Gold futures rally on record-high oil, falling dollar

NEW YORK (MarketWatch) -- Gold futures rallied 2% Wednesday, as oil's surge to a new all-time record and weakness in the U.S. dollar boosted demand for the precious metal.

Gold for June delivery soared $19.50 to finish at $937.50 an ounce on the New York Mercantile Exchange.
"Crude surging and the drop in the dollar are creating the rallying cry for gold today," said Burton Schlichter, director of trading at New World Trading.
The surprising drop in crude inventories "has pushed crude over the old March highs, which in return is giving gold a boost," he said. "If crude continues to surge, gold will go along for the ride."
Crude-oil futures rallied to a new record of $112.21 a barrel Wednesday after government data showed that crude supplies declined by 3.2 million barrels during the week ended April 4. Analysts surveyed by Platts had been looking for an increase of 2.7 million barrels.
Crude for May delivery rose $2.37, or 2.2%, to close at $110.87 a barrel.
"The backdrop of economic fears in the U.S., energy-related inflationary pressures and ongoing credit issues continues to draw investment interest from those looking longer term," said James Moore, an analyst at TheBullionDesk.com, in a research note.
The dollar extended losses against the yen and the euro as stocks withered on Wall Street and investors awaited a policy decision from the European Central Bank. The dollar index, which tracks the performance of the greenback against a basket of currencies, dipped 0.7% to 71.79.
The European Central Bank is expected to hold its key rate steady at 4%, but maintain its focus on price stability and worries about inflation.
On Tuesday, gold fell $8.80 an ounce. The International Monetary Fund said it would seek approval to sell more than 14.2 million ounces of its gold reserves, currently valued at more than $13 billion.

By Polya Lesova, MarketWatch
Last update: 4:17 p.m. EDT April 9, 2008