Tuesday, June 20, 2006

 

Gold Finds Support On Nuke Worries

Bloomberg reports on what moved gold prices today. "Gold rose on concern that North Korea may be preparing to test a long-range ballistic missile, prompting some investors to buy bullion as a haven. A conflict over Iran's nuclear program helped push gold to a 26-year high last month. Since then, prices have dropped 21 percent."

"'The market's gotten enough of a liquidation, it's coming back to looking at core fundamentals,' said metals trader Frank McGhee. 'Gold will start refocusing on North Korea, Iran and the hurricane season.'"

"Gold futures for August delivery rose $8.10, or 1.4 percent, to $580.50 an ounce on the Comex division of the New York Mercantile Exchange. Gold for immediate delivery rose $10.45, or 1.8 percent, to $575.70 an ounce at 7:30 p.m. in London."

"Gold also rose today after the dollar had its biggest decline against the yen in two weeks, making the precious metals cheaper for Japanese buyers. Gold traditionally moves in the opposite direction of the U.S. dollar. The yen rose against the dollar after Bank of Japan Governor Toshihiko Fukui said the central bank needs to adjust interest rates from near zero percent 'without delay.' Some investors buy gold to hedge against the erosion of dollar denominated assets."

"Wide price fluctuations have discouraged some investors from buying or selling the metal, analysts said. Gold's historical volatility, or the rate at which a price moves up and down, is at 45 percent in the past 10 days, compared with 39 percent during the same period a month earlier."

"'There are people standing aside,' said Jeffrey Christian, managing director a New-York based metals research firm. 'The market has not been able to firmly move above $570 for the past few trading days, so there are people who think it's vulnerable to another leg down. We could spike down to $540 and move up to $580.'"

Some interest rate news from Canada. "The Canadian two-year note's yield rose to the highest in more than four years and the nation's currency strengthened as a government report showed consumer prices last month increased more than forecast. The report added to speculation that the Bank of Canada will raise borrowing costs once more this year."

"'There is a bit of shock for bond investors who were complacent that the Bank of Canada is done with its rate increases,' said Sheldon Dong, a fixed-income analyst."

"The inflation report 'calls into question the assumption that the Bank of Canada is on hold,' said Edward Devlin, a portfolio manager of Canadian bonds at PIMCO, which manages the world's largest bond fund. 'Now there may be a need to reposition the portfolio as I see the risk of more rate increases.' The central bank has lifted its benchmark interest rate seven straight times since September to 4.25 percent to keep inflation in check."

"The Bank of Canada's target for annualized core inflation is an average of 1.8 percent in the second quarter. The CPI advanced 0.5 percent compared with the previous month. The overall year-over-year inflation rate was 2.8 percent in May after a 2.4 percent increase in April, Statistics Canada said in Ottawa today."

"Canada's dollar rose to 89.55 U.S. cents from 89.29 U.S. cents yesterday. One U.S. dollar buys C$1.1168."

Comments:
'Gold futures for August delivery rose $8.10, or 1.4 percent, to $580.50 an ounce on the Comex division of the New York Mercantile Exchange. Gold for immediate delivery rose $10.45, or 1.8 percent, to $575.70 an ounce at 7:30 p.m. in London.'

IMO, days like today have fundamentals helping to set up technical strength. Next two days or so should be critical for the near-term.
 
Gotta wonder what NK is up to. Reportedly their only options are to fire or destroy that missile. TPTB are pretty sure that NK can't build a small enough nuke to put on it, so I'd be surprised if they don't launch.
 
Tj....I for one want to see that little pot bellied nut-job fire off his rocket. So we can try out our new defense system, and shoot it down. Enough of this jerking around, he is like a little brat looking for attention. It would also send a much needed message to Amaboutogamawad in Iran. There are some people on this planet you can not "play nice" with.
 
I have an OT question. I am not and expert on Money and Metals or economics for that matter. But, it seems strange that after 16 (soon to be 17) increases in overnight interest rates, high gas and energy prices the US Economy seems to be running pretty good. Housing has slowed but not dropped except a few places. Unemployment seems pretty stable. I would suggest that the past historically low interest rates, easy access to credit and resulting red hot housing markets had our economy really running hot. What should the Fed do on the monetary side and the government do on the fiscal side (other than spending money like drunken sailors) to slow this economy down to a sustainable rate and slow the inflation pressure that looks to be building up?
 
Mark,
Don't kid yourself on not being an expert. I am becoming more and more convinced that the folks running the economy are the ones who don't know what they are doing. What did they think was going to happen after nearly giving money away for a couple of years?

Inflation pressure building is the self-licking ice-cream cone. They've created the money already, and are still creating it, just at a slower rate. They are doing everything they can by "talking" about raising rates to get the money from "safe" places (commodities) into what they hope folks will feel is "safe" (CDs, Treasuries, etc...whatever doesn't show up in their inflation figures). Because they really can't raise rates or the housing bubble will collapse, they are prolonging the inevitable which is a weaker dollar.

See, you know as much as they know. They just are better at trying to confuse folks so that the confusion makes sense...if you know what I mean. I apologize about the last sentence, but that is exactly what you hear. Stuff that makes absolutely no sense, so then it kind of does.
 
there are just way too many fundamentals on golds side. it seems like each week I come up with a higher price than the oft-mentioned $2300/ounce.

the easiest excuse is the dollar. when the dollar goes down, gold will move the other way.
 
Mark,

I don't know that anyone here would claim to be an expert on those topics. I would say that -- given your comments -- you may want to visit a few more contrarian websites. Things are not as rosy as you suggest, and as the government (and Wall Street) would have you believe. Here's some of my favorites:

www.prudentbear.com
www.fiendbear.com
www.safehaven.com
www.dailyreckoning.com
www.financialsense.com
 
Kerk, TJ,

Thanks for the comments. I will visit the websites you list. It will be interesting to see how this unfolds.

Mark
 
Maybe I'm just naive but do they always have to find a reason to justify a advance/decline. "Gold went up today on the sudden change of President Bush wearing a red tie instead of a blue tie..."

Its usually pertinent but sometimes they really stretch it...just my two cents.
 
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