U.S. Commodities: Gold, Silver Tumble Most in Three Weeks

Gold and silver futures tumbled the most in three weeks as the dollar climbed, eroding the appeal of precious metals as an alternative asset.

The greenback rose for the third straight day against a basket of six major currencies on speculation that an extension of tax cuts will spur the U.S. economy. Gold has gained 26 percent this year, reaching a record $1,432.50 an ounce yesterday.

“Gold is dominated by short-term traders at the moment,” said Frank Lesh at FuturePath Trading LLC in Chicago. “Big players have taken a profit after record highs, and the dollar has stabilized, so short-term traders will sell gold and commodities.”

In other markets, natural gas rose to a four-month high on forecasts that cold weather in the eastern and central U.S. will cause a bigger-than-average stockpile decline. Copper also climbed. The UBS Bloomberg Constant Maturity Commodity Index advanced 0.7 percent to 1,572.76.

Gold futures for February delivery dropped $25.80, or 1.8 percent, to settle at $1,383.20 on the Comex in New York, the biggest decline for a most-active contract since Nov. 16.

Silver futures for March delivery tumbled $1.525, or 5.1 percent, to $28.252 an ounce, the biggest decline since Nov. 12. Yesterday, the price reached $30.75, the highest since March 1980. The metal has jumped 68 percent this year.

Natural Gas

Natural-gas futures for January delivery rose 21.3 cents, or 4.8 percent, to $4.606 per million British thermal units on the New York Mercantile Exchange. It was the biggest one-day gain since Nov. 17 and the highest settlement price since Aug. 4. The price has jumped 10 percent this month.

The Energy Department tomorrow will say 85 billion cubic feet of gas were withdrawn from storage in the week ended Dec. 3, according to the median of 21 analyst estimates compiled by Bloomberg. The five-year average supply decline for the week is 74 billion.

“If we get an extended period of cold weather, it’s going to deplete some of this storage and give prices an upward thrust,” said Mike Rose, the director of energy trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “The market trades with waves of cold.”

Copper

Copper rose to a record closing price on speculation that demand will outpace production as a global recovery sparks construction of new homes and appliances.

Output shortages of 800,000 metric tons may occur in 2011 and in 2012, compared with a balanced market this year, said Trafigura Beheer BV, a leading industrial-metal trader. Copper inventories may drop to an all-time low of less than one week’s usage, Bank of America Merrill Lynch said. Prices have jumped 23 percent this year.

“The basic fundamentals are bullish,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis. “China is still strong. Our recovery is looking better. It seems there is not enough copper to meet demand.”

Copper futures for delivery in March rose 5.1 cents, or 1.3 percent, to settle at $4.1005 a pound on the Comex in New York, the highest ever.

Yesterday, the metal reached $4.1315, the highest since May 5, 2008, when futures touched an intraday record of $4.2605.

Commodities settled as follows:

Precious metals: February gold down $25.80 to $1,383.20 an ounce March silver down $1.525 to $28.252 an ounce January platinum down $23.80 to $1,681.40 an ounce March palladium down $9.75 to $728.95 an ounce

Livestock: February live cattle up 0.075 cent to $1.04625 a pound January feeder cattle up 0.95 cent to $1.18175 a pound February lean hogs up 0.35 cent to 75.675 cents a pound February pork bellies up unchanged at $1.045 a pound

Grains: January soybeans up 10.5 cents to $12.96 a bushel March corn up 12.75 cents to $5.745 a bushel March wheat down 0.75 cent to $7.84 a bushel March oats up 5 cents to $3.78 a bushel

Food and Fiber: March coffee down 3.25 cents to $2.0465 a pound March cocoa down $49 to $3,035 a metric ton March cotton up 1.58 cents to $1.3195 a pound March sugar up 0.57 cent to 28.98 cents a pound January orange juice up 5.3 cents to $1.66 a pound

Energy: January crude oil down 41 cents to $88.28 a barrel January natural gas up 21.3 cents to $4.606 per million British thermal units January heating oil down 0.95 cent to $2.4607 a gallon January gasoline down 1.84 cents to $2.3046 a gallon

Others: March copper up 5.1 cents to $4.1005 a pound March lumber up $7.70 to $273.70 per 1,000 board feet

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editors responsible for this story: Steve Stroth at sstroth@bloomberg.net

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