Money and Metals

Bloomberg reports on the first trading day of 2006. "Gold in New York climbed 2.6 percent, the most since February 2002, on speculation that investors will buy bullion as an alternative to currencies because of concern about accelerating inflation."

"Gold's rally was sparked by the dollar's biggest decline in three months against the euro, after a report showed the pace of U.S. manufacturing slowed. Gold jumped 18 percent in 2005 for the fifth straight annual gain, even as the dollar climbed 15 percent. The precious metal rose in all currencies last year, paced by a 36 percent value increase in yen and euros."

"'We're trying to get exposure to gold as a hedge for a weakening dollar and the twin deficits,' said Matthew Rudolf, a fund manager in Seattle with $400 million under management."

"Gold has become an alternative reserve currency to both the U.S. dollar and the euro for second and third-tier central banks, said (economist) Dennis Gartman. Russia, South Africa and Argentina said last year they would hold more gold. Central banks, mainly in the U.S. and Europe, hold almost a fifth of the world's gold. 'This is a bull market predicated upon disdain for all currencies,' Gartman said."

And this Australian report looks a US dollar bets. "Billionaire investor Warren Buffett and the biggest banks in the currency market, Deutsche Bank, UBS and Citigroup, missed the United States dollar's rally in 2005. But they are sticking with their predictions for 2006."

Mr Buffett, chairman and CEO of Berkshire Hathaway, lost almost $US1billion ($1.4billion) betting in part on the British currency against the $US as the pound suffered its biggest loss since 1992. Deutsche Bank, UBS and Citigroup analysts forecast the $US would weaken to an all-time low of $US1.40 to the euro. Instead, it rose 14.4per cent."

"Mr Buffett and the bank analysts said they were not wrong, just early."

"'There are signs the Fed may stop raising rates so the $US may go down,' said Benedikt Germanier, a currency strategist in Zurich at UBS, the second-biggest foreign exchange trading bank."

"Mr Buffett, who has been selling the $US since 2002, said the currency should fall because the trade deficit, which increased to a record $US68.9billion in October, keeps widening. A wider deficit means more US dollars have to be exchanged for foreign currencies to pay for imports."

"'I am a bull on sterling versus the $US,' Mr Buffett said in May. The pound has since dropped 6 percent. Mr Buffett reduced his bets on the $US's decline to $US16.5 billion from $US21.5 billion in June, according to a November 4 statement from Berkshire Hathaway. The company, which had $US 926 million of pretax currency losses in the first half, used forward contracts, agreements to purchase or sell a currency in the future at a preset price."

"'The policies that we're following are likely to lead to a weaker $US over a long period of years,' Mr Buffett said in June. 'It's not a forecast for next week, or next month or even next year.'"