Money and Metals

Reuters reports on some new records for precious metals. "Precious metals futures closed at new multiyear peaks on Thursday, powered by heavy fund buying across a range of commodities that was driven by positive market outlooks and thoughts of even higher prices. Platinum hit an all-time peak atop $1,100 an ounce as funds piled in to boost their returns at quarter's end, while gold and silver futures shot to 25 and 22-year highs, respectively, and palladium scored its highest level in nearly four years."

"Silver for May delivery at the COMEX division of the New York Mercantile Exchange rose 4.9 percent, or 54.5 cents, to end at $11.66 an ounce, after trading from $11.10 to $11.7150; the priciest for futures since September 1983. Silver has climbed about 12 percent since the Securities and Exchange Commission on March 21 approved rule changes that would allow the American Stock Exchange to list shares in Barclays Plc's ETF."

"Analysts have said silver could reach $12 or even $15 in the medium-term, if the ETF eventually attracts copious buying of the metal. Spot silver streaked to $11.62/11.65 an ounce, from $11.10/11.13 previously. The daily London fix was at $11.45. COMEX June gold shot up $13.20 to $591.80 an ounce, just off a new high of $592, which was the priciest for futures since January 1981. The day's low touched $576.50."

"Investors are scooping up more gold and other hard assets as a safe haven amid uncertainty over the economy and geopolitics, analysts said. Its next major target lurks a mere few dollars higher, traders said. 'Gold looks like it's going to $600 so everyone's watching that,' said one metals floor dealer."

"Spot gold advanced to $586.20/587.10 an ounce, up from the last New York close of $573.10/574.00. On the board at NYMEX, benchmark July platinum got as high as $1,104.80 before edging back to $1,102.70 for a gain of $14.80. Spot platinum rose about $18 to $1,088/1,092. NYMEX June palladium hit its highest since September 2002 at $355.80 before trading to $350.30, still up $12.90. Spot palladium rose around $10 to $343/347."

"In other markets, the dollar fell against the euro, while crude oil climbed toward $67 per barrel after Iran rejected a U.N. Security Council demand that it halt uranium enrichment."

And Bloomberg has the latest on the Australian dollar. "The Australian dollar gained, heading for its first weekly rise in four, as the price of the country's commodity exports copper and zinc hit records and gold surged to a 25-year high. The jump in metals prices has helped the Australian dollar rebound from an 18-month low two days ago as concern over a waning interest rate gap weighed on the currency."

"The currency was also supported be a weaker U.S. dollar, which slumped on concern the Bush administration will pursue a policy supporting a weaker currency to help spur economic growth and employment. The New York Times reported that Joshua Bolten, who will replace Andrew Card as White House chief of staff next month, wants Treasury Secretary John Snow to resign. Snow has been an advocate of a 'strong dollar' policy."

Reuters has an update on the currency front. "Sterling hit a fresh seven-month low against the euro on Thursday as the single currency's overall strength prevailed due to growing expectations for a European Central Bank rate hike in May. A recent wave of hawkish rhetoric from the ECB left investors pricing in an interest rate rise for May as a near certainty in short-term money market instruments."

"This comes only days after the Bank of England signalled it would keep borrowing costs steady at 4.5 percent for now, with economists in a Reuters poll expecting the bank to remain on hold all year. 'I think the market generally likes the euro against just about everything,' said Kevin Grice, economist at American Express Bank."

"A survey from the Nationwide building society showed British house prices jumped 1.1 percent this month, taking the annual increase to its highest in almost a year, suggesting a housing recovery is firmly back on track. 'I think (the house price numbers are) consistent with the theme that the housing market has certainly bounced from the bottom and will help to provide some momentum for the consumer sectors through the course of this year,' said Jeremy Stretch, market strategist at Rabobank. 'I think that's going to be enough momentum to suggest that the Bank of England will not do anything on rates through the course of 2006.'"

"Earlier this year, many had expected that UK rates would be cut by the end of 2006 in order to boost growth."

And Business Week has this on mining stocks. "Suppliers are dealing with strikes and outages. But as demand soars, investors are seeing gold, silver, and other commodities hit their highest prices in years. Prices for gold, silver, and platinum are at the highest levels since the early 1980s."

"So isn't it time to sell these hot commodities and the stocks of companies that produce them? Not so fast, say analysts and fund managers. Commodity cycles run in decades, and there are plenty of fundamental reasons why metal prices should, at the very least, remain elevated. 'We see good global demand while supplies are facing labor and mining problems,' says Derek van Eck, chief investment officer of Van Eck Associates in New York. 'I just can't find a big, bad story out there anywhere on the horizon that's going to change the picture.'"

"Gold sometimes trades in its own world as the safest of all safe havens in times of turmoil. The current rally is being fed rather by increased buying from a host of areas, according to the World Gold Council. Jewelry demand rose 14% measured in dollars, industrial demand increased 11%, and investors upped their purchases by 37%, including a 67% increase from exchange-traded funds in the U.S. and elsewhere, the council reported. On the supply side, mines produced only 1% more gold than they did in 2004."

"Frank Holmes, CIO at U.S. Global Investors in San Antonio, has been bullish on gold throughout the current cycle; he points to the run-up in oil as an overlooked factor. Billions of petrodollars have already flowed into gold, he says. Based on the historic relationship between the two commodities, he says, gold should hit at least $700 within a couple of years."

"Still, that doesn't mean that shares of every gold-mining company are a buy, say the fund managers. The biggest producers, companies like Newmont Mining (NEM) or Barrick Gold (ABX), aren't able to increase production much and are operating older, less-efficient mines than some smaller players. Van Eck favors mid-tier players including Meridian Gold (MDG) and Agnico-Eagle Mines (AEM). Holmes likes Goldcorp (G) which is showing growth and has diversified into copper."

"Silver rose last year as demand for the metal in jewelry and electronics grew faster than expected. But lately, silver has been running higher because of ETF excitement. While there may be less interest in a silver ETF, the silver market trades far less in a day than gold, so the impact of the ETF could be greater. Investors who don't want to wait can buy shares of silver producers. Silver Wheaton (SLW) has been able to increase cash flow at double the rate of the metal's advance, says U.S. Global's Holmes."

Many rumors were moving metal and currency markets today. "Gold futures rallied Wednesday to close near a quarter-century high as traders eyed mixed trading in the U.S. dollar and digested the latest raise in interest rates by the Federal Reserve, which signaled more rate hikes to come. Silver prices ended at levels not seen since late 1983 and copper futures reached an all-time high."

"'Once again gold has defied all the naysayer's and lukewarm bulls who continue to predict major tops or severe corrections only to see gold charge back up,' said Peter Grandich."

"Gold for June delivery rose $6.40 to close at $578.60 an ounce on the New York Mercantile Exchange after a $579.50 high. The contract hasn't traded at levels this high since Feb. 6, when it touched $583. April gold added $6.30 to close at $573.30 after a $574.50 high."

"'The hikes are not as much an attempt to stave off inflation as they are designed to attract investment into the dollar by would-be debt holders (China, Japan, etc.) of the U.S. currency,' said Jon Nadler, an analyst at bullion dealers Kitco.com. But 'to that, we say: good luck,' he said, adding that 'there still is no real competition from paper as far as gold is concerned.'"

"The precious metal's 'fundamentals after all, look a LOT better than those of the U.S. dollar,' he said. And 'after tax and after inflation are taken into account, real rates are very close to tiny increments above zero.' The implication of future rate increases is 'a only a little bit more troubling, but, at the end of the day, the feeling is that the rate hikes will either damage the heavily indebted U.S. consumer and/or become inflationary in and of themselves,' said Nadler."

"Silver, meanwhile, saw its May contract climb 24.5 cents to close at $11.115 an ounce. The contract touched a fresh 22-year high of $11.13. 'For the short-term, we expect silver to add onto gains in the coming sessions and possibly spike much higher before we find the next large liquidation and correction,' said Peter Spina, an analyst at GoldSeek.com."

"Platinum rose to $1,071/1,075 an ounce from $1,069/1,073 previously, while palladium closed at $333.50/337.50 an ounce from $337/342."

I had to dig hard to verify this quote. "Japanese Prime Minister Junichiro Koizumi should take the lead at a Group of Eight meeting in calling for a 'Plaza Accord II,' former U.S. trade negotiator Clyde Prestowitz said Tuesday."

"'We all need to cooperate on diminishing the role of the dollar in international trade,' said Prestowitz, now the president of the Economic Strategy Institute which he founded, at a lecture at the Foreign Correspondents' Club of Japan."

The metals market is reacting to the Fed decision. "Gold futures lost more ground in electronic trading after the Federal Reserve raised interest rates by a quarter percentage point to 4.75% Tuesday. The move was widely expected by Wall Street."

"On Tuesday afternoon, shortly after regular metals-futures trading on the New York Mercantile Exchange ended, the Federal Open Market Committee increased its target for overnight interest rates by a quarter-percentage point to 4.75%, marking its 15th straight meeting with a quarter-point rate hike. The Fed also left the door open for further increases. In recent electronic trading, gold for June delivery fell to a low of $567.80 an ounce and was last down $4.20 at $568. April gold fell $4.40 to $562.60."

"During Tuesday's regular session, June gold climbed as high as $575 an ounce, a level not seen since March 3. It closed the day at $572.20 on the New York Mercantile Exchange, down 40 cents. April gold closed at $567, also losing 40 cents for the session. May silver rallied as high as $10.94 an ounce in Tuesday's regular to match Monday's high before pulling back. The contract closed down 2.5 cents at $10.87 an ounce."

