Transcripts

Investors Take A Shine To Commodities

SUSIE GHARIB: Stocks today suffered one of their biggest losses of the year as commodity prices skyrocketed. June gold futures surged $15 to $721.50 an ounce. Silver prices jumped 4.5 percent and oil rose $1.19 to $73.32 a barrel. On Wall Street, the Dow tumbled 141 points and the NASDAQ lost 48 points. Those losses were fueled by inflation concerns just a day after the Federal Reserve raised interest rates and signaled that it`s watching commodity prices closely. Erika Miller has more on what`s behind the surge in metals prices.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s easy to understand the lure of metals, when you consider their performance this year. Since January, copper is up 85 percent. Gold has risen 37 percent. And though the stock market is having a good year, the 5 percent gain in the S&P 500 pales by comparison. Ten-year Treasury notes are currently yielding about 5 percent. Investors and speculators around the globe are flocking to hard assets like metals because they are concerned about a weakening dollar.

GEORGE GERO, VP GLOBAL FUTURES, RBC CAPITAL MARKETS: Right now the major interest in metals is from the world that is concerned about the dropping value of the U.S. dollar, because what people are concerned about is maintaining purchasing power.

MILLER: Improving global demand has also supported prices, especially for base metals like copper and zinc. But even precious metals, like gold and silver, are at their highest levels in a quarter century. Though gold has limited industrial use, experts say it is benefiting from worries about inflation. Gold is also being used as a safe-haven investment by investors concerned about Middle East turmoil.

GERO: Years ago, people always turned to Treasury bills as a safe haven. And today, where the Fed has been signaling that every time you buy a Treasury bill it may be worth less with another increase in the rate, the people are looking at other assets like gold.

MILLER: In the short term, most experts predict the rally in metals can continue, especially gold and silver. Gold closed above $721 an ounce today, and some analysts think it could challenge its all time high of $850 an ounce this year.

JAMES STEEL, METALS ANALYST, HSBC: Certainly there is enough bubbling in the Middle East. There`s going to be enough concern about inflation I think, and enough uncertainty in general going forward particularly if the dollar remains weak to keep gold and silver high.

MILLER: Experts say there`s one other reason for the renewed interest in gold: easier investment options. Investors can now buy gold exchange traded funds instead of having to own the actual metals. Erika Miller, NIGHTLY BUSINESS REPORT, New York.