Gold prices fall as dollar gains strength

NEW YORK — Gold prices fell Monday, undermined by the dollar's advance on hopes for an economic stimulus package in the U.S. Meanwhile, energy and agriculture futures rose.

The dollar rose against the euro and the Japanese yen, buoyed by President-elect Barack Obama's calls for steps to be taken early in the year to boost the economy. The president-elect met with members of Congress Monday and endorsed tax cuts now expected to reach $300 billion.

The dollar's direction was a major factor in commodities prices for much of 2008; its weakness contributed to the rally in futures the first half of the year and its strength, along with the deepening recession, help send prices plunging in the second half. Analysts expect both to continue to play a major role in how commodities fare this year.

Gold can be especially sensitive to the direction of the dollar because it is often used as a hedge against inflation and a weak greenback.

Inflation is a concern to some economists now that the Federal Reserve has sent U.S. interest rates about as low as they can go. That theoretically could boost gold prices, but with the economy so weak, inflation may well be contained for some time. Additionally, many other countries are expected to cut their interest rates, which could undermine their currencies and potentially give the dollar a boost.

Matt Zeman, head trader at LaSalle Futures in Chicago, attributed gold's decline Monday to a stronger dollar, but isn't so sure that trend will continue.

"I think the dollar is going to remain under pressure," he said. "I wouldn't look for gold to fall too far either."

Gold for February delivery lost $21.70 to settle at $857.80 an ounce on the New York Mercantile Exchange.

Other precious metals prices also fell. March silver fell 22 cents to $11.27 an ounce, while March copper futures shed 0.2 cent to $1.4590 a pound.

On Wall Street, stocks fell moderately as investors gave back some of last week's big gains, but were tempered by a better-than-expected report on construction spending. Investors also are anxiously awaiting corporate earnings reports in the coming weeks. The Dow Jones industrial average fell 81 points to 8,952, after rallying more than 250 points on Friday.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.49 percent from 2.39 percent late Friday.

Oil prices advanced on the Nymex, driven by ongoing unrest in Gaza and a dispute between Ukraine and Russia over gas imports.

Light, sweet crude for February delivery rose $2.47 to settle at $48.81 a barrel.

In other Nymex trading, gasoline futures added 7.19 cents to settle at $1.1824 a gallon, while heating oil gained 9.6 cents to settle at $1.5763 a gallon.

Grain prices mostly rose on the Chicago Board of Trade, boosted in part by the rally in crude oil.

March wheat futures gained 5.75 cents to $6.1675 a bushel, while March soybeans rose 10 cents to $9.87 a bushel.

Corn for March delivery slipped 1 penny to $4.1125 a bushel.

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