"Some weakness Tuesday in the U.S. dollar put a floor under prices for the precious metals. 'The U.S. dollar is putting in a massive top and is primed and ready for a big fall,' said Peter Grandich. 'Such a move can only add to the many bullish factors already underpinning gold.'"

"Also in Tuesday's regular session, April platinum tacked on $5.80 to close at $1,074.30 an ounce, while June palladium fell 55 cents to end at $342.25 an ounce."

"The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at the CNY 8.0206 level in the over-the-counter market, down from CNY 8.0214 and the pair’s weakest closing price after the yuan revaluation of 21 July 2005. In the exchange-traded market, the pair closed at CNY 8.0215."

"The big story in China today was a report from People’s Bank of China confirming China now boasts the world’s largest foreign exchange reserves portfolio. As of the end of February, China’s FX reserves were around US$ 853.7 billion, eclipsing Japan by some US$ 3.6 billion."

Newsday covers the days' trading action. "Silver hit a fresh 19-year high Monday on anticipation of a silver exchange-traded fund, driving an impressive rally in precious metals. The May silver contract on the New York Mercantile Exchange reached $10.94 an ounce Monday, then later settled at $10.895 an ounce, up 16 cents."

"Silver's buying momentum did run into some profit-taking late in the session, but the white metal is widely expected to extend its rise. Analysts at MKS Finance said it expects silver to challenge major resistance at $11 an ounce, due to the strong anticipation of the silver ETF listing."

"The rally in silver spilled over into the gold market, where the most active April gold settled the day up $6.90 at $567.40 an ounce. Earlier in the day, the contract reached a three-week high of $568.60 an ounce.'

"The platinum group metals also got a jolt, as the most active April platinum contract settled $16.90 higher at $1,068.50 an ounce. Earlier, the contract rose to a 5 1/2-week high of $1,072 an ounce. June palladium followed suit as it rose to a high of $344 -- marking a new contract high for the metal. It later settled at $342.80 an ounce, up $8.75 on the day."

A reader sent in this report from a Bond market trade group. "The Bond Market Association announced today that it has accepted an invitation by a private-sector working group established by the U.S. Federal Reserve Board to develop and lead the creation of a so-called 'NewBank,' a standby bank that would only be activated if one of two existing clearing banks in the U.S. government securities markets was suddenly forced to leave the business."

"Both government officials and market participants have long been concerned about the possibility, even if remote, of one of the banks suddenly exiting the markets and have agreed the NewBank concept is an appropriate precautionary measure."

"'The Bond Market Association is pleased to accept this important responsibility,' said Edward C. Forst, Chairman of the Bond Market Association and Chief Administrative Officer of Goldman Sachs & Co. 'The Association is well-positioned to bring together market participants and coordinate the implementation of this emergency facility.'"

"Since the mid-1990’s all of the major participants in the U.S. government securities markets have depended critically on one of two clearing banks, Bank of New York and J.P. Morgan Chase, to settle their trades and to facilitate financing of their securities inventory positions. Interruption of a clearing bank’s services has the potential to severely disrupt those markets, as was evident in the wake of the tragic events of 9/11."

"Further, the importance of the government securities markets to the U.S. and global economies cannot be overstated. Securities dealers are also increasingly dependent on tri-party repos for financing, with $1.9 trillion of securities now funded through this mechanism. 'Securities dealers need a contingency plan in the event one of the clearing banks is forced to exit the markets,' commented Micah S. Green, President and CEO of the Bond Market Association. 'Establishing NewBank is a prudent market-based initiative aimed at mitigating any potential problems caused by the sudden involuntary exit of one of the banks.'"

"The idea of a standby bank was first recommended by a private-sector working group established by the Federal Reserve in 2004. The bank would only be activated if a credit, legal or other problem caused market participants to lose confidence in an existing clearing bank, and no well-qualified bank immediately stepped forward to purchase the exiting bank’s clearing business. The standby bank is not designed to address resiliency problems such as those encountered after 9/11."

"The working group recommended the Association carry out the next phase of implementing NewBank because the Association has the relationships and the experience necessary to lead the effort. 'The Association has years of experience bringing market participants together to establish principles and practices leading to efficient, liquid markets,' said Mr. Green. 'We welcome this opportunity and are confident we can establish an effective contingency facility to mitigate the risks posed to the markets if one of the clearing banks is forced to exit.'"

Some currency news. "The dollar tumbled on Friday after a weaker-than-expected U.S. new home sales report pared back expectations for further greenback-boosting Federal Reserve interest rate hikes. The housing data trimmed the U.S. currency's robust weekly gains, but the euro was still down about a cent and a half against the dollar from $1.2189 last Friday, with the dollar holding within recent ranges."

"The dollar had started the day higher but first stumbled after a report showed weakness in a key measure of U.S. business investment. The currency had been gaining all week, underpinned by an earlier perception that the Fed would keep raising rates beyond an expected hike to 4.75 percent next week."

"Against the yen, the dollar was down 0.4 percent to 117.46 yen. Against the Swiss franc, the dollar was down 0.5 percent at 1.3095 francs. Sterling was up 0.4 percent at $1.7425."

"The housing report also 'highlights the notion that February existing home sales were a fluke, an aberration. The market overall is going to maintain the view of an overall slowing in the housing market,' Dolan added."

"Some analysts downplayed the new home sales' report's potential effect on Fed policy. 'New home sales only represents 20 percent of the inventory. We don't think that this number, while worse than expected, is going to affect Fed sentiment at all, or their statement after their highly anticipated rate hike next week,' said Matt Kassel, head of FX strategy at IDEAglobal in New York."

And some news on Mexico. "Mexico's central bank pushed interest rates a quarter percentage point lower on Friday to boost the economy but it said further cuts will depend on inflation trends and external conditions. The central bank said in a statement that it would allow the key overnight lending rate to fall another 25 basis points to 7.25 percent. The rate stood at 9.75 percent when the bank started easing monetary policy in August. Mexico's peso currency gained 0.35 percent to 10.859 against the dollar after the central bank's policy statement."

"Markets are as concerned about how much further the U.S. Federal Reserve will raise interest rates as about how much Mexico's central bank will cut them. If both central banks continue to move in opposite directions, analysts say interest in relatively high-yielding Mexican local bonds will eventually wane as spreads compress."

"Consumer prices rose much less than expected in the first half of March as fruit and vegetable prices tumbled, but core inflation was slightly above analysts' consensus forecast as prices of services rose."

"Mexico's economy has picked up in recent months on climbing manufacturing exports, especially from the auto industry. The central bank said the economy would grow about 5 percent in the first quarter of this year compared to the first quarter in 2005, and about 3.7 percent in all of 2006."

A look at the days' trading action. "Gold futures fell Thursday to post their third losing session in a row, but prospects for higher demand lifted silver and copper prices to new heights. 'Gold continues to be the weakest link among the major metals and remains trapped in a broad trading range of $535-$570,' said Peter Grandich. I believe it will last until such time a definitive move in the U.S. dollar to the downside takes place, which to me is only a question of when, not if,' he said."

"Gold for April delivery settled down 90 cents at $550.80 an ounce on the New York Mercantile Exchange. It touched a low of $544.80 earlier, its weakest level since March 14. The contract has lost more than $5 during a three-session losing streak.
'From a fundamental perspective, the gold market continues to be dogged by a number of factors, with the most important factor being the rather unimpressive view toward near-term growth,' said Nell Sloane. 'Rounding out the near term limiting factors are periodic strength in the dollar, tempered inflation expectations and perhaps alternative interest in silver, platinum and copper,' she said."

"May silver rose 19.5 cents, or 1.9%, to settle at $10.69 an ounce on NYMEX, after peaking at the $10.70 mark, a level the futures market hasn't seen since late 1983. 'While we suspect that new investment interest will cushion the market and, in the process, prevent the market from a major washout, we wouldn't be surprised to see a correction down to $10.36 basis the May contract,' said Sloane."

"It's important to note that 'high prices may damage demand for quite a few years and we could be in for a period that sees falling demand and rising supply,' said Williams Adams, an analyst at BaseMetals.com. But despite that, 'all markets have the ability to ignore the fundamentals for long periods of time so as far as the base metals are concerned, the market is still waiting direction,' he said. 'In the absence of any changes to the fundamentals, this means waiting to see what the funds and producers do next.'"

"April platinum settled up 40 cents at $1,046.40 an ounce while June palladium fell $2.75 to settle at $323.20 an ounce."

"Coeur d'Alene Mines (CDE) tacked on 4.5% to end at $6.08 on the heels of Wednesday's more than 4% climb. Agnico-Eagle Mines (AEM) gained 4.7% to close at $26.72."

Market Watch has this on the trading action. "ilver futures closed lower Wednesday, retreating from a 22-year high after failing to extend a 2% gain from the prior session even as a proposed silver exchange-traded fund came closer to a launch. 'Just because the market has a [potential] new investment vehicle doesn't necessarily guarantee that conditions will continue to attract investment to the new vehicle,' Nell Sloane said."

"Silver for May delivery climbed as high as $10.60 an ounce, a level the futures market hasn't seen since late 1983. The contract then retreated to $10.495, closing down 7 cents for the session. From here, silver prices look set to test $10.65/$10.80 in the coming sessions, said James Moore, an analyst at TheBullionDesk.com in London.
'With the scale of fund interest already expressed,' Moore said he still believes that 'the actual launch of the ETF will drive silver prices towards $12.'"

