Gold sinks as recession fears ebb; oil, grains rise

NEW YORK: Gold prices tumbled 2.7 percent on Monday, giving back the previous session's gains as fears of a new recession receded, while oil prices rose and corn soared to contract highs on crop concerns.

US stocks rallied as a merger between two big banks in Greece suggested Europe was working through its financial problems, while a rebound in US consumer spending calmed fears about the health of the world's biggest economy.

The Reuters-Jefferies CRB index, a 19-commodity global benchmark for the asset class, rose 0.59 percent to 337.24, its highest in nearly four weeks, by 1:16 p.m. EDT (1716 GMT).

Commodities around the world have had a volatile month, with the CRB falling nearly 10 percent and then rebounding 7 percent as investors fretted about the global economy.

Many commodity markets in London were closed for a British public holiday and will reopen on Tuesday.

Spot gold was down 2.3 percent at $1,786.73 an ounce, sliding more than $120 from its peak last week at a record $1,911.46.

"With a possibility of a stimulus package from the Fed in the weeks ahead, risk appetite seems to have returned to the markets and safe havens are being dumped," said Pradeep Unni, senior analyst at Richcomm Global Services.

"With the failure to break key resistance at $1,838, selling pressure seems to be mounting, and there is a possibility of a slide to $1,750 and below in the coming sessions."

Copper futures fell in New York, with the active December COMEX contract dropping 0.23 percent to $4.1080 per lb.

Oil prices rose as equities rallied on the possibility of fresh economic stimulus from the US Federal Reserve and relief that damage from Hurricane Irene to the New York area was less severe than expected.

"The spending data helped Wall Street take off, and oil rose on the hope some of that spending will be on gasoline," said Phil Flynn, analyst at PFGBest Research in Chicago.

"The weaker dollar index also was supportive, along with the fact that refiners didn't seem to get hurt by Irene."

Tropical Storm Irene left nearly 5.5 million homes and businesses along the US eastern seaboard without power on Monday morning.

US crude climbed 2.3 percent to $87.33 a barrel.

CORN SURGES TO CONTRACT HIGH

US new-crop corn futures soared to a contract high in overnight Globex trading on concerns about dry conditions in the Midwest hurting US crop prospects, the weaker dollar, and robust demand from the livestock and ethanol sectors.

Soybean futures jumped more than 1 percent.

"The big thing is dry weather concerns across the Midwest and a lack of rain in the forecast," said Brian Hoops, president of Midwest Market Solutions.

"Beans are in their reproductive stage and are getting hurt."

Chicago Board of Trade new-crop December corn was up 0.6 percent at $7.71-1/4 per bushel, after hitting a contract high at $7.79. New-crop November soybeans rose 1.3 percent to $14.41-3/4.

In the softs complex, arabica coffee and US cocoa futures rallied on chart-based buying and a lift from the weak dollar, while raw sugar took a hit from long liquidation.

Copyright Reuters, 2011