Gold Prices Climb As Stocks, Dollar Fall

Gold prices advanced Friday as investors sought a haven from sinking stock prices, a falling U.S. dollar and heightened world political risks.

Wall Street slumped after the Labor Department reported payrolls dropped by an unexpected 4,000 in August - the first decline in four years and a shock for economists who projected the nation's employers would add 110,000 jobs to the payrolls. The weakness bolstered the case for a cut in the Federal Reserve's benchmark interest rate, and in turn undermined the U.S. dollar.

Investors have been wary of any sign that the housing slump or tighter credit conditions would spread and spoil growth in the broader economy, and the poor jobs data was "one signal that definitely contradicted the containment scenario," said Jon Nadler, senior analyst with Kitco Bullion Dealers.

The Fed meets Sept. 18 to discuss the direction of its federal funds rate, which banks charge each other on overnight loans.

As the U.S. dollar deflated, December gold gained $5.10 to settle $709.70 an ounce on the New York Mercantile Exchange, after earlier rising as high as $716.60. Silver prices, which often tail gold, jumped 22.7 cents to close at $12.76 an ounce.

Nadler said Friday's rise in gold incorporated "an anxiety premium." If the decline in payrolls foretells a contraction in the world's largest economy, "this cannot help but impact demand" for both precious and base metals, he said.

Meanwhile, threats to stability abroad returned to the forefront on Thursday. The Syrian government charged that Israeli aircraft violated its airspace and dropped "munitions" inside the country, exacerbating tensions in the region. In Nigeria, the U.S. Embassy cautioned that American and other Western installations face the risk of terrorist attack, although the embassy said no specific threat prompted the warning. Nigeria is a major supplier of oil to the U.S.

Gold's rise this week also has a technical component. Once gold prices crossed the $680 an ounce threshold Friday, that opened up a "huge breakout" of technical buying from computer-driven funds that buy or sell when an asset hits a certain level, said Scott Meyers, senior trading analyst with the Pioneer Futures division of MF Global.

The nervousness on Wall Street also led to "a little bit of a flight to quality," he said.

The price of bonds - another safe-haven asset - rose sharply following the payrolls report. The 10-year Treasury note yield, which moves opposite its price, slid to 4.43 percent from 4.51 percent late Thursday.

Industrial metals retreated on the London Metal Exchange amid the economic growth concerns, although the dollar's decline helped prevent an even steeper fall. Commodities are priced in dollars, and a cheaper U.S. currency makes metals more attractive to foreign buyers. Nickel, copper, zinc and lead all lost more than 1 percent on the LME.

Barclays Capital analysts noted in a report that copper prices are likely to remain sensitive to U.S. economic data, although recent and proposed strikes at mines in Latin America will continue to provide support. Nymex copper for December delivery fell 5.1 cents to $3.2515 a pound.

Elsewhere, energy futures climbed on the Nymex, reversing early losses, as concerns about squeezed supplies of oil and gasoline outweighed investor worries about a possible economic slowdown. On Thursday, the Energy Information Administration reported larger-than-expected draws on crude and gasoline inventories last week and a surprising rise in refinery activity. Investors also expect the Organization for Petroleum Exporting Countries to leave output targets unchanged when oil ministers meet Tuesday in Vienna.

Adding to supply concerns was news that a pipeline carrying oil from Canada and the Rockies to the Midwest had been shut down.

Oil prices also remain underpinned by the potential threat of a hurricane in the height of the storm season, as well as world political risks.

Light, sweet crude for October delivery gained 40 cents to settle at $76.70 a barrel a barrel on the Nymex. October gasoline futures 1.47 cents to settle at $1.9864 a gallon.

In Chicago, wheat futures continued their march higher after slipping back earlier in the session, while corn and soybean prices also rose. Wheat prices have piled on a hefty 68 cents, or 9 percent, in a week on the back of global supply concerns and continued robust demand for the grain.

On Friday, the U.S. Department of Agriculture reported exports of 110,000 tons of hard, red winter wheat to unspecified destinations and export sales of 100,000 tons of corn to South Korea.

December wheat jumped 19.5 cents to close at $8.435 a bushel on the Chicago Board of Trade - a new high. November soybeans rose 12.75 cents to $9.0525 a bushel, while December corn added 8.25 cents to $3.475 a bushel.