"Gold, meanwhile, saw its April contract fall by $1.50 to close at $551.70 an ounce, its lowest level since March 13, extending their prior-day losses made on strength in the U.S. dollar. 'Softer oil/firmer dollar prices and Iran's decision to enter into talks with the U.S. will weigh on sentiment in the coming session, but physical support is likely to remain strong around $548-$550,' said Moore."

"April platinum closed up $10.30 at $1,046 an ounce and June palladium rose $7.90 to finish at $325.95 an ounce. Rhodium, a metal mainly used to clean automobile exhaust emissions, rose sharply in Europe on Wednesday to trade at $4,000 an ounce for the first time since July 1991. Free-market prices stood at $4,000/4,100, up $200 from levels prevailing earlier this week on industry buying, and some $600 up this month.

"'It is well bid now at $4,000, and there is hardly an ounce to be had,' a trader said. Rhodium has risen steadily from the depressed levels of $500 an ounce seen in 2004, and has significant upside potential, its all-time high was $7,000 in 1980."

"'One of the main factors behind the recent price rise is the lack of available material, as traders hold back their stocks in anticipation of further price rises,' Wolfgang Wrzesniok-Rossbach."

"The price advance has caught many end-users by surprise, and they have been forced to change their buying strategies. 'They did not think that it was going to go to this level. They have been living on a hand-to-mouth basis,' another trader said. Material has been difficult to secure, especially as some of the speculative longs are unwilling to make metal easily available."

"'They find longs do not want to lend it; lease rates are 14 to 15 percent, so rolling over shorts is not an option, and they (borrowers) are having to buy instead,' the second trader said."

And a reader sent this in. "Gold should outperform equities over the next few years, technical analysts at Merrill Lynch say. This is because the relative ratio of the Dow Jones industrial average to the price of gold is declining and likely will continue to do so, according to a note by analysts Mary Ann Bartels and Cam Hui, who tracked the ratio back to 1910."

"A chart in a report by the analysts shows the ratio is currently just below 20:1, down from about 42:1 in the mid-1990s. 'The long-term target for the relative ratio appears to be 13:1,' they said. 'Based on the current DJIA level of roughly 11,000, this would translate into a long-term gold price target of $850 [U.S. an ounce], or the peak set in January 1980.' They warn, however, that returns are 'likely to be volatile.'"

The Middle East News site has this news from the geopolitical front. "A number of Middle Eastern central banks said on Tuesday they would seek to switch reserves from the US greenback to euros. The United Arab Emirates said it was considering moving one-tenth of its dollar reserves to the euro, while the governor of the Saudi Arabian central bank condemned the decision by the United States to force Dubai Ports World to transfer its ownership to a ‘US entity,’ the UK Independent reported."

"'Is it protectionism or discrimination? Is it okay for US companies to buy everywhere but it is not okay for other companies to buy the US?' said Hamad Saud Al Sayyari, the governor of the Saudi Arabian monetary authority."

"The head of the United Arab Emirates central bank, Sultan Nasser Al Suweidi, said the bank was considering converting 10 per cent of its reserves from dollars to euros. 'They are contravening their own principles,' said Al Suweidi. 'Investors are going to take this into consideration (and) will look at investment opportunities through new binoculars.'"

"The Commercial Bank of Syria has already switched the state’s foreign currency transactions from dollars to euros, Duraid Durgham head of the state-owned bank said. The decision by the bank of Syria follows the announcement by the White House calling on all US financial institutions to end correspondent accounts with Syria due to money-laundering concerns. Syria’s Finance Minister Mohammad Al Hussein said: 'Syria affirms that this decision and its timing are fundamentally political.'"

Reuters has this to report. "U.S. benchmark silver futures on Tuesday reversed losses to trade at session highs after the U.S. Securities and Exchange Commission said it approved rule changes for a silver exchange-traded fund."

"Silver for May delivery at the COMEX division of the New York Mercantile Exchange bounced to $10.41 an ounce, up 4.8 cents, at 11:41 a.m. EST. The SEC said it has approved rule changes that will allow the American Stock Exchange to list shares in Barclays Plc's iShares Silver Trust, which is designed to track the price of the metal."

Update: Silver hit it's highest level in more than 22 years on Tuesday on investor buying, after a ruling by U.S. regulators seemed to lead the first silver exchange-traded security one step closer to final approval. 'It shouldn't take long for the registration statement to get approved, so I think the market will move somewhat higher over the next couple of days because people will be focusing on what this may mean for the price of silver,' said Jeffrey Christian. The silver ETF would be backed by silver bullion held in vaults in London, with each share worth about 10 ounces of silver."

"Spot silver climbed as high as $10.55 an ounce and was last indicated in New York at $10.53/10.56, against Monday's late quote of $10.33/36, a rise of 1.65 percent on the day."

"'Silver has hit our one-month target of $10.50/oz but we believe that it can trade towards our three-month target of $11/oz very quickly. Longer term forecasts will now be highly dependent on the investor interest in the ETF,' John Reade, analyst with investment bank UBS, said. Silver could rally further if the ETF eventually prompts both substantial spot purchases and also speculative buying on fears about potentially decreasing liquidity in the global market."

"An announcement by Germany's Bundesbank that it would sell no substantial amount of gold from its reserves over the next six months had no immediate impact on gold prices but would support market sentiment, they said. 'The market has largely ignored news that the Bundesbank is not going to sell gold this year. It just shows that the funds are not very keen on gold at present,' said Yingxi Yu, analyst at Barclays Capital."

"Spot gold had made several attempts in the past two weeks to break above $560 an ounce, but prices fell as investors booked profits. It slid to $546.90 before recovering to $551.80/552.70 late in New York, down from $553.90/554.80 late Monday. The dollar strengthened after a core gauge of U.S. inflation for February, core producer prices, rose a more-than-expected 0.3 percent. The data reinforced views that the Federal Reserve may not be finished with dollar-boosting interest rates."

"Gold and the greenback usually move in opposite directions, though the relationship has weakened in the past nine months."

"Platinum fell to $1,035/1,039 an ounce from $1,041/1,045. The metal touched a two-week high of $1,041 on Monday on fund buying. Palladium eased to $314/318 an ounce from $317/321."

An Australian report on that nations' currency. "Investors deserted the dollar yesterday, sending it to a 17-month low amid fears Japanese investors might quit their holdings of local currency securities. The dollar fell to 72.05 US cents at the local market close and was trading at US71.60c last night. It is down 3.3 per cent over the last two weeks and 10 per cent below the peak of 79.7c reached 12 months ago."

"Traders believe the attitudes of international investors towards the Australian dollar are changing as they chase returns in economies where interest rates are likely to rise. 'There is some kind of a shift under way, with the large move over the last couple of days testing the bottom of its range for the last year,' ABN AMRO currency strategist Greg Gibbs said yesterday."

"The Australian dollar has followed the New Zealand dollar, which has plunged 6.7 per cent in the last two weeks against the US dollar."

"'There is concern among fund managers that their total return on Australian dollar bond positions is being eroded in a dramatic fashion,' said David Mozina, a currency strategist at Lehman Brothers in New York. 'What was looking good from a yield perspective has blown up in their face through the currency meltdown.'"

"On the equity market, a weakening in the Australian dollar is yet more good news for the miners who sell their product in US dollars, but generate costs in Australian dollars."

"The currency has been slowly weakening against the US dollar for almost 12 months, but had held steady against the euro and the yen. The biggest change in the market is the expectation that the Bank of Japan will start raising rates in the next 12 months."

"The uridashi market, which allows retail Japanese investors buy securities denominated in high-yielding currencies such as the Australian dollar, has been dormant for the past year, but there is now a large stockpile of securities about to mature. This could add further selling pressure over the year ahead."

"The currency has been weakening despite continued strength in commodity prices, with which it has traditionally moved in tandem. The zinc price has risen by 60 per cent since December while other metals have also risen sharply. National Australia Bank currency strategist John Kyriakopoulos said the currency was being influenced more by the difference between rates here and in other major markets than by commodity markets."

"Australian rates were 3.6 per cent higher than the average of US, European and Japanese rates over 2004, but this margin has fallen to 2.3 per cent and may fall further. Australia usually has high interest rates at times when world commodity prices are high, but the slowdown caused by the end of the housing boom has thrown the economic cycle in Australia out of time with the rest of the world."

A reader asked about the big move in uranium stocks today. "China has backed away from threats to intervene in price negotiations between its steel mills and Australian iron ore producers. The latest move by China was seen in some quarters as an attempt to clear the air ahead of the visit to Australia by Chinese Premier and former geologist Wen Jiabao."

"Apart from the potential for a bilateral agreement on nuclear safeguards being announced on his visit, clearing the way for the first uranium exports to China, other deals are in the making."

Here is a small north American uranium play. "Uranium Energy Corp., an exploration stage company, engages in the acquisition, exploration, and development of mineral properties in North America. It primarily explores for uranium deposits. The company, either through lease or stake, has interests in 4,333 acres of mineral properties consisting of 8 claim blocks located in the States of Arizona, Colorado, Utah, and Texas."

"Uranium Energy Corp. was formed in 2003. It was formerly known as Carlin Gold, Inc. and changed its name to Uranium Energy Corp. in 2005. The company is based in Austin, Texas."

