Commodities rise as dollar falls
Oil and gold prices reached new records as the dollar sank to its lowest value in 35 years against six other major currencies. With more interest-rate cuts ahead, Bob Moon reports on when commodity prices might reach their peak.
Gold and silver (iStockPhoto.com)
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TESS VIGELAND: So, when is bad news good news? You may know the answer if you've invested lately in gold, oil or a lot of other commodities. The sinking U.S. dollar is causing many investors to move their money into assets with a reputation for being safe havens. For the fourth straight trading day, gold prices hit a record $989 an ounce. Silver's at highs not seen in 27 years, and then there's black gold. Some crude oil prices hit $104 a barrel today.
We asked Senior Business Correspondent Bob Moon to explain what's driving the commodities craze.
BOB MOON: In some cases, it's a rush to stock up on raw materials before the cost goes even higher. With gold and oil though, investors are simply climbing on for the ride. Ron Goodis is a trader at Equidex Brokerage Group. He says the value of those commodities is directly tied to the greenback.
RON GOODIS: Because gold and oil are priced in dollars, the price naturally has to go up in order for the producers of oil and gold to be compensated for the lesser value of the dollar that they're receiving.
Bullion traders are downright giddy over gold's prospects, precisely because the dollar sank to its lowest value in 35 years today, against six other major currencies. The Fed is signaling more interest-rate cutting ahead, and Goodis says it'll be no big deal for gold to hit the $1,000 mark soon.
GOODIS: I don't think, necessarily, that the round number will mean anything. I just think that potentially we're going to blast right through the 1,000, and that's going to become a new floor, and, you know, maybe we head up to 12 or 1,300 over the next few months.
He's quick to caution, the markets are on pins and needles, so investors need to stay on pins and needles, too. Analyst Stephen Schork says that also applies to oil prices. From Vienna, where OPEC is meeting, he warns that oil speculators could soon see market realities burst their bubble.
STEPHEN SCHORK: OPEC is adding spare capacity. The United States is probably in a recession, so you're going to see a material pull-back in demand. Rising supply, falling demand, ultimately should lead to a pop in this balloon.
Both market watchers say, for the immediate future though, they see prices heading higher.
In Los Angeles, I'm Bob Moon for Marketplace.
