Money and Metals

The Associated Press has the trading numbers for Thursday. "Gold and silver prices slipped Thursday, despite a sharp rise in U.S. jobless claims and the dollar's drop against the euro. However, without the effect of a partial government shutdown in Puerto Rico, jobless claims would have dropped from the previous week, the Labor Department said, suggesting strength in the job market."

"June gold futures settled $11 lower at $687.80 an ounce on the New York Mercantile Exchange. July silver fell to a low of $12.50 an ounce Thursday, before settling at $12.52 an ounce, down 72 cents from a day earlier. Platinum settled below the key $1,300-an-ounce level for the first time since Monday. July platinum closed $18.60 lower at $1,297.80 an ounce. Palladium also ended down at $372.50 an ounce, a loss of $10.60 on the day."

"The dollar fell against other major currencies Thursday, with the euro buying $1.2829 in late afternoon New York trading, up from $1.2741 late Wednesday."

"'Precious metals appear to be in a dilemma as to whether to continue their (welcome) correction or simply turn around and climb higher as dollar difficulties continue to undermine confidence and bolster defensive posturing,' said Jon Nadler, an investment products analyst at bullion dealers Kitco.com. 'The consensus among traders remains that several sustained closings above $690 to $700 might be required to resume gold's climb beyond the $730 and $750 marks,' he said."

"'Long-term gold investors are apparently undeterred, as they watch the sad saga of the U.S. dollar unfold while the yen and euro bask in a glow of strength,' said Nadler. 'Stock market weakness could also add to gold's current resilience as will, no doubt, the Iranian rejection of the terms of appeasement it was recently offered,' he said, referring to the recent European Union offer of certain incentives in exchange for Iran's halt of nuclear activities."

"Overall, 'the persistent impression among investors...is that inflation is making an unwelcome return in the near future and thus portfolios need the protection offered by counter-cyclical assets,' said Nadler."

A report from PIMCO. "The drop in oil and metal prices this week has raised fears that a speculative bubble in commodities is bursting, but giant U.S. fund manager PIMCO says fundamentals will hold up the asset class. 'In considering commodities, we need to take a more strategic view instead of trying to predict in very short term what prices might give,' said Bob Greer, senior vice-president and manager for real return products at the $600-billion-fund which mainly invests in fixed income."

"Greer, who oversees a $12 billion allocation for commodities at Pimco, said his model showed economics would support prices of natural resources. 'To have a speculative bubble, you need one or both of two things, one, a restricted supply of whatever it is that's going to bubble up, and two, you need to lose all concept of an objective measure of value.,"

"'The former was true in real estate.' he said. 'Real estate is in limited supply and you can certainly bid up the price of that limited supply. In the case of dotcoms, there was a classic case of losing all concept of what a measure of value was. Neither of that holds for commodities.'"

Some news from the IMF. "Facing its first annual loss in decades, the International Monetary Fund on Thursday turned to a group of international financial heavyweights to figure out how to pay its bills. Managing Director Rodrigo Rato named a panel of advisers, including former Federal Reserve Chairman Alan Greenspan and European Central Bank President Jean-Claude Trichet, to evaluate how to finance IMF operations."

"The IMF uses interest from loan repayments to finance its operations. The decision of Argentina and Brazil this year to repay their multibillion dollar loans early has left the fund facing an operational shortfall of $110 million this year. And Asian countries that were hit by financial crises in the 1990s have built up huge reserves so they would not have to resort to the IMF for bailouts should they encounter financial difficulties."

"The committee will address ways to finance the fund's operating costs rather than financing for loans to member countries, IMF spokesman Masood Ahmed said. Funds available for lending are at an all-time high of about $200 billion, Ahmed said. In the past the 184-nation lending organization has resorted to selling some of its gold reserves to finance operations."