Commodities - Gold, oil end mostly lower, soy rallies

Reuters-Forbes.com, 04.14.03, 5:12 PM ET

CHICAGO (Reuters) - Gold prices fell Monday as some optimism about economic growth and corporate profits deflected the war spotlight from safe-haven investments.

Oil prices closed mixed as the markets awaited decisions by the Organization of Petroleum Exporting Countries. OPEC may soon pull back production it raised before the war with Iraq, but Venezuelan and Nigerian supplies have already been rising.

At the COMEX, trading volume in gold was far below what was seen before the war in Iraq, when gold hit its highest price in 6-1/2 years, near $390 an ounce.

The U.S.-led forces that toppled the government of Saddam Hussein are wrapping up combat after 26 days. Financial markets continue to retrain their sights on the stock market.

On Monday, Wall Street spirits were raised by the progress of the war and by encouraging earnings from Citigroup Inc. , the world's biggest banking group. The Dow Jones industrial average closed 147 points higher at 8,351.

As in recent weeks, gold prices fell as stocks rose and diluted safe-haven demand from big investors.

COMEX June gold closed $3.60 lower at $324.90 an ounce. Gold bullion closed at $324.30/5.05, down from $327.80/8.55 at Friday's close. The London Monday afternoon fix was $325.95.

U.S. Central Command said the capture of Saddam Hussein's hometown of Tikrit Monday brought the U.S.-led military campaign to a "transition point." But it was not ready to say the war was over, given the potential for small-scale skirmishes.

Investors grew nervous as Washington accused Iraq's neighbor Syria of harboring members of Saddam's government and of testing chemical weapons. The U.S. search for such weapons of mass destruction in Iraq prompted the U.S.-led invasion.

But analysts said the gold market looked more balanced since prices fell some $70 from the highs. Gold bottomed at $318.75 a week ago, its lowest since Dec. 3, 2002.

"To a large extent, the short-term large commodity funds and the novice speculators have now left this market," said Leonard Kaplan, president of Prospector Asset Management.

U.S. interest rates are at 40-year lows, which makes gold more attractive. The dollar is also near multiyear lows, which makes dollar-denominated gold cheaper for overseas investors.

May silver bucked gold's trend, rising 4.5 cents to $4.538 an ounce and trading at a four-week high at $4.545.

At the New York Mercantile Exchange, crude oil and heating oil futures for May delivery closed firm on short-term supply tightness. But most other petroleum contracts closed lower.

NYMEX May crude closed 49 cents higher at $28.63 a barrel. In London, May Brent crude rose 25 cents at $25 a barrel.

Traders said the main question mark remains OPEC, which has signaled it is considering reducing crude output to ward off a further dive in prices amid oversupply. OPEC ministers are expected to gather on a still-undecided date this month.

Iraqi oil production and exports are forecast to resume in three months and may be aggressive to finance rebuilding.

Meanwhile, rising production from Nigeria after a recent shutdown caused by ethnic clashes and increasing exports from Venezuela, which is emerging from a long strike, were also adding to world supplies.

NYMEX May heating oil closed 2.30 cents higher at 74.75 cents. May gasoline fell 0.13 cent to 84.91 cents a gallon.

At the Chicago Board of Trade, soybeans ignored the record harvest in Brazil and Argentina now gathering pace and set new five-year highs. May soybeans closed 7-1/2 cents higher at $6.07-3/4 a bushel.

China, the top U.S. soybean buyer, has imported record amounts of soybeans since September as its soybean crush industry has boomed and livestock herds grown. CBOT soymeal, a prime livestock feed, also closed near contract highs Monday.

China's soybean importing, coming after U.S. soybean crops shrank amid drought last year, has driven projected U.S. soybean end-season stocks this year to seven-year lows.

Rumors began circulating that Brazilian soybeans might even be imported this summer into the United States, the world's biggest soybean exporter. That has already happened with two other U.S. crop exports: wheat and soymeal.

The U.S. Agriculture Department said last Thursday that China's soybean imports in 2003 would be 500,000 metric tons more than what it expected in March at 16.5 million tons -- and compared with 10.4 million imported last year.

"I'm worried about them going to 18 million tons, instead of 16.5," said analyst Roy Huckabay at the Linn Group.

CBOT May corn closed unchanged at $2.39-1/4 a bushel. But May wheat closed 3-1/2 cents lower at $2.80-3/4 on worries about whether Egypt will stay a strong U.S. wheat importer.