Gold prices rebound as dollar sinks

NEW YORK - Gold prices rebounded Friday as the dollar gave back some of its recent gains and fell against other major currencies. Energy prices slipped, while agriculture futures rose.

Gold, which investors often use as a hedge against inflation, tends to move inversely with the dollar. The greenback has gained strength in recent months as currencies around the world weakened due to the worsening economic outlook. But the dollar changed direction Friday, falling against the euro, British pound and Japanese yen in response to the U.S. government's latest efforts to help prop up the ailing financial industry.

Late Thursday, Bank of America Corp. reached a deal to receive an additional $20 billion in government funds, as well as guarantees to cover up to $118 billion in losses on certain loans and securities. The deal is similar to one that Citigroup Inc. reached with the government late last year. Citigroup, meanwhile, said it plans to split in two, separating its traditional banking business from its riskier operations.

Both banks also announced hefty losses for the fourth quarter, which has investors worried that the government may need to provide even more assistance to the troubled industry.

The government has already pumped $250 billion into the financial system by buying up preferred stock in banks. This is on top of a number of initiatives designed to free up lending. All of these efforts have the potential to weaken the dollar and feed inflation, which in turn could benefit commodities, analysts said.

"I think people are looking ahead," said Stephen Platt, analyst with Archer Financial Services. "There's genuine concern that the monetary expansion that we've seen resulting from the effort to bolster banks and the like and the economy in general will actually lead to a devaluation in terms of the dollar."

Investors' wariness over the stability of the banking system has also renewed investment interest in gold, Platt said. Investors often turn to gold, considered a safe-haven investment, in times of economic uncertainty.

Gold for February delivery rose $32.60 to settle at $839.90 an ounce on the New York Mercantile Exchange. The contract still finished down 1.8 percent for the week.

March silver jumped 77.5 cents to $11.2150 an ounce, while March copper futures rose 7.4 cents to $1.5275 a pound.

On Wall Street, stocks seesawed as investors' concerns about the rising losses at banks were somewhat offset by optimism over their steps to improve operations. The Dow Jones industrials rose 68 points to close at 8,281.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.32 percent from 2.20 percent late Thursday.

Energy prices were mostly lower on the Nymex, as a major energy group, the Paris-based International Energy Agency, predicted demand will fall again this year.

Light, sweet crude for March delivery fell 97 cents to settle at $42.57 a barrel. The February contract, which expires Tuesday, rose $1.11 to settle at $36.51 a barrel in very light trading.

In other Nymex trading, gasoline slipped by less than a penny to settle at $1.1672 a gallon, and heating oil fell 1.3 cents to settle at $1.4734 a gallon.

Grain prices advanced on the Chicago Board of Trade.

March wheat futures gained 9.5 cents to $5.7825 a bushel, while corn for March delivery rose 25.75 cents to $3.91 a bushel.

March soybeans rose 25.5 cents to $10.20 a bushel.

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