Reuters has the precious metals numbers. "Platinum prices climbed 1.1 percent to end Monday near a two-week high, supported by speculative and technical fund buying that emerged late in the U.S. session, dealers said. Silver dipped but still held near its highest in more than 22 years, buoyed by expectations of more investment demand to lift metal prices, while gold was steady in a tight band.'

"An U.S. analyst at a precious metals refiner said investment fund buying in New York hoisted platinum at the end of an otherwise lackluster session. The chart picture also looked short-term positive in platinum, which triggered some light speculative purchases, he added. Palladium was up at $317/321 an ounce from $315/320."

"Silver hit a high of $10.43 an ounce on Friday. Silver, used in jewelry, photography and electronics, has risen 18 percent since the start of this year."

"Gold, which failed to capitalise on silver's gains last week, traded in a range of $6 an ounce. 'We see some positive factors that could potentially bring prices near the top of this range,' said Yingxi Yu, analyst at Barclays Capital, referring to a trading band of $535-$575 in recent weeks. 'We have been turning quite negative on the dollar over the past week and we see some further downside potential for the dollar,' she said."

The Associated Press reports on the foriegn ownership of US debt and assets. "The furor over efforts by an Arab company to buy U.S. port operations has focused attention on a little noticed economic fact of life: America increasingly is foreign-owned. From the ritzy Essex House hotel in Manhattan, owned by the Dubai Investment Group, to the nationwide chains of Caribou Coffee and Church's Chicken, owned by another company serving Arab investors, foreigners are buying bigger and bigger chunks of the country."

"The U.S. must borrow more than $2 billion per day from foreigners to finance its huge trade deficits. In 2005, for example, there was a record deficit of $805 billion in the current account, the broadest measure of trade."

"Foreigners already own half of the U.S. government's publicly traded debt. As of January, some $2.19 trillion in Treasury securities were in the hands of central banks, including China and Japan, and private investors abroad. At the end of 2004, the total foreign direct investment in this country, actual factories, office buildings and other tangible assets as opposed to stocks and bonds, came to $1.53 trillion, 8.2 percent more than in 2003. That investment shows up in all of the 50 states."

"European nations accounted for $977 billion, or two-thirds, of the $1.53 trillion of foreign direct investment. By contrast, Arab countries in the Middle East accounted for $9.3 billion, led by $4.7 billion in investment from Saudi Arabia."

"A bill by the chairman of the House Armed Services Committee, GOP Rep. Duncan Hunter of California, would bar foreign ownership of U.S. infrastructure deemed critical to the national security. 'To those who say this is protectionism, I say, America is worth protecting,' Hunter said. Opponents say his proposal would mean the fire sale of billions of dollars of assets now in foreign hands and end up hurting the U.S. economy."

"To the puzzlement of some economists, the current debate centers on direct foreign investment, the most stable type of investment. Yet the far larger share of foreign investment is in Treasury securities, corporate bonds and stocks. If foreigners suddenly decided to reduce their holdings of these assets, the dollar could plunge in value, interest rates could soar and stock prices could suffer a big blow."

"David Wyss, chief economist at Standard & Poor's in New York, cited the 51 percent share of foreign ownership of the federal government's debt, and that share is rising. 'That strikes me as scary,' Wyss said. 'When you make yourself so dependent on inflows of capital from the rest of the world, the question is what happens if the inflows slow down.'"

"The amount of federal debt that must be financed each year is climbing because of the budget deficits. On Thursday, Congress acted to raise the debt ceiling, the amount the government can borrow, by $781 billion, to nearly $9 trillion."

"A decline in the value of the dollar against other currencies, including China's, would help by making U.S. goods more competitive on overseas markets and imports more expensive and thus less attractive for American consumers. Falling global energy prices and stronger overseas economic growth to boost demand for U.S. exports would also help. 'A lot of things will have to come together' to reduce America's need for foreign capital, said Mark Zandi, chief economist at Moody's Economy.com."

Here's an odd report combining gold prices and housing. "Sharp climbs in the price of gold, which is widely used in housing transactions in Vietnam, threaten thousands of households as they face losing homes if they cannot handle the increased debt."

"The price of pure gold currently stand at VND10.6 million (US$666) per tael (1.25 oz), while that in 1999 was only VND4.9 million. Mrs. Anh from District 1 who bought an apartment on gold loan in May 2002 told Thanh Nien she had seen her debt in Vietnamese dong almost double."

"She borrowed 27.5 taels of gold in May 2002, priced at VND5.9 million per tael, or VND162 million in total. The loan was to be paid in installments over 10 years to buy an apartment in a building on Cong Quynh Street."

"After four years of paying down the debt, her loan later was now VND288 million, an increase of VND126 million due to surging gold prices. The worst case scenario is having to leave her house, after failing to pay the housing company contract after 10 years due to rising gold prices."

"In another case, Mr. Luy from Thu Duc District, said he bought the apartment worth VND122 million on a rent to own contract in 1999. In the first months he had to pay VND400,000 per month to the bank but the sum later climbed over VND1 million, fueled by rising gold prices."

"Real estate companies said thousands of households belonging to site clearance for projects and purchasing re-settle houses in the city fall into a situation like Anh’s. Failure to pay house loans is common situation among households located in the building, according to Luy. Many had to sell their houses to pay off the debt."

"The domestic market saw gold price hikes mirroring global prices towards the end of 2005 as demand outstripped supply, pushing the metal to a 24-year high of $541 an ounce Dec. 12. Vietnamese gold rates have scaled to fresh new highs several times recently, peaking at VND10.9-10.91 million ($688) early this month."

"Experts predict gold could climb as high as $600 per ounce this year, driven by fund hoarding, a weakening US dollar, and geopolitical tensions."

A late report due to the network outage. "Silver prices closed at a fresh 22-year high as traders bet on a strong demand outlook. Gold prices ended the session modestly lower, retreating from a high near $559, but they still posted a 2.5% rise from the week-ago close. 'Metals continue to move higher basically on the anticipation of strong demand,' said Phil Flynn. Gold is 'having a hard time getting too rambunctious,' said Flynn. 'Inflation data is still very tame.'"

"May silver tacked on 2.3 cents to close at $10.365 an ounce after peaking at $10.46, a level not seen since late 1983, according to Flynn. The contract finished the day around 4.1% above the week-ago close of $9.96. 'Silver..continues to eye upside resistance pegged at $10.50 as ETF [exchange-traded funds] speculation continues,' said James Moore."

"Gold futures fell Friday, but after tallying a gain of over $14 an ounce in the past four sessions, they ended the week higher. 'Gold closed out the week on a firmer yet inconclusive note as traders squared logbooks ahead of the weekend,' said Jon Nadler. 'Nervousness about supplies of crude oil in the wake of the fresh Iraqi offensive launched by the U.S., as well as continuing perceptions of Iranian warmongering are the backdrops that will have gold traders checking news websites way before early Monday morning's resumption of trading,' he said."

"April platinum added $3.40 to end at $1,034 an ounce, up over $21 from last Friday's close. June palladium added $4.40 to close at $319.75 an ounce, up over $30 from last week's close. Indexes that track stocks in the metals-mining sector moved modestly higher Friday, following gains in four of the previous five sessions. They were ready to end around 4% higher for the week."

TheStreet.com looks at gold and the Fed. "Gold closed higher on Thursday despite a CPI report and other data that convinced many inflation is not a problem and the Federal Reserve will stop raising interest rates sooner than later. But gold, which serves as a hedge against inflation, still found cause to rally. First, the dollar took a hit after the CPI. The Fed's 20-month-long campaign to raise rates has provided key support to the greenback."

"Second, crude oil prices, which gold has been tracking recently, jumped $1.41, or 2.3%, to $63.58 per barrel after the U.S. launched its biggest air attack in Iraq in three years. The result: Gold for April delivery gained $1 to $555.40 per ounce, marking its fourth straight session of upside for a total gain of $14.10."

"The metal's advance didn't do much for gold mining stocks, which have remained depressed since gold took a corrective turn in February. The CBOE Gold Index dropped 0.7% and the Philadelphia Gold and Silver Index fell 0.8%."

"There's more to the story behind gold's resilience than apparently tame inflation. Gold bugs love a good conspiracy theory and they actually have a fairly convincing one. The CPI, many gold bugs believe, is not to be trusted. A real gauge of inflation, they argue, is M3, which is the largest measure of the money supply. And guess what? That weekly measure, which used to rock the bond and stock markets in the 1970s, is about to be scrapped on March 23."

'The explanation on the Fed's Web site reads: 'M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.'"

"If you ask gold bugs, however, the Fed is trying to hide something. M3 includes the smaller measures of the money supply such as M1 and M2 plus large time deposits, institutional money market accounts, and Eurodollar deposits of U.S. banks held at foreign branches and at all U.S. offices. While the first two measures are mostly held by the public, M3 is about putting 'money into the system,' writes David Chapman, director of the Millennium Bullion Fund."

"'The Fed has been running a well managed hyperinflationary environment,' says John Strafford, a gold analyst and editor of The Strafford Newsletter. 'They must inflate or die.'"

"Iran was expected to launch an exchange next week to start trading it oil in euros instead of dollars. Given current geopolitical tensions, a possible huge rush out of dollars would occur, and that would have hit M3 the most. A sharp drop in M3 has typically been seen as presaging recession, and markets would have panicked, says Chapman."

