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.
 
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
 
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