Tuesday, February 28, 2006

 

Gold Breaks Resistance As US Dollar Rally 'Stalls'

Reuters reports the US dollar was weaker today. "The dollar weakened across the board on Tuesday after a measure of growth in U.S. Midwest economic activity came in lower than expected, fueling expectations that the Federal Reserve may not have much more room to raise interest rates to curb inflation pressures. Investors will now look to other economic indicators to see if the slower-than-expected growth in manufacturing in and around Chicago was a blip or part of a more general slowdown."

"'The dollar rally of recent weeks may have stalled today,' said Axel Merk, manager of the Merk Hard Currency Fund in Palo Alto, California. 'What's important here is that maybe a slowing U.S. economy directly translates into a lower dollar. And we are likely to see more of that as evidence grows that the housing market is in trouble, much of the job growth last year was, very broadly speaking, housing-related,' Merk said."

"The index of Midwest business activity fell to 54.9 in February from 58.5 in January, falling short of analysts' expectations for an unchanged reading. Other data on Tuesday showed that sales of existing U.S. homes fell in January by 2.8 percent to a 6.56 million annual rate, and the inventory of unsold homes was the highest since August 1998."

"The dollar was down 0.8 percent against the Swiss franc at 1.3120 francs and sterling was up almost 1 percent at $1.7540. The greenback was down 0.4 percent against the Canadian dollar at C$1.1358, near its lowest since December 1991."

"Despite some intraday choppiness, broad ranges remain intact. This has helped drive down implied volatility, which measures the anticipated trading range of a currency over a given period of time, to multi-year lows in some cases. 'One has to wonder if the financial markets are underestimating the risk in the financial markets with both currency and bond vols near historic lows,' Thomas Rogers, senior currency analyst at IFR Forex."

"Gold bullion rose in late trade on Tuesday, boosted by U.S. dollar weakness and higher New York gold futures, as a flurry of speculative and technical buying lifted prices above chart resistance at $560 an ounce. Other precious metals markets also advanced on gold's coattails, with platinum rising 1.25 percent from its last close."

"Spot gold gained to $561.30/562.20 an ounce by midafternoon in New York, compared with $554.70/555.50 late on Monday. 'Starting in New York, there was some aggressive buying around that $560 area, and once we broke through there, it was stop-loss buying and fresh technical buying,' said a dealer at a precious metals desk. 'There also was some good physical support during London trading, and now it looks like we're poised to get back above $575' an ounce, he added."

"'It is worth noting that prices are getting little support from the physical markets despite relatively steady prices of late, which suggest that threat of further correction remains,' Barclays Capital said in a note. It said a slowdown in inflows into the exchange-traded funds was a worrying signal for the market. Total gold held by the funds rose by just about 16.5 tonnes in February, compared with 87.5 tonnes in January and 43.7 tonnes in December."

"Platinum rose to $1,050/1,054 from $1,032/1,036 an ounce, while palladium was at $287/291 an ounce from $279/283. Silver was quoted at $9.75/9.78 an ounce from $9.64/9.67."

"Silver traders anxious to know if a proposed silver exchange-traded fund (ETF) will be approved by U.S. regulators probably have to wait a while longer, sources familiar with the matter said."

Comments:
Gold felt ready to correct a little until the Saudi Oil attack happened. I think we have pull back coming our way. Any thoughts on a consolidation number, before the next advance? I think we may be as low as $500.00 to $520.00. I've been wrong a lot lately, but I've been fooled/burned in the years past, so I may still be a little "gun-shy" on making predictions!
 
It's not going to $500 with the Yen carry trade ending. The USD is going to slip badly. $600 is much more likely.
 
This comment has been removed by a blog administrator.
 
It's not going to $500 with the Yen carry trade ending. The USD is going to slip badly. $600 is much more likely.
# posted by AustinYankee : 8:58 PM

Which in turn would mean we are in for higher inflation.
 
O.T. I found this train of thought interesting.

"The Mystery of the Siler ETF"

http://www.gold-eagle.com/editorials_05/dross022806.html
 
A note from my cousin. Has anyone heard this?

I read somewhere this morning that the Rothschild bank in London will
no longer trade gold. Why? Because they're buying and to trade gold
they'd also be forced to sell. Not sure if this is true or not, but
looking at gold stocks I suspect someone is accumulating big time.
(Gold stocks should be much higher, but keep getting slammed down so
the big boys can get in. Altogether...ALL mining stocks put together
have less of a market cap than Walmart!)
 
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