"Meanwhile, it seems that Iran's launch of the bourse has been delayed until April, according to Platt's Commodity News."

"According to John Lonski, chief economist at Moody's and a veteran Fed watcher, the Fed is not trying to hide something. 'M3 is less relevant now than it was in the 1970s, given thin evidence that monetary growth is correlated to inflation nowadays,' he says."

"Moreover, as long as most market participants believe there's no inflation, then there's little to worry about, as prices don't get out of hand. 'Perceptions matter a great deal,' Lonski says."

"But gold bugs, who believe that the U.S. economic imbalances such as the swelling current account deficit are not reflected in the current value of the dollar, will continue to believe in the precious metal's upside."

The Business Day site has todays trading numbers. "Gold rose to its highest in a week in early European trade today as traders took heart from overnight gains, triggered by a weakening in the dollar. Silver was also looking strong, having fallen less aggressively than gold at the end of last week, with some analysts looking for it to launch an attack on its recent 22-year peak of $10,31."

"In early trade spot gold was at $551,60/552,35 a troy ounce, unchanged from late levels in New York yesterday and just off a one-week high of $552,25. Analysts said gold’s recent closer correlation to the price of oil could make it vulnerable to a setback down in the $435-440 regions if oil prices wobbled. But growing holes in the US balance sheet should underpin a still bullish longer term look. Oil dipped below $63 a barrel today, pausing after a two-day rally that added 5% to prices."

"The dollar fell around one percent yesterday and remained in a feeble state today on views that US interest rates won’t rise as much as initially thought. Data showing a plunge in US retail sales in February and a record current account deficit in the fourth quarter also bruised the US currency and diminished gold’s appeal to investors."

"'Both results cast doubts on the US economy and weighed on the US dollar, encouraging investors to continue their investment interests in the yellow metal,' Standard Bank said in a daily note."

"Investor interest in silver remained high. Spot prices rose to $10,21/10,24 an ounce, versus New York’s $10,20/10,23. 'With fund players back on the bid silver is now within range of its multi-year high of $10,31 set on March 3rd,' James Moore of TheBullionDesk.com said. He added that a breach of that peak was likely to bring $10,45-50 quickly into view, but a failure to move higher would see the metal move back to support at $10 then $9,85 and $9,65."

The Dallas News looks at investor sentiment. "Commodities, emerging markets and bond markets have given investors pause in recent weeks. The same can't be said of U.S. stocks, an exception some experts view as encouraging. Francois Trahan, Bear Stearns' chief strategist sees more than a few signs that U.S. stocks are simply going to be the last to throw in the towel. 'Peaks in the stock market typically have a number of similar characteristics,' he wrote recently. 'They are most often accompanied by tightened Fed policy, flagging economic indicators and a crescendo of investor enthusiasm.'"

"He added to this list a sense of denial among investors, or 'the reflex on the part of investors to rationalize a lot of the negative aspects of the market.' Mr. Trahan identified this resentment as a natural human instinct: 'Investors by and large want equities to go higher, and this can cloud their judgment.'"

"Take the current thinking on the Federal Reserve. If the Fed raised interest rates throughout 2005 and stocks managed to gain ground, well then, it can do the same in 2006. The difference is, last year monetary policy was accommodative. Today, mortgage applications have fallen 20 percent and signs of household debt stress have emerged."

"'Now is not the time to ignore monetary policy,' Mr. Trahan warned. 'If anything, now is the time to pay more attention to it.'"

"And that's just one thing U.S. stocks investors are ignoring. A few years ago, the current mix of geopolitical tensions, global health risks and fiscal irresponsibility would have raised investors' collective blood pressure. Judging by the stock market, one might conclude that Iran had complied like a kitten with the U.N., bird flu had been eradicated and the budget deficit had been cut in half."

"On the plus side, it remains to be seen whether long-term interest rates will breach the 5 percent level, something that hasn't happened in nearly four years. Most strategists have taken it for granted that long-term rates will get there, but I'd be careful about writing that chapter into the history books just yet."

"The catalyst for rates' recent spike is the concern that Japan's central bank will raise its interest rates significantly, something that would force U.S. rates upwards to compete for global capital. This theory makes perfect sense save one glaring detail that wasn't lost on J.P. Morgan senior economist James Glassman: 'The Bank of Japan announced an end to quantitative easing, but the market impact is more psychological than real. The BOJ will have to maintain low policy rates for a long time to enable the government to cut its budget deficit, which is three times that of the U.S. and Europe relative to GDP.'"

Even though it's up today, check out the VIX for an idea of how complacent investors are.

Morningstar has some gold mining stock recommendations out. "We at Morningstar believe in buying assets at a discount to their intrinsic value and waiting patiently for prices to recover. The metal has been justifiably touted, though, as an inflation hedge and portfolio diversifier. However, gold stocks, while highly correlated with gold, carry additional baggage that may offset some of their diversification and inflation-hedge benefits."

"Gold miners are plagued with rising costs, lack of control over the price of their product, and few product differentiation opportunities. It follows that most gold producers have no competitive advantage, or economic moat, and their returns on invested capital trail their cost of capital. With no moat, we would never buy these companies in our market-beating Tortoise and Hare model portfolios."

"There are a few gold producers of whom we are particularly wary because they expose the investor to additional risks for one of several reasons. First, these stocks tend to have higher-than-average operational risk. This is a characteristic of small, undiversified producers whose output relies on a small group of mines or even a single mine. Because this is the case, a small operational glitch could severely affect overall production and revenue."

"Second, extraction costs at these companies tend to be above average. High costs are very undesirable in a price-taker's market like gold because it means producers will be among the first to incur losses if commodity prices take a dive. Indeed, even with the price of gold at the current high levels, three of the four companies we have singled out below have posted red ink in the past year. Finally, our less-desirable companies tend to have operations in politically unstable countries, adding geopolitical risk."

"Cambior (AMEX:CBJ) Two of Cambior's three mines (one in Guyana and two in Canada) are high-cost operations. Costs at the third mine--Rosebel in Suriname--are not substantially below average. The company's extraction costs in 2005 were $305 an ounce, compared with the industry average of about $250. Cambior is also subject to a high level of operational risk due to its small number of mines. Because Rosebel produces about half of the company's gold, a stoppage here, even if temporary, will have a big adverse impact on overall production and revenue. Finally, Cambior's debt--at 12% of total capital--is relatively high for a gold producer. Paying down debt during flush times, like now, is considered a best practice in the mining industry. However, Cambior was only marginally profitable in 2005, and the company has not brought down its debt level. When gold prices fall and profits turn to losses, servicing this debt might become a burden the firm cannot bear, given its high operation costs."

"Bema Gold (AMEX:BGO) Bema operates two mines--one in Russia and one in South Africa. While the economics of the Russian mine are respectable with slightly below-average cash costs, the South African operation has been a drag on profits and cash flow since Bema started mining there in 2003. However, instead of improving profitability at its existing operations, the company is intent on raising production from about 290,000 ounces projected for 2005 to 1 million ounces. Given the lack of cash flow from operations, Bema has been forced to raise additional equity and debt capital to fund its exploration and expansion projects. As a result, Bema has one of the weakest balance sheets in the gold mining industry. Negative free cash flow, a weak balance sheet, and uncertain prospects make an investment in Bema little more than a speculative bet on the company's future, in our opinion."

"Hecla Mining (NYSE:HL) Given all the risks at Hecla--a relatively small production base in unattractive countries, future production not growing as much as expected, commodity prices not cooperating, as well as more financing and environmental charges--an investment in these shares remains highly speculative."

"DRDGold (NasdaqSC:DROOY) Mining gold in South Africa is a high-cost business that started more than a century ago. As more gold is mined, mines get deeper and costs generally rise. In addition, older technology and strong labor unions in South Africa also contribute significantly to the high costs prevalent in that country. Even by South African standards, DRDGold is saddled with relatively high cost and older mines. While recent efforts at operational improvements mean that DRDGold is less of a 'cigar-butt investment' than before, we do not think the company is out of the woods. Even with all the improvements, we still expect the company's cash costs to be more than $300 per ounce, compared with the industry average of around $250 per ounce. For DRDGold to consistently turn a profit, gold must trade at prices comfortably above the firm's operating costs and relevant currency-exchange rates must cooperate. As a commodity producer, DRDGold has little influence over either of these factors because it is a price-taker in both the gold and the foreign-exchange markets."

"Should gold prices fall precipitously in the next year or two, something that is not inconceivable, these companies will be among the first to suffer."

Market Watch has the trading numbers. "Gold futures closed Monday with a gain of more than $6 an ounce, recouping part of last week's losses of nearly 5%, as some weakness in the U.S. dollar and ongoing tension over Iran's nuclear-refining program helped renew investment demand for the precious metal. 'The marginally weaker dollar, coupled with the relentless violence in Iraq and the 'in-your-face' defiance emanating from Iran ... are keeping gold bugs on the alert,' said Jon Nadler, an analyst at bullion dealers Kitco.com."

"The April futures contract rose $6.20, or 1.2%, to close at $547.50 an ounce on the New York Mercantile Exchange, marking its highest session-ending level since last Tuesday. The contract closed Friday at its lowest level in more than two months, down 4.7%, or $26.70, for the week."

