SereneLoi.com

COMMODITIES – Gold, Commods Rally With Dollar In Rare Trend

* Gold at record high as India buys gold for reserves
* RJ/CRB up 1 pct as crude oil nears $80 per barrel
* Dollar hits 1-month highs

NEW YORK, Nov 3 (Reuters) – Gold raced to record highs on Tuesday and oil and grains prices rose too while the dollar hit one-month highs, exhibiting a rare breakdown of the inverse relationship between the currency and commodities. Gold crossed $1,080 an ounce in both spot bullion and futures trading across Europe and the United States as India’s central bank bought 200 tonnes of the precious metal from the International Monetary Fund to diversify its reserves.

In New York, oil got near $80 a barrel, a price critical for the confidence of market bulls. Copper, corn and sugar rose too in a broad rally that lifted the Reuters/Jefferies CRB basket of 19 commodities by more than 1 percent. The run-up occurred despite the dollar surging to its highest levels since early October against a basket of rival currencies.

Traditionally, commodities and the dollar move in opposite directions as the competitiveness of dollar-denominated assets such as gold and oil depend on how costly or cheap the dollar gets for commodity buyers holding other currencies. Tuesday’s trading showed that while some investors sought gold and other hard assets as a hedge against potential inflation, others were betting on the dollar to be a safe haven in the event the financial crisis worsened, analysts said.

“This has quite clearly broken away from the relationship with the dollar,” Stephen Briggs, a commodities strategist for RBS in London. Gold futures benchmark December contract swept to a record high of $1,088.50 an ounce. Spot gold, reflecting bullion trades, also set a new record at $1,087.45.

The rally came on news that the International Monetary Fund had sold 200 tonnes of gold to the Reserve Bank of India, underscoring gold’s increasing status as an official reserve. While India’s purchase lifted gold, U.S. data spurred crude oil higher. Factory orders in September expanded faster than expected, signaling potential for more fuel demand in the world’s biggest energy consumer. U.S. crude oil’s front-month contract closed up almost 2 percent at $79.60 a barrel. The market has settled below $80 a barrel, an important psychological level for energy bulls, since Oct. 23.

#