Commodities mostly lower after dollar strengthens

Gold prices fell for a third straight session Wednesday as the dollar muscled higher against the euro, dampening the appeal of commodities as a hedge against inflation. Silver also dropped.

The dollar has gained ground against rival currencies in recent weeks as worries mount that Europe, Japan and other major economies are beginning to suffer the same economic slowdown that first afflicted the United States. The 15-nation euro fell to $1.4493 from $1.4518 late Tuesday in New York.

A stronger dollar encourages investors who bought commodities as an inflation hedge to sell their contracts. It also makes dollar-denominated commodities appear more expensive to overseas buyers.

Gold for December delivery fell $2.30 to settle at $808.20 an ounce on the New York Mercantile Exchange, after earlier falling as low as $793.70.

"Dollar strength is still sapping the confidence ... among the remaining longs" in gold, said Jon Nadler, analyst with Kitco Bullion Dealers Montreal, referring to investors with large gold holdilngs.

Other precious metals traded mixed. December silver fell 19.8 cents to settle at $12.947 an ounce on the Nymex, while December copper rose 3.9 cents to settle at $3.312 an ounce.

In energy markets, crude prices inched lower Wednesday as the stronger dollar and falling demand for crude prompted selling despite an almost total shutdown of oil and gas production in the Gulf of Mexico after the passage of Hurricane Gustav.

Light, sweet crude for October delivery fell 36 cents to settle at $109.35 a barrel on the New York Mercantile Exchange, after earlier dipping as low as $107.22.

In other Nymex trading, heating oil futures inched up half a penny to settle at $3.0788 a gallon, while gasoline futures rose 3.31 cents to settle at $2.7668 a gallon.

In agriculture markets, the gain in the dollar and oil's continued slide fed selling of most major grains.

Wheat for December delivery rose 8 cents to settle at $7.7475 a bushel, while December corn fell 7 cents to settle at $5.6225 a bushel.

November soybeans lost 47 cents to settle at $12.515 a bushel.

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