"Prices are 'drifting' between support that Nadler pegged at $530 to $540 and resistance around $550 to $552 an ounce. 'We have to get some momentum behind it [or] else we sink lower again,' he said. For the moment, the $535-to-$550 range 'appears to present the path of least resistance,' he said."

"The dollar's recent strength 'has certainly been one of the contributing factors in gold's six-week decline,' said Dale Doelling. However, Doelling sees the dollar as having reached 'an extremely overbought condition,' raising prospects for what he said could be 'a significant decline..just the tonic for what currently ails the precious-metals markets.'"

"May silver rose 19.7 cent to finish at $10.157 an ounce. June palladium tacked on $11.30, or 3.9%, to close at $300.90 an ounce and April platinum added $10.40 to finish at $1,023.10 an ounce."

The technical situation. "The spot price of gold rose marginally on Monday as the metal staged a technical recovery from the weakness seen at the end of last week. Analysts and traders said that gold was well supported at current levels. 'Gold is getting good support at current levels and is holding above the lows of last week,' UK-based analyst James Moore said."

"'The increase in the gold price is largely technically related and after holding the mid-$530s/oz, gold has seen a technical bounce. However, gold should find resistance between $548.50/oz and $550.50/oz. Gold should maintain its level in the $540s, but should resume its decline later this week,' a London trader commented."

"A European trader said that physical demand for gold seemed to be supporting it. However, he expected the metal to decline to between $525/oz and $530/oz in the foreseeable future. 'Gold is a bit higher on the weaker US dollar, with gold trading in a range between $540/oz and $545/oz. There isn't much interest in gold today,' a Johannesburg trader said."

"There was good support for platinum between $995/oz and $1,000/oz and platinum should remain above this level for the foreseeable future, Moore said. Rhodium last traded at $3,640/oz, just off the metal's recent long-term high of $3,675/oz."

Here is the Elliott Wave technical read from tonights short-term update. I only get a couple more of these. "Friday’s $533.30 low in spot ($534.50 basis April) marks the bottom of five-wave decline in Gold. The rise from Friday’s low is wave ii and has carried to just shy of the $550-$560 area (basis April), which is resistance. Prices may still poke up into this range in the coming days, which, if it occurs, should mark the top of wave ii. Coming beneath $540 in spot ($539 basis April) would be the initial signal that wave ii is complete and wave iiiis unfolding."

"Wave 2 up in May Silver is just about complete. The pattern of the corrective rebound is a double zigzag, as seen in the above chart. Today’s $10.18 high tags the bottom of the ideal target for the wave 2 top of $10.17-$10.21. This area is where the second zigzag would equal the first wave y would equal wave w, the .786 retracement of wave 1 down, where within the second zigzag, wave (c) would equal wave (a), the upper trendline of the parallel trendchannel formed by the wave 2 rise and the down-sloping trendline drawn of the waves i (circle) and ii (circle) highs."

"This is as strong a resistance area as can possibly be formed, so if prices exceed it, then new highs will be seen. Our interpretation is that prices will not exceed resistance, but instead turn down in wave 3, which should draw silver to the area surrounding the $8.95 level, the initial downside target."

A pair of reports on the start of the week in currencies. "Major currencies remained stuck in narrow ranges against each other, reflecting a quiet start to the week and ahead of some key US data in the days to come. After a sharp rise on Friday in the wake of forecast beating non-farm payrolls, the dollar had edged lower. However, its falls have been limited due to expectations that US interest rates will have to go up further."

"'Friday's solid US payrolls headlines and strength in average earnings growth have boosted Fed tightening expectations further,' said Daniel Katzive. 'Moreover, with a fair amount of Fed tightening now priced in, the US currency remains more vulnerable to downside surprises than upside surprises,' said Katzive."

"Among the key US data scheduled for this week are the US retail sales numbers for February on Tuesday and US inflation numbers for February on Thursday. Additionally, the US Treasury report on portfolio flows into the country are scheduled for Wednesday. This will show if the US will be able to cover its foreign funding needs through long-term portfolio flows. 'We are sceptical and see the dollar coming under pressure,' BNP Paribas analysts said."

"'After last week's buoyant U.S. economic news, traders are starting to switch out of long dollar positions in anticipation of the fact that numbers due for release over the coming days, including retail sales, TICS data, the consumer price index and Michigan sentiment, may start to underline some weaknesses in the American economy,' said Stuart Scrase, senior dealer at CMC Markets, in a note."

"In New York trading, the dollar was last quoted at 119.04 yen, up 0.03%, while the euro edged up 0.2% to $1.1934. The British pound was last up 0.3% at $1.7306. The dollar changed hands at 1.3135 Swiss francs, down 0.3%."

Bloomberg has a survey on gold demand. "Gold may rebound from the biggest weekly decline since 2004 as investors seek alternatives to stocks and bonds, a Bloomberg News survey shows. Thirteen of 32 traders, investors and analysts surveyed from Melbourne to New York on March 9 and March 10 advised buying gold, which fell 4.7 percent last week to $541.30 an ounce on the Comex division of the New York Mercantile Exchange. Eight said to sell the metal and 11 were neutral."

"Commodity holdings by fund investors will double to $120 billion this year, Standard & Poor's estimates."

"Some analysts said gold will trade in a range as prices attempt to climb past $580 and test support at $540. 'A prudent investment posture might be to purchase a strangle, a put and call, with the view that gold prices could rise or fall $35 in the near term, or do both,' said Jeff Christian, managing director of CPM Group, a commodities researcher."

And from the Peninsula in Qatar. "Demand for 10 and 20-gram pure gold bars remains high in Doha despite increasing prices. Asian expatriates are large buyers of small bars while locals mostly prefer jewellery made from 18, 21 and 22-carat gold."

"Gold coins from one gram to 41.7 grams are available but in Qatar more popular are coins of two, four and eight grams. There are coins of 18, 36 and 40 grams as well. The difference between coins and bars is that while the former are made of 21 and 22-carat gold only, bars are of pure gold."

"The smaller a coin or a bar is the costlier it is due to making charges, according to Muzammel Hanif, vice-president of Al Fardan Exchange, which also sells bullion. For example, one kilogram of gold bar costs QR65,240 in the local market, but the price of a 10-gram bar is QR675."

"A 20-gram bar costs QR1,330, a little cheaper. The biggest bar is of 400 ounces or 12.5 kilograms but this is used mainly in trading between banks."

"Bars of 2.5, five, 50, an ounce (31.1035 grams), half ounce, and even 100 grams are available. Swiss bars are more popular, while British coins, known as George Sovereign, are more in vogue."

"Indians and Pakistanis buy small bars mostly for use in jewellery at home or to sell to make small profits due to the difference between the price here and at home, says Muzammel Hanif."

Here is the Friday update on gold and silver from Elliott Wave. "Wednesday night we laid out the overall bearish case for Gold going forward. Tonight we’ll get back to the near term only. The decline from yesterday’s $551.70 intraday high (basis April) to today’s $534.50 intraday low(April), occurred against diverging hourly momentum oscillators. The non-confirmation leaves open the possibility that today’s low is either a fifth wave from the March 2 high ($572.50) or the “B” wave of an irregular upward flat correction."

"However, daily momentum oscillators remain pointed lower, which indicates that whatever near-term bounce is left in gold should be completely retraced thereafter, as the larger downtrend continues. Prices may still try to come up to $550-$560 (basis April), but as before, I remain uncertain whether this bounce will develop. As we noted Wednesday, if it does, we would view it as a prime opportunity to add to or to establish a bearish stance in gold, using the March 2 high as the 'key level' in order to keep risk to a minimum."

"Our stance remains bearish and our initial target is still the midline of the parallel trendchannel, which crosses near $503 next week in the spot market ($501 in the April contract). There is more bearish potential once the area surrounding the midline is breached. The .382 retracement of the rise from the August 1999 low is $452 (basis spot)."

"Wave 2 up in May Silver either topped yesterday at $10.09 or it should do so with one more minor push above this higher early next week. Wave 3 down is the next large move for prices, according to our interpretation of the wave pattern. Coming under $9.75 would be a strong sign that wave 3 is already underway. As before, the first downside target surrounds the $8.950 level, which is the .382 retracement of the entire rise from the August 30, 2005 low and (arguably) the bottom of a previous fourth wave. More bearish potential exists. Only an unexpected rise above the $10.33 top would negate this forecast."

As promised, here is some commentary from Elliott Waves short term update Wednesday night. When it comes out later today, I will post the Friday update for comparison. "Gold declined initially from its $575.80 high to $534.50 (basis spot). A failed rally attempt carried prices to a lower high of $571.25 on March 3. The pattern of the advance unfolded as an 'A-B-C,' a countertrend move, while investor optimism remained near previous extremes; the 10-day Daily Sentiment Index hit 84.3%."

"Gold refused to join silver at a new recovery high (above the February 2 high), creating an inter-market bearish non-confirmation between the two metals, and daily momentum remained weak, completing a pattern of three lower highs since December (see chart). Since October 2005 when gold was at $480, large speculators (hedge funds), which had provided the 'fuel' for gold’s speculative rise up until that point, started scaling back their net-long positions."

"The final rise from late November 2005 when gold was at $490, has been almost entirely driven by small traders, which is 'the public,' typically the ones 'holding the bag' at significant trend changes. Finally, and most importantly, the Elliott wave pattern from August 1999 is complete at the early February high, having traced out an impulse wave. All the subdivisions are in place at the top, which means that at the very least, an 'A-B-C' decline is underway that should correct the entire rise from the 1999 low. This is the recipe for a COLLAPSE in gold prices."

