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Gold futures soar to record on weak dollar, inflation fears

Gold futures soar to record on weak dollar, inflation fears

Gold futures surged to their highest level ever Wednesday after the dollar plunged to a record low and crude oil spiked above $102 _ inflationary signs that fed buying of precious metals as alternative investments.
Silver continued its record-setting rally and copper also hit a fresh high. Other commodities traded mixed, with wheat extending recent gains and soybeans falling.
Speaking to Congress, Federal Reserve Chairman Ben Bernanke suggested the central bank will again lower interest rates to right the shaky U.S. economy, which has been buffeted by the subprime mortgage crisis and a protracted credit crunch. Bernanke's comments helped send the dollar on a slide versus the euro, which hit an all-time high of $1.5143.
"The dollar keeps falling and crude oil has gone above $102, so you've got a lot of inflation worries and this is helping gold prices," said Carlos Sanchez, a precious metals analyst at CPM Group in New York. "The Fed is trying to help with these issues but they've been reacting since August and it hasn't helped as much as many would have liked."
A weak dollar encourages U.S. investors to turn to gold because the metal is known for holding its value. It also encourages foreign investors to buy the dollar-denominated metal, because the cost is not as high for those with stronger currencies.
Gold for April delivery jumped to a new all-time record of $967.70 an ounce on the New York Mercantile Exchange, before pulling back to settle at $961, still up $12.10.
At these levels there's bound to be some profit-taking," Sanchez said. "I wouldn't be surprised to see gold pull back to $900 in March but still be in an upward trend."
Gold gained nearly 32 percent in 2007 and is up 12 percent so far this year. Still, when adjusted for inflation, gold remains well below its record high. An ounce of gold at $900 in 1980 would be worth about $2,300 today.
Other precious metals also rose Wednesday. Silver for March delivery added 49 cents to settle at $19.210 an ounce on the Nymex, after earlier hitting $19.490 _ its highest level since 1980.
Copper for March delivery advanced 5.95 cents to settle at $3.8465 a pound after earlier rising to a record $3.8625.
The rally in precious metals has been aided by the sharp rise in crude prices, which broke above $102 on Tuesday. Prices later retreated after the government said stockpiles of crude oil and gasoline rose far more than expected last week.
Light, sweet crude for April delivery fell $1.24 to settle at $99.64 on the Nymex, after surging as high as $102.08 a barrel in electronic trading earlier. On Tuesday, the contract jumped $1.65 to settle at a record $100.88 a barrel.
Other energy futures fell. March heating oil futures fell 4.39 cents to settle at $2.7711, while March gasoline futures fell 7.28 cents to settle at $2.4777.
In agricultural futures, wheat topped $13 a bushel for the first as investors bet on higher prices amid dwindling stockpiles and growing demand.
Wheat for May delivery jumped to an all-time high of $13.495 a bushel on the Chicago Board of Trade before settling at $12.50 a bushel, up 35.5 cents. The contract earlier traded as low as $10.90 a bushel.
Other agriculture futures fell. Soybeans for May delivery shed 9 cents to settle at $14.7525 a bushel on the CBOT, while March corn lost 5.5 cents to settle at $5.25 a bushel.