Monday, June 12, 2006

 

'Global Investors More Risk Averse'

MarketWatch has the trading numbers. "Gold futures fell Monday to mark a five-session losing streak and close at a two-month low with U.S. inflation data due this week expected to support the case for the Federal Reserve to continue raising interest rates. The gold market shows a weak tone as traders 'await the publication of a key series of health readings on the state of the U.S. economy,' said Jon Nadler of bullion dealers Kitco.com."

"The likelihood of a 'sub-$600 dip this week remains very much in place, and some nerves may be tested before Friday rolls around,' he warned."

"For now, support for gold will likely be strong around $600, with technical support between $585-$578 'likely to hold, barring any extremely bearish news,' analyst James Moore said."

"Gold for August delivery closed down $1.50 at $611.30 an ounce, after falling as low as $605 in electronic trading. Those are its weakest intraday and closing levels since April 13. On Friday, the contract closed out the week down 4.4%. Silver for July delivery finished down 14.5 cents at $11.065 an ounce, falling to a low under $11 for the first time since late March. July platinum lost $18.80 to end at $1,171.40 an ounce and September palladium lost $9.80 to close at $315.75 an ounce."

"'As before, the firmer dollar and concerns about a combination of slowing U.S. growth and further Fed tightening are likely to keep gold and other commodity prices pressured,' said economists at research firm Action Economics. The dollar touched a six-week high against the euro on growing expectations the Fed will continue to raise interest rates."

"Canada's dollar rose for a second day on speculation an economy that added almost five times the number of jobs forecast in May will prompt the Bank of Canada to raise its benchmark interest rate at least once more this year. Canada's dollar rose 0.7 percent to 91.05 U.S. cents at 4:01 p.m. in Toronto, from 90.39 U.S. cents on June 9 when the currency increased 1.5 percent. One U.S. dollar buys C$1.0984. The Canadian dollar advanced against all 16 of the most actively traded currencies tracked by Bloomberg today."

"'The Canadian dollar is still trading on its own domestic momentum,' said Marc Levesque, chief strategist at TD Securities in Toronto. 'After super unemployment numbers, investors are expecting that the Bank of Canada may end up raising interest rates' on July 11 at the central bank's next meeting, from 4.25 percent to 4.5 percent."

"China said Monday that its trade surplus reached a record $13 billion in May, raising the prospect of renewed trade friction with the United States and Europe. The huge trade gains are just the latest evidence of China's remarkable economic boom and the figures could create new pressure on Beijing to allow its currency, the yuan, to appreciate against other world currencies as a way of balancing global trade."

"After posting a record $100 billion trade surplus in 2005, much of it with the United States and Europe, China said Monday that its surplus had already reached nearly $47 billion in the first five months of this year, a period that is traditionally slower for exports than the second half of the year."

"Plans to encourage domestic consumption and bolster imports as a way of better balancing trade, have not been able to keep pace with export growth. 'The economy is cooking along,' says Jonathan Anderson, an economist in Hong Kong at UBS. 'Still, they have excess capacity, so that's slowing down imports.'"

"There are also some signs of inflationary pressure, economists said. While inflation grew at a mild 1.4 percent in May, several economists said inflationary pressure could be building and might show up more clearly in 2007 or 2008, after a lag period. They are also worried about the enormous rise in bank loans."

"Trading was suspended on the Colombian Stock Exchange on Monday after risk- wary investors fled toward U.S. markets, depressing share prices in the Andean country by more than 10 percent. It was the steepest one-day fall in the five-year history of the exchange."

"Trade was cut off in the afternoon after the bourse dropped 10.46 percent to 6,749.73, due in part to rising global interest rates that are making safer markets more attractive to international investors, traders in Bogota said. The exchange, set up in 2001 with the combination of bourses in Colombia's three main cities, soared to about 9,500 at the end of last year from 1,500 at the start of 2003."

"'The exit of capital from the stock market is being driven this year by foreign funds, as well as individual investors,' one trader said."

"As global investors have become more risk averse in recent weeks, the U.S. dollar is emerging as the main beneficiary. The greenback rose to one-month highs against a basket of major currencies on Monday, after central banks in the euro zone, India, South Africa and South Korea raised rates last week."

Comments:
'technical support between $585-$578 likely to hold, barring any extremely bearish news'

This will be one to watch. The press will focus on the $600 number, but the TS level will tell the tale.

I have a question. If global investors are more nervous, why aren't they heading for gold instead of the US$? Also, LatAm meltdowns have 70's style stagflation written all over them.
 
I must say this is turning into an amazing correction on Wall St. And no end in site. Gold stocks are way down. Everybody must be moving to cash.
 
Supposedly the COT is showing that the commercials are buying the gold that the hot money crowd is selling. If so, this vindicates that we're at or near the bottom.
 
I have a question. If global investors are more nervous, why aren't they heading for gold instead of the US$?

Because they don't yet grasp the depth of the problem.
 
If global investors are more nervous, why aren't they heading for gold instead of the US$? "

Perception is that the USD is safer than their currency. That used to be true, but the dominos of weak currency are heading towards the USD. Remember the asian contagion? USD will fall, and only then will gold be looked at as safety.

TJ, I agree with you. This summer should see the bottom. We might see $550 though.
 
This is going to be a long hot summer, and there is a lot more downward pressure in the market place. I have been long Au&Ag since gold was in the low 4's and silver was in the high 4's. I for one think you'll see gold back in the low 5's and silver below 10. I have been waitng on the side lines, and will continue. This market has a long,long way to go,and it will take time.
 
it's hard to believe, but it is a flight to safety- the US dollar. nothing has changed though. we're still bleeding red ink.
 
There's nothing mysterious about it as far as I can tell. It's ironic, however, that gold's traditional status as a "safe haven" has turned it instead into one of the riskier speculative vehicles. Hedge funds and speculators flock to gold when inflation looms not because they think that gold is an inflation hedge or that we're returning to a gold standard, but because they know that goldbugs think that. A duck hunter doesn't care why ducks fly south, he just knows that they do every year and he'd like to position himself along the route with a thermos of coffee and a shotgun. Likewise, speculators try to pile into gold before the goldbugs get there so they can make a quick buck and get out. Their participation in the market drives prices higher and gives goldbugs a sense of confirmation that their theories were correct. They commit more money to gold and prices spiral upward into a parabolic rise, just like we've seen this past year. Eventually, prices drop and then some number of years later the cycle repeats itself.
 
"Likewise, speculators try to pile into gold before the goldbugs get there"

that doesn't make sense, goldbugs are always in gold, no? if they weren't, they wouldn't be goldbugs.

I also forgot to answer the other day. my definition of a bubble is a 20 year burst, like gold from 1980-2000 about.

bubble=secular bear market of around 20 years. what gold is experiencing now is just a correction.
 
The asian market are getting rocked tonight (tuesday morning there) The Nikkei is down 300 pts...Gold into the 500s

Many of us had a strong feeling we were heading towards a catastrophe...is this the beginning or is it just excess liquidity being mopped up?
 
I think this is the beginning of a major meltdown. homes are falling and the stock market is going down too. this fits right into the pattern of the IMF's study on asset bubbles. the long dead cat bounce in the market is finally over.

let's hope it never gets this bad.

Argentines barter to survive

Argentine pensioners turn to prostitution

Yes, But Glitter
by James Grant

 
Silver...
http://www.investmentrarities.com/weeklycommentary.html
 
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