Monday, December 19, 2005


Currencies Flat, Gold Wobbles

Daily FX has today's US dollar action. "With no major economic releases on the calendar today, the dollar recuperated a part of its losses during the Asian session and then spent most of the US trading session range bound. The NAHB housing market index was the only release on the calendar and the disappointment from the release was hardly surprising since the housing market has already shown signs of slowing."

"Falling to a 32 month low of 57 in December, evidence that the Fed’s interest rate hikes are slowing the economy is becoming increasingly apparent. A slowdown in the housing market has broad ramifications for the economy as a whole. Not only could it directly impact consumer spending, but it can also have residual effects on the construction sector and demand for building materials. In addition, a large number of jobs tied to the housing market have been created over the past few years."

"The British pound sold off against the dollar today as the UK gave up a part of its EU rebates and Bank of England Chief Economist Bean sounded another dovish note for a fragile market that is waiting impatiently for the BoE to signal whether another bout of tightening may be seen early next year. The dollar rallied 0.4 percent against the Japanese yen, which is rather small compared to the currency pair’s 4 percent slide over the course of three days."

"U.S. gold futures settled a shade higher but off session highs Monday as the market's failure to breach a key technical level and a sale of gold reserves from the Bank of Portugal caused some investors to liquidate some of their long positions, sources said."

"Gold for February delivery edged 0.20 cents higher to $506.10 an ounce at the New York Mercantile Exchange's COMEX division, after dealing from $503.60 to $512.10. 'The gold market ran into resistance just where it was expected, at the $512-$513 area, and we failed. To be up around $5 earlier in the day and then close virtually unchanged is not a good sign,' said one dealer."

"Adding to the downside pressure was a report Monday that the Bank of Portugal had sold 10 tons of gold reserves in the last month and has now completed settlement of the sale. 'As of now, most of the central banks have closed their books and are now just going to be book squaring heading into the new year,' said George Gero."

"Spot silver reached $8.55/58 an ounce, firmer than the previous $8.52/55. The fix was at $8.6150. In NYMEX futures, January platinum surged $16 to end the day at $977 an ounce, as option expiration day on Wednesday caused some short players to cover positions. Platinum futures hit a near 26-year high at $1,026 last Monday. Spot platinum was quoted at $972/976. March palladium gained $1.05 to $265.75 an ounce. Spot at $260/264."

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