Thursday, May 25, 2006
Gold Gains On 'Bargain Hunting,' US$ Weakness
Reuters has the trading news. "Gold rose 1.4 percent on Thursday, with bargain-hunters and physical buyers entering the market on dollar weakness a day after gold tumbled nearly 5 percent, dealers said. Spot gold rose as high as $650.30 an ounce and was at $649.80/650.60 an ounce late in New York, against $639.20/640.00 late on Wednesday."
"Gold got some support from the dollar. The greenback slipped against the euro and yen as data showed U.S. economic growth was slightly slower than expected in the first three months of the year."
"'The dollar slipping was one piece of it,' said Bernard Hunter, a director at ScotiaMocatta in Toronto. 'But it also was a relief-rally' after the cross-commodities sell-off over the last week."
"Barclays Capital said in a note that U.S.-based streetTRACKS fund attracted 1.86 tonnes of gold on Wednesday, marking the first inflow into the exchange-traded fund since late April. Over the past month, about 15 tonnes had been withdrawn from the product, which tracks prices of the metal. Such gold funds, traded on stock exchanges, have accumulated about 480 tonnes of gold since their launch about three years ago."
"Silver rose to $12.66/12.76 an ounce from $12.45/12.55 a day earlier. UBS noted a drop of 2.5 million ounces of silver on Wednesday from Barclays' exchange traded fund (ETF) in the U.S. 'We remain positive about the outlook for the silver ETF because we do not believe that metal prices have peaked. That should happen, we believe, sometime in 2007. But for the ETF to attract new inflows, metals need to stop falling,' UBS said."
"Platinum's fall below $1,300 an ounce sparked buying interest from jewelers in China, which accounts for half of global platinum jewelry demand. Platinum rose to $1,287/1,297 from $1,280/1,290. Last week it hit a record high of $1,336. 'I think the demand is quite steady in China, but there's also a possibility that some jewelers are using old stocks,' said a dealer in Hong Kong. Palladium was at $350/358 an ounce, versus $344/349."
"The Canadian dollar strengthened the most in about a year as commodities including copper, crude oil and gold advanced, boosting demand for the nation's currency. The central bank yesterday lifted its benchmark interest rate a quarter-percentage-point for the seventh straight time since September to 4.25 percent."
"Rising commodity exports have led to record corporate profits, making Canada the lone Group of Seven nation with a balanced budget. That's allowed the country to reduce annual debt sales by 44 percent in the past decade. The yield on Canadian 10-year bonds fell below that of U.S. Treasuries in 2005."
"'It used to be when we saw Canadian bond yields trade lower than U.S. Treasuries, we would see interest dry up,' said Colin Embree, a government bond trader at CIBC. 'This time volume has tripled.' Investors should buy Canadian bonds as they will 'benefit from a strong currency, supported by high oil prices.'"
"U.S. 10-year Treasuries yielded about 78 basis points more than comparable Canadian bonds, the highest since 1989."
"Mexico's fixed exchange rate Thursday was set at 11.2897 pesos per dollar (ppd), reflecting a drop of 7.57 ppd compared to Wednesday's final quote at 11.2854 ppd."
"The US government reported Thursday the country's annual gross domestic product (GDP) growth in the first quarter of this year was revised up from 4.8 to 5.3 percent, which was inferior to analysts expectations of 5.8 percent; news that gave a boost to world currencies against the US dollar."
"Gold got some support from the dollar. The greenback slipped against the euro and yen as data showed U.S. economic growth was slightly slower than expected in the first three months of the year."
"'The dollar slipping was one piece of it,' said Bernard Hunter, a director at ScotiaMocatta in Toronto. 'But it also was a relief-rally' after the cross-commodities sell-off over the last week."
"Barclays Capital said in a note that U.S.-based streetTRACKS fund attracted 1.86 tonnes of gold on Wednesday, marking the first inflow into the exchange-traded fund since late April. Over the past month, about 15 tonnes had been withdrawn from the product, which tracks prices of the metal. Such gold funds, traded on stock exchanges, have accumulated about 480 tonnes of gold since their launch about three years ago."
"Silver rose to $12.66/12.76 an ounce from $12.45/12.55 a day earlier. UBS noted a drop of 2.5 million ounces of silver on Wednesday from Barclays' exchange traded fund (ETF) in the U.S. 'We remain positive about the outlook for the silver ETF because we do not believe that metal prices have peaked. That should happen, we believe, sometime in 2007. But for the ETF to attract new inflows, metals need to stop falling,' UBS said."
"Platinum's fall below $1,300 an ounce sparked buying interest from jewelers in China, which accounts for half of global platinum jewelry demand. Platinum rose to $1,287/1,297 from $1,280/1,290. Last week it hit a record high of $1,336. 'I think the demand is quite steady in China, but there's also a possibility that some jewelers are using old stocks,' said a dealer in Hong Kong. Palladium was at $350/358 an ounce, versus $344/349."
"The Canadian dollar strengthened the most in about a year as commodities including copper, crude oil and gold advanced, boosting demand for the nation's currency. The central bank yesterday lifted its benchmark interest rate a quarter-percentage-point for the seventh straight time since September to 4.25 percent."
"Rising commodity exports have led to record corporate profits, making Canada the lone Group of Seven nation with a balanced budget. That's allowed the country to reduce annual debt sales by 44 percent in the past decade. The yield on Canadian 10-year bonds fell below that of U.S. Treasuries in 2005."
"'It used to be when we saw Canadian bond yields trade lower than U.S. Treasuries, we would see interest dry up,' said Colin Embree, a government bond trader at CIBC. 'This time volume has tripled.' Investors should buy Canadian bonds as they will 'benefit from a strong currency, supported by high oil prices.'"
"U.S. 10-year Treasuries yielded about 78 basis points more than comparable Canadian bonds, the highest since 1989."
"Mexico's fixed exchange rate Thursday was set at 11.2897 pesos per dollar (ppd), reflecting a drop of 7.57 ppd compared to Wednesday's final quote at 11.2854 ppd."
"The US government reported Thursday the country's annual gross domestic product (GDP) growth in the first quarter of this year was revised up from 4.8 to 5.3 percent, which was inferior to analysts expectations of 5.8 percent; news that gave a boost to world currencies against the US dollar."
# posted by Ben Jones @ 2:29 PM 
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If anyone reading lives close enough to Mexico to know the blackmarket rate of exchange, I'd be glad to hear it. I understand the Indian physical buyers got back into gold today.
These new times demand a new term. I propose the term "Sagflation" to describe conditions of inflating asset prices coupled with deflating real wages. The American prototype is currently being tested in California. It's not quite widespread yet because the folks experiencing declining wages are still fortunate (and thus content) compared to what they left behind in Mexico. But when they are finally counted (soon the Senate promises) the new economic model will become more apparent.
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