.5 cents to $14.40 an ounce, while platinum for January delivery gained $8.20 to $1,459 an ounce on the Nymex.

Agriculture futures notched gains on the Chicago Board of Trade, meanwhile, helped in part by the rally in the energy market. Corn, soybean and wheat prices all climbed. "They're related markets because of alternative fuels," said DTN analyst Gary Wilhelmi. "When you get something sensational happening, like this week in the crude, that's going to lop over into the agriculture markets."