Commodities Retreat As Dollar Rebounds

Investors retreated from the commodities markets Monday amid concerns that global economic growth could slow, damping demand for raw materials.

Early declines in the stock market, and the dollar's bounce off a record low, added to the pressure on commodity prices. Energy futures declined, as did precious and industrial metals and most agricultural products.

With speculative investment in many commodities near record levels, the linkages between Wall Street and the oil, agriculture and metals markets have grown increasingly tight, analysts say. The dollar's influence on commodities has grown, as well. A declining dollar gives foreign buyers incentive to buy cheaper oil or wheat, while a stronger greenback makes prices look more expensive abroad, hurting demand.

Major stock indexes were volatile on Monday amid worries about the credit and housing markets. Wall Street moved lower before making a comeback to finish moderately higher. As stocks rose, commodities pared the worst of their losses but remained in negative territory.

Light, sweet crude for November delivery fell $1.04 to settle at $87.56 a barrel on the New York Mercantile Exchange. Gold for December delivery dropped $8.40 to end at $760 an ounce on the Nymex. On the Chicago Board of Trade, December corn lost 5.75 cents to $3.645 a bushel.

The parallel move in the commodity and equity markets over the past six weeks has been strong, said Richard Feltes, director of MF Global Research in Chicago.

"I think we're in a situation in which we are trading in tandem," he said, adding that "for commodities, the real story still goes back to Asian growth, specifically China and their voracious commodity demand. Until that shows signs of waning, unless there is an equity meltdown, I think the commodity boom is still intact."

Still, recent developments have left investors nervous about the health of the global economy. Finance ministers of the world's seven richest nations warned over the weekend that "uneven conditions" in global financial markets would likely persist for some time, even as they pledged to do what they could to limit the damage. That joint commitment came after a rough session on Wall Street, when the Dow Jones industrial average plunged more than 360 points on Friday.

Exacerbating the worries about economic growth was oil's surge over $90 a barrel last week and the dollar's slump to an all-time low against the euro earlier Monday. The 13-nation currency bought a peak $1.4348 in early trading before easing back.

Copper, nickel and zinc prices fell on the London Metal Exchange. Gasoline futures traded on the Nymex fell 3.53 cents to settle at $2.1332 a gallon. Wheat recovered from early losses to gain 15.5 cents to $8.71 a bushel on the CBOT, while soybeans for November delivery dipped 6.75 cents to $9.765 a bushel.