"The first target in the decline is the midline of the parallel trendchannel. Depending upon when it is reached, it crosses just above $500. There is more bearish potential once the area surrounding the midline is breached. The .382 retracement of the rise from the August 1999 low is $452 (basis spot)."

"Let’s wrap up gold tonight by coming back to the trees (the near term) for a second. It’s possible to consider the decline from the $572.50 high of March 2, basis the April contract, to today’s $543.50 low (basis April) as a complete (or nearly so) five-wave decline. This would be wave one down of a larger five-wave decline. So the short-term subdivisions allow for a bounce back toward $555-$560 in wave two, prior to more selling pressure. I am not certain this bounce will develop, prices may extend lower immediately, based on the larger position within the pattern. Bu if a bounce does develop, we would view it as a prime opportunity to add to or to establish a bearish stance in gold, using the March 2 high as the 'key level' in order to keep risk to a minimum."

"May Silver has topped. The decline that started at Friday’s $10.330 high is likely to be even sharper than gold’s for the simple reason that silver sports a higher 'beta' relative to gold. The first target surrounds the $8.950 level, which is the .382 retracement of the entire rise from the August 30, 2005 low and (arguably) the bottom of a previous fourth wave. Near term, prices are either ending the fifth wave down of the initial impulse wave, or are in a third wave, via the close-only chart. It’s not clear at the moment. We would use any periods of near-term rally to position for additional selling pressure toward the first downside target cited above."

Reuters reports on the markets. "Gold rebounded on Thursday from its lowest level in three weeks following a pickup in physical demand, a recovery in oil and some weakness in the dollar, but investors remained cautious and waited for a sustained rise. Silver also recovered after tumbling more than 3 percent the previous day."

"'I don't think this (drop) is enough to put investors off completely, there is still a huge amount of money coming into commodities,' Stephen Briggs, economist at SG Corporate and Investment Banking, said. 'But I do think it will be harder work getting back towards the highs now,' he said."

"Dealers said gold tried but failed a couple of times in recent weeks to breach recent highs as investors booked profits. It might struggle to jump again in the near term in the absence of fresh catalysts. Spot gold rose as high as $550.10 an ounce and was worth $545.60/546.50 an ounce late in New York, compared with $542.60/543.30 on Wednesday when it slipped 1.6 percent on fund-led selling."

"But technical analysts said the market was vulnerable to a further correction. 'The market could be subject to further weakness in the near term towards $535. The technical charts will be closely monitored in this correction phase for any signs of a broader trend reversal,' Barclays Capital said in a report."

"Analysts said fundamentals were unchanged, with a standoff over Iran's nuclear ambitions likely to lift safe-haven buying. Iran vowed on Thursday not to compromise in its nuclear dispute with the West."

"The price drop in gold attracted buying interest from jewellers and investors in India, Indonesia, Thailand and Malaysia. Consumers in India, the world's largest gold buyer, have begun buying gold to meet their needs in the wedding season, which peaks in April and May, dealers said. 'The sharp price falls have seen the beginnings of some bargain hunting by consumers and investors, although whether this will be enough to turn the markets higher remains to be seen,' Alan Williamson, analyst at HSBC Bank, said in a report."

"The dollar steadied against the yen as traders cooled to the idea that the Bank of Japan's scrapping of a five-year-old ultra-easy monetary policy means strong short-term demand for yen-based assets. It also showed firmed against the euro, despite news of a record U.S. January trade deficit."

"Oil prices rose after falling sharply Wednesday. Firm oil lifts the metal's allure as a hedge against inflation. Spot silver rose to $9.96/9.99 an ounce from $9.84/9.87 late on Wednesday when it lost three percent. Platinum rose to $1,016/1,020 from $1,008/1,012 an ounce previously. It had touched a three-week low of $999 an ounce this week. Palladium climbed to $285/289 an ounce, vs. $277.50/281.50."

A pair of reports with relevance to currencies. "Inflation in Switzerland unexpectedly accelerated in February to the fastest pace in five months as energy prices and rents increased, adding to the central bank's case for a rate increase as early as next week. 'Rising oil prices are driving this,' said Thorsten Polleit, an economist at Barclays Capital in Frankfurt. Today's report 'is a further support for the Swiss central bank's policy of normalizing interest rates toward a neutral level, which we consider to be between 2 percent and 2.5 percent.'"

"The Swiss franc pared losses against the euro after today's report, climbing to 1.5612 by 8:36 a.m., after falling as low as 1.5641 from 1.5597 yesterday. Central banks in the U.S., Japan, and the dozen nations that share the euro, the world's three largest economies, have all signaled they may lift interest rates as growth picks up this year."

From Tokyo. "The Bank of Japan announced it will slowly let interest rates rise and gradually close the spigot that has sent a flood of excess cash into Japan's banking system during the past five years. The balanced approach is being cheered by Japan's government and investors. The Bank of Japan on Thursday declared an end to five years of ultra-easy monetary policy, which kept interest rates effectively at zero. But the central bankers also said they will not immediately raise rates."

"The central bank governors also said they will adopt what is called a reference rate for inflation, in essence aiming to keep price rises between zero and two percent a year. Despite government data showing that Japan is emerging from its slump and deflation is ending, influential politicians have urged restraint on monetary policy. They fear that raising rates could cut consumer spending and would make it more expensive for the government to pay off its massive debt."

"On the other hand, the B.O.J. governors are concerned that keeping the loose policy too long might trigger inflation and create a bubble in real estate prices."

"Stock market investors seemed to approve of the policy change. The benchmark Nikkei index closed up 409 points Thursday, more than a 2.5 percent gain, sending the Nikkei above the 16,000 yen line for the first time this month."

Some price movement in the precious metals. "April gold fell $12.50, or 2.3%, to $542 an ounce in afternoon dealings, after tapping a nearly three-week low of $540.60. Weaker crude-oil prices and strength in the U.S. dollar weighed on gold prices Wednesday, said Peter Spina, an analyst at GoldSeek.com. And the session's action is feeding off the negative momentum from the past few trading sessions, he said. 'We are breaking supports and traders want out.' April gold lost $15.90 over the past three sessions."

"The Toronto stock market skidded more than 100 points Wednesday in a broad-based decline led by falling mining and energy stocks. U.S. markets also dropped as U.S. government bond yields rose, raising investor worries about interest rates. Toronto's S&P/TSX composite index was down 124.98 points at 11,691.48 with all sectors except real estate in the red. The junior TSX Venture Exchange declined 54.75 points to 2,537.4."

"The Canadian dollar was off 0.29 of a cent to 86.63 cents US after tumbling 0.81 of a cent Tuesday when the Bank of Canada hinted that interest rate increases may soon end."

"The gold sector was the biggest percentage decliner in Toronto, down 2.4 per cent, as the price of bullion also traded lower. The April bullion contract on the Nymex lost $10.60 to $543.90 US an ounce and Goldcorp Inc. lost $1.60 to $29.60 and Barrick Gold Corp. gave up 66 cents to $30.54."

"In the U.S., the yield on the 10-year Treasury note rose to 4.74 per cent from 4.73 per cent late Tuesday. Bond yields have recently been trading at their highest levels since June 2004.'

"U.S. investors are concerned that the Federal Reserve will continue to hike interest rates, which could make loans harder to get for consumers and businesses, slowing the economy. At the same time, higher rates can make bonds more attractive than equities, draining money away from stocks."

"Overseas, London's FTSE 100 index dropped 40.5 points to 5,816.9. Frankfurt's DAX 30 fell 47.4 points to 5,691.88 while the Paris CAC 40 declined 25.72 points to 4,966.49. Tokyo's Nikkei 225 index shed 98.53 points, or 0.63 per cent, to finish at 15,627.49 points on the Tokyo Stock Exchange. The Tokyo market has now fallen in five of the last six sessions amid growing expectations that the central bank will scrap its five-year policy of quantitative easing, which kept interest rates at zero and flooded the financial system with excess cash to spur borrowing."

"In Hong Kong, the blue-chip Hang Seng Index fell 109.27 points, or 0.7 per cent, to 15,493.09."

"Currency strategists are divided on how far the local currency will be driven down by speculation over a narrowing interest rate gap between Australia and the US. The Australian dollar sank to its weakest level in more than two months yesterday as foreign exchange dealers around the world switched to the greenback, believing there are impending rate rises in the US."

"During trade yesterday the dollar traded as low as US73.18c before closing at US73.43c, nearly 0.5 per cent lower for the session. Activity on global currency futures markets has seen traders hedge their bets that the US Federal Reserve will soon lift its benchmark borrowing rate beyond 5 per cent."

"Traders are speculating that the US Federal Reserve could lift rates to 5.5 per cent before the end of the year to rein in economic growth. Westpac senior international economist Huw McKay said that when combined with weaker commodity prices it was a recipe for the Australian dollar to be sold down."

"'There is also speculation the Bank of Japan will exit its unconventional monetary policy which supports the Australian dollar through extra liquidity in Japan,' he said. People expect the Australian dollar to fall, quite bluntly. By the end of the year we expect the dollar to be around US66c.'"

MarketWatch has the latest on precious metals. "Gold futures closed at a more than one-week low Tuesday, marking a three-session loss of almost $16 an ounce as traders reacted to expectations that a compromise over Iran's nuclear program could be worked out. Gold for April delivery fell as far as $549.50 an ounce on the New York Mercantile Exchange, then recovered slightly to finish at $554.50 an ounce, down $2.30 at its lowest close since Feb. 23."

