Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

GLOBAL MARKETS-Gold extends record high on dollar weakness

Published 11/18/2009, 02:13 PM
Updated 11/18/2009, 02:15 PM

* U.S. dollar hit by profit-taking after rally

* Gold rises to fresh record high of $1,152.75 per ounce

* U.S. technology shares hit by some weak earnings

By Daniel Bases

NEW YORK, Nov 18 (Reuters) - Investors took profits after a U.S. dollar rally and the status quo view of low U.S. interest rates, plowing the cash into gold, which lurched to another record high on Wednesday.

Commodity prices benefited from the dollar's decline. U.S. benchmark stocks fell on worrisome outlooks from major software makers and a surprise decline in new home construction that undermined the economic recovery outlook.

European share prices were brought lower once U.S. markets opened. Japanese share prices fell to six-week lows.

U.S. Treasury bonds could not capitalize on the drop in stocks as slightly stronger-than-expected U.S. consumer inflation data encouraged some selling. Euro zone government bond prices followed suit. [ID:nN1899353]

Spot gold prices rose 85 cents, or 0.07 percent, to $1,141.40 after earlier hitting a record $1,152.75.

Analysts said the run-up in gold was driven by investors counting on the precious metal as a hedge against a falling dollar and by speculative buying.

St. Louis Federal Reserve Bank President James Bullard said the U.S. central bank would likely start tightening financial conditions by selling assets it has accumulated before raising interest rates.

The Bullard statement "throws cold water on any lingering thoughts of rate hikes," said Jacob Oubina, strategist at Forex.com in Bedminster, New Jersey. It also offset comments this week from Fed Chairman Ben Bernanke, who triggered a dollar rally when he said the central bank was attentive to the dollar's value.

At 1:20 p.m. (1820 GMT), the dollar was down against a basket of major currencies <.DXY> 0.33 percent at 75.118.

The euro was up 0.54 percent at $1.4948 while the dollar was flat versus the Japanese yen, up just 0.03 percent at 89.35 .

On Wall Street, the Dow Jones industrial average <.DJI> was down 61.75 points, or 0.59 percent, at 10,375.67. The Standard & Poor's 500 Index <.SPX> was down 5.82 points, or 0.52 percent, at 1,104.50. The Nasdaq Composite Index <.IXIC> was down 20.75 points, or 0.94 percent, at 2,183.03.

In the last week there has been a breakdown in the negative correlation between U.S. stocks and the dollar whereby any positive news on the economy has been good for equities but bad for the dollar as investors take a step off the sidelines with their cash and put it at greater risk.

"I think the reason why it has broken down this week has been talk on behalf of the Fed on the dollar and possibly maintaining low interest rates for a prolonged period of time," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

"It is uniformly negative for the U.S. dollar regardless of the direction of the (U.S.) stock market," he added.

European share prices fell for a second consecutive day with stronger mining stocks unable to offset weak U.S. economic data and technology shares.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended down 0.3 percent at 1,027.16 points, having hit a fresh 13-month high earlier in the trading session.

U.S. technology stocks, among the stronger areas of the market weakened after architectural and engineering software maker Autodesk Inc forecast fourth-quarter earnings below expectations. Customer relationship software maker Salesforce.com Inc reported a slowdown in new business. For details, see [ID:nN1747284] and [ID:nN1739572].

In the energy markets, U.S. crude oil turned lower in U.S. trade, slipping 35 cents, or 0.44 percent, to $78.79 per barrel.

The benchmark 10-year U.S. Treasury note was down 8/32, with the yield at 3.3527 percent.

Euro zone government bond yields rose. The 10-year Bund yields were up half a basis point at 3.288 percent.

"The volume of risk taking is very, very light," said a European-based trader, adding that people were stepping back ahead of the end of the year. (Additional reporting by Naomi Tajitsu, Christoph Steitz, Kirsten Donovan in London, Leah Schnurr, Steven C. Johnson, Emily Flitter in New York; Editing by Kenneth Barry)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.