Gold, other commodities rebound as dollar declines

NEW YORK — Gold and other commodities recouped some of their losses on Tuesday as the dollar slipped against other currencies.

The dollar resumed its three-month decline against the euro and British pound, despite weak economic data out of Europe, helping to lift prices for gold and other commodities. Commodities have largely been at the mercy of the dollar in recent weeks, and tend to rise when the dollar falls and vice versa.

Investors use gold as a hedge against inflation, which has benefited gold prices as the dollar weakens. At the same time, economically sensitive commodities like oil and grains also tend to rise when the U.S. currency is weak because that makes them cheaper for foreign buyers. Some industrial commodities have also been rising on hopes for an economic turnaround that could lift demand for basic materials.

Gold for August delivery rose $2.20 to settle at $954.70 an ounce on the New York Mercantile Exchange.

The dollar has been weakened partly because the Fed has kept interest rates so low for so long, leading investors to search for higher returns elsewhere. Investors have also been worried about the government’s massive debt load and its ability to fund its economic stimulus programs.

July silver added 18.5 cents to $15.14 an ounce, while July copper futures gained 11.25 cents to $2.3655 a pound.

July platinum rose $13.90 to $1,257.90 an ounce.

On Wall Street, stocks traded in a narrow range for most of the day following the Treasury Department’s widely expected announcement on which banks will be allowed to return bailout funds. Energy companies and material producers also rose, buoyed by recovering commodities prices.

Oil prices closed above $70 a barrel for the first time this year as the U.S. government raised its forecast on crude prices.

The Energy Department’s Energy Information Administration said crude prices will likely average $67 a barrel in the second half of 2009, about $16 higher than the first six months of the year, and more than its previous forecast of $55.

Light, sweet crude for July delivery rose $1.92 to $70.01 a barrel. Gasoline futures rose 3.07 cents to $1.9667 a gallon, while heating oil futures rose 3.97 cents to $1.8076 a gallon.

Grain prices were higher on the Chicago Board of Trade.

July wheat futures jumped 15.75 cents to $6.1375 a bushel, while corn for July delivery added 9 cents to $4.44 a bushel.

July soybeans rose 11 cents to $12.4350 a bushel.