Dollar fear sparks rush to oil and gold
By Javier Blas in London and Michael Mackenzie in New York

Published: January 2 2008 19:00 | Last updated: January 3 2008 00:37

Crude oil prices briefly hit the $100-a-barrel mark and gold prices jumped to an all-time high as investors poured money into commodities on Wednesday amid deepening fears about the weakness of the US dollar.

The oil price rally soured the first stock trading day of the year, with the Dow Jones Industrial Average closing 1.7 per cent lower, its worst start since a slide of 1.9 per cent on the first day of trading in 1983.

The $100-a-barrel level was reached as the result of a single trade by two independent traders – known as locals – at the Nymex floor, industry sources said.

Before the trade, oil prices were at $99.53 a barrel. In spite of the controversy about the single trade, crude oil closed up $3.64 at $99.62 a barrel in New York. The White House said President George W. Bush would not tap the Strategic Petroleum Reserve and was focused on other ways to boost US oil supplies.

The Institute for Supply Management said that its manufacturing index for December fell to 47.7, its lowest level since April 2003 and well below 50.8 in November. A reading below 50 indicates a contraction in activity and has historically served as a harbinger of recession.

TJ Marta, fixed income strategist at RBC Capital Markets in New York, said: “A further decline in the overall index below 45 would be consistent with the recessions of 1990-91 and 2001.â€