Gold Prices Decline on Auto Industry Woes

Gold prices decline moderately on auto industry woes, bleak economic reports; end week higher


Gold prices declined moderately Friday as the uncertainty of a bailout for the auto industry and a batch of bleak economic reports heightened investors fears of a prolonged recession. Energy prices slumped, while agriculture futures were mixed.

Investors' concerns about the economy welled up again, sending stocks and commodities falling sharply in the early going after the Senate punted a bill to inject $14 billion into the beleaguered auto industry. But markets pulled back off of their lows after the Treasury Department said it was prepared to support the nation's top three carmakers in an effort to prevent a major bankruptcy.

Stocks managed to close moderately higher, with the Dow Jones industrial average finishing up 64 points to the 8,629 level, after being down more than 200 at the open.
"Basically we sold off early on the back of this Detroit news and we saw sort of a gradual recovery in line with a firmer stock market on hope that there will be some money coming to them after all," said Edward Meir, senior commodities analyst at MF Global in New York. "We really just tracked the equity markets all day."

The fear has been that a bankruptcy of one of the car companies would lead to a surge of layoffs, which would ravage an already battered labor market and extend the recession.
General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

A handful of economic reports added to investors' uneasiness about the economy.

The Labor Department said wholesale prices sank in November for the fourth straight month, raising deflation fears.
And according to a report from the Commerce Department, retail sales fell by 1.8 percent in November. The drop marks the fifth straight monthly decline -- a period of weakness never before seen on the government's retail sales records.

Businesses also slashed inventories in October by the largest amount in five years, and more than economists had expected, the Commerce Department said.
Gold for February delivery slipped $6.10 to settle at $820.50 an ounce on the New York Mercantile Exchange. Still, gold prices were up 9 percent for the week.

March silver shed 19.5 cents to $10.23 an ounce, while March copper futures slipped 8.35 cents to $1.4285 a pound. Both silver and copper futures also finished higher for the week.
The dollar was mixed against other major currencies. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.59 percent from 2.63 percent late Thursday.

Oil prices pulled off their earlier lows on the Nymex on hopes for a resolution for the automakers. Still, prices finished lower, weighed down by the discouraging economic data. Light, sweet crude fell $1.70 to settle at $46.28 a barrel.
In other Nymex trading, gasoline futures fell less than a penny to settle at $1.0777 a gallon, and heating oil dipped 1.3 cents to settle at $1.4934 a gallon.

Grain prices were mixed on the Chicago Board of Trade.

March wheat futures rose 5.5 cents to $5.13 a bushel, while corn for March delivery rose 22 cents to $3.7350 a bushel.
March soybeans slipped 4.25 cents to $8.5625 a bushel.

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