"The contract has tallied a loss of $15.90 an ounce from weakness on Friday, Monday and Tuesday. Even so, 'off-stage acceptance of the $500-plus levels has been building, so the falls will stop where physical demand wants it to,' said Jullian Phillips."

"Silver was the lone gainer in the precious-metals futures market Tuesday. May silver climbed 8.2 cents to close at $10.107 an ounce following a decline of 21 cents sustained in the previous session. On Friday, it climbed as high as $10.31, a level not seen in about 22 years, as traders bet that the silver-based exchange-traded fund in registration from Barclays Global Investors may soon begin trading."

"Other metals futures lost ground Tuesday. The June palladium contract shed $5.65 to close at $292.75 an ounce, while April platinum lost $2.50 to end at $1,040.90 an ounce and May copper fell by 1.95 cents to finish at $2.177 a pound."

"Also lower were indexes that track stocks in the metals-mining sector, mirroring the continuing weakness in gold. The Amex Gold Bugs Index (HUI) closed down 3.2% at 296.8 points. A close in the HUI below the support level of 295 could create another 10% fall, Peter Spina warned."

"Among the index components, shares of Hecla Mining (HL) were the biggest losers, down 8.3% to close at $5. Agnico Eagle Mines (AEM) dropped 7% to finish the session at $25.32."

Money Week has this overnight report on metals. "A plunge in metal prices overnight wrought havoc with London's top performing shares today erasing gains made in the last two sessions. Mining stocks are responsible for a big chunk of the decline with Antofagasta and Rio Tinto down on copper concerns and BHP Billiton suffering from sharply lower crude oil prices."

"Base metals fell sharply on the London Metal Exchange on Tuesday as a wave of speculative selling suggested the previously strong bull market in commodities was becoming shaky.'

"'Monday's across the board weakness looks like another wave of fund liquidation selling. If this turns out to be the case, then the recent lows on the base metals may well be extended,' analyst William Adams of BaseMetals.com said. 'With oil and gold down and the dollar heading higher, it looks like the selling may have come from further commodity-index selling,' he added."

The Financial Times has this news. "A silver price tracker fund, also known as an exchange traded fund, is expected to be launched on the London Stock Exchange within the next month by ETF Securities, which has already launched an oil-backed ETF on the LSE. The planned new investment product is separate to the silver-backed ETF filed by Barclays Global Investors with the SEC, which is expected to make a decision shortly on the proposal."

"It is understood that ETF Securities has approval from the UK’s Financial Services Authority. ETF Securities is controlled by Graham Tuckwell, who listed the world’s first commodity-backed ETF when he launched Gold Bullion on the Australian Stock Exchange three years ago."

"Expectations of a launch of a new silver-ETF in the US have been a key driver behind the recent surge in the silver price, which has risen 60 per cent since the start of 2005. Once fully issued, the proposed BGI silver ETF would require the purchase of 130m ounces of silver, according to the fund’s prospectus. However, few have factored in the possible listing of a silver investment product in London."

"Unlike the various gold and oil backed ETFs and the BGI initiative, the proposed silver fund in London will not be physically backed by the underlying commodity. The funds raised by the proposed London listed silver ETF would not be spent on buying the metal, but the performance of the fund would remain linked to the silver price. Funds raised by existing commodity-backed ETFs are spent on buying the physical commodity, which adds to the increase in demand."

Bloomberg reports on the news behind interest rate changes. "U.S. Treasuries fell, pushing the benchmark 10-year note's yield to the highest since the day before the Federal Reserve began a series of 14 straight interest-rate increases in June 2004. Investors drove prices lower on speculation a government report this week will show job growth is fast enough to encourage the Fed to lift borrowing costs at least twice more."

"'We're going to see a new, emerging period of higher long- term interest rates that are going to start now, and I believe they're going to carry on for some time,' said John Kosar. Ten-year notes are heading for a fourth day of declines, the longest losing streak since January. The yield on the 10-year note rose 6 basis points, or 0.06 percentage point, to 4.74 percent at 3:03 p.m. in New York, the highest since June 29, 2004. The yield has climbed from 4.55 percent on Feb. 28."

"The margin by which two-year yields exceed 10-year yields shrank for the seventh consecutive day to 2 basis points. Two year yields, little changed today, rose above those on 10-year notes in December for the first time in almost five years, creating a so-called inverted yield curve. The gap reached 16 basis points on Feb. 23."

"A 10-year yield at 4.75 percent may spur mortgage companies such as Countrywide Financial Corp. to sell Treasuries and other securities they hold as a hedge against falling interest rates. Betting that Treasuries will fall pushes yields higher and may lead to more sales, said Bulent Baygun. Large speculators in interest-rate futures last week had record bets on gains in the 10-year note, which may limit their interest in buying even as prices fall."

"Among hedge-fund managers and other large speculators, long positions, or bets prices will rise, outnumbered short positions by 182,758 contracts on the Chicago Board of Trade, the biggest margin on record since 1983."

"'The U.S. economy is going quite well,' said Charles Diebel, head of European rates strategy in London at Nomura International Plc. Nomura's U.S. unit is one of 22 dealers authorized to bid at Treasury auctions. 'We could see yields move a little higher from here,' he said, advising investors to stay out of 10-year notes until after the Fed's May 10 meeting."

"The 10-year yield may climb to 4.75 percent within two months, Diebel said. The yield helps determine interest rates on home mortgages. The average rate on a 30-year fixed rate mortgage, 6.24 percent last week, according to Freddie Mac, rose to a more than two-year high of 6.37 percent in November, two weeks after the 10-year yield came within a basis point of its peak for the year."

"Yields remained higher today even as a report on pending home sales added to signs the housing market is slowing. The NAR said its index of pending home resales fell 1.1 percent in January after a 2.6 percent drop in December that was originally reported as a 3 percent decline."

"Fed officials have expressed concern about the extent to which a surge in home prices has enabled consumers to increase spending faster than their incomes are rising. A report published by then-Fed Chairman Alan Greenspan in September concluded 'that a significant amount of consumption is being driven by capital gains on some combination of both stocks and residences,' he said at the time."

"Fed policy makers have boosted their target for the overnight lending rate between banks to 4.5 percent, the highest in almost five years. Interest-rate futures indicate traders are pricing in a 100 percent chance of an increase to 4.75 percent at the central bank's March 28 meeting, up from about 90 percent a month ago. The odds of another move at the May 10 meeting are about 80 percent, up from about 40 percent a month ago."

The Money Week site makes the case for $1,000 gold. "The gold price has doubled in the last three years. It has now settled at around $550 an ounce, after some profit taking. The World Gold Council expects that it will go to $600 an ounce by the end of the year. I am never sure about such short term market predictions; it is always hard to get one’s timing right."

"Another doubling of the price in the next three to five years is entirely plausible on the known facts. The first factor is the expansion of the US debt, both in terms of the Budget deficit, which is not under control, and the trade deficit. The rise in US debt has been accompanied by an expansion in the money supply."

"Excessive debt and an inflated money supply make the dollar a weak currency, at a time when other currencies, particularly the euro are also unattractive. There is every prospect that the weak currencies will remain weak for the next five years. Democratic parties have to win elections, and elections are not won by policies of monetary discipline."

"The second favourable factor is the strength of the demand for gold as jewellery, particularly in Asia. In 2005, the jewellery market absorbed 2,736 tonnes of gold, with a value of about $40 billion. That was an increase of about 4 per cent in tonnage. In terms of value the rise is considerably greater."

"Alan Greenspan blames terrorism for having pushed gold 'beyond its underlying strength as a commodity.' There is no doubt that terrorism, or the threat of war, is a political cause for purchases of gold. I can see no reason to expect terrorism to decline over the next five years. Certainly the situation in Iraq remains intensely threatening. Unfortunately, fear of terrorism and war is likely to remain a constant, if it does not actually get worse."

"The final factor is the oil market. The impact of the local troubles in Nigeria has shown that the oil market is very precariously balanced. Any major political or security problem in the Middle East could push the oil price above $100 a barrel. At present a barrel of oil costs the same as an ounce of gold. I do not expect that to be reliable as a constant, but it is worth noting. If Iraq or Iran gets much worse, gold will rise."

"There are, therefore, several long-term, underlying reasons to expect a higher gold price. I can see no immediate downside risks, though there will always be profit taking. Even the hedge funds are likely to accelerate the present upside movement, since they badly need the opportunity of a major speculative trend."

A reader wants to hear your predictions. "1) Predictions!!! Especially post-ETF silver.

2) IAB impact on currencies.

3) Long bonds are finally moving.

4) JPY interest rates, yen carry trade, etc.

5) Ramifications of Dubai port issue."

Another added, "Yeah, that $12.50 target might be conservative considering there will be a frenzy. I wouldn't be surprised if it hit that the day before SLV was launched."

"There are a few items completely gone from APMEX's site. Cull silver coins, sterling silver, and they recently had a 90% silver coin sale for 0.10 less than spot. I think it only lasted a few hours before it was all gone. Their stock does fluctuate and some people have offloaded their collections. Check under 'wholesale lots' to see what I mean. It just seems the fluctuation is more so now."

"I was surprised with the silver sterling they gave me. All but one piece was plated with 24k gold. That's pretty cool."