Money and Metals

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."