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October 31, 2007 > Gold, silver prices climb as oil reaches record level

Gold, silver prices climb as oil reaches record level

By Lauren Villagran

NEW YORK (AP), Oct 26 _ Gold surged to its highest level in 27 years on Friday as investors sought refuge from high energy prices and the dollar's decline to fresh lows.

It was a day of records in the commodities market.

Oil prices crossed $92 a barrel for the first time. The dollar slumped against the euro, which bought a peak $1.4392. Gold topped $780 an ounce as the metal edged closer to its all-time highs in 1980.

Energy prices climbed this week as tensions in the Middle East have grown and supply concerns have mounted.

The U.S. on Thursday toughened its sanctions on the Iranian military and state-owned banking systems, punishing a government it accuses of funding terrorism and developing nuclear weapons. The head of Iran's Revolutionary Guards on Friday dismissed the possibility of a U.S. military strike against Iran but said his forces would respond with ``an even more decisive strike'' if attacked.

The militant rhetoric from both sides has unnerved an energy market already concerned about oil supplies.

Iran is the world's fourth-largest producer of crude; the U.S. is the world's biggest consumer.

A barrel of light, sweet crude oil for December gained $1.40 to settle at $91.86 a barrel on the New York Mercantile Exchange, after rising as high as $92.22 in overnight electronic trading.

November gasoline futures rose 3.82 cents to $2.274 a gallon, while heating oil futures added 2.41 cents to $2.4325 a gallon.

Oil supply worries deepened when a U.S. government report issued on Wednesday showed large draws on inventories of crude oil, gasoline and distillates. On Thursday, OPEC's secretary general told the Wall Street Journal that the petroleum cartel was not in discussions to boost production.

Precious metals climbed sharply. December gold prices jumped $16.50 to close at $787.50 an ounce on the Nymex, the highest since gold surged to a peak $875 an ounce in January 1980. Investors often turn to gold during times of political uncertainty, when the dollar loses strength or when oil prices pop _ and all three elements were in action on Friday.

Jon Nadler, senior analyst with Kitco Bullion Dealers, called the gold market ``massively overbought,'' given that prices have piled on $100 an ounce since Sept. 1. The market is ``running on raw emotion and pure speculative fever at this point,'' he said.

The week's bearish economic news helped solidify expectations for another rate cut when the Federal Reserve meets next week. Sluggish home sales, a decline in orders for big-ticket manufactured goods and a weaker reading on consumer sentiment all pointed to slower growth in the U.S. _ supporting the case for lower interest rates and adding to pressure on the dollar.

The greenback fell against the euro, British pound and other world currencies. The euro bought $1.4381 late Friday, just off its peak.

Silver futures picked up 37.5 cents to settle at $14.28 an ounce.

Industrial metals moved higher, bolstered by the dollar's weakness. Nickel, copper, zinc and lead prices rose modestly on the London Metal Exchange.

December copper rose 5.15 cents to settle at $3.5375 a pound on the Nymex.

Elsewhere, agriculture futures finished mixed on the Chicago Board of Trade. December corn added 5.75 cents to close at $3.7125 a bushel. January soybeans rose 0.75 cent to $10.1325 a bushel. Wheat for December delivery fell 2 cents to $8 a bushel.

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