Wednesday, June 21, 2006


Gold Ignores 'Short-Term Rate Differentials'

Some important moves in money and metals. "The dollar fell to a more than one week low against the euro Wednesday, playing off hawkish comments from the head of the European Central Bank that boosted expectations interest rates in the euro zone will soon rise further. Late in New York, the euro stood at $1.2663, compared with $1.2582 late Tuesday, after touching $1.2676, the highest level since June 9. The dollar changed hands at 114.79 yen, compared with 114.93 yen. The euro traded at 145.34 yen from 144.62 yen."

"The British pound was fetching $1.8448 compared with $1.8426. The dollar was trading at 1.2336 Swiss francs compared with 1.2384 francs. The British pound eased against the dollar before paring losses after the minutes of the latest Bank of England monetary-policy meeting were viewed as less hawkish than expected."

"Marc Chandler, senior currency strategist at Brown Brothers Harriman, said the euro's advance on Wednesday caught the short-term market 'wrong-footed' and "pushed the greenback to the lower end of its recent trading range."

"Currency trading is likely to remain range-bound ahead of next week's Federal Reserve monetary-policy meeting, said Stuart Scrase, a foreign-exchange trader at CMC Markets. Traders are pricing in a 100% chance that the Fed will lift rates by a quarter of a percentage point."

"Looking ahead, 'forecasts are for another [dollar] decline,' said Scrase. However, 'so long as any slowing isn't as marked as last month then there may be limited incentive to start another run of dollar selling.'"

"'We continue to argue that the principal U.S. dollar driver will be such structural factors rather than short-term interest-rate differentials,' analyst Steven Saywell said. 'A number of factors has emerged this week to support this premise, encouraging our confidence in the short dollar recommendation as a strategic macro view.'"

"Overnight, the Chinese yuan closed at 7.9970 against the U.S. dollar, its strongest close since China revalued its currency by 2.1% and abandoned its decade-old yuan/dollar peg last July. The yuan, also known as the renminbi, touched the same level in intraday trading Friday."

"Since the big move last summer, the Chinese currency has appreciated about 1.4% against the U.S. dollar. 'It is important that the PBoC has let dollar/yuan close below the 8.00 level," said Craig Russell, foreign-exchange strategist. 'This is a setup for a move to 7.76 or so over the coming year.'"

"The Canadian dollar rallied against its U.S. counterpart after stronger-than-expected readings on retail sales boosted hopes the Bank of Canada will raise interest rates sooner rather than later. The loonie last traded at C$1.1083, down 0.7%."

"Gold futures closed higher Wednesday, finishing a few dollars short of the psychological barrier of $600 an ounce, as the dollar fell and Iran signaled it's in no hurry to respond to a Western effort to dissuade it from enriching uranium."

"Gold for August delivery ended up $10.50 at $591.0 an ounce on the New York Mercantile Exchange, having earlier traded as low as $573.50. 'A confluence of factors is hitting the market at once,' said Charles Nedoss, a metals analyst at the Peak Trading Group. The latest news from Iran 'makes people a little bit nervous,' Nedoss said. 'A lot of this also has to do with North Korea and the dollar.'"

"James Moore of said next week's FOMC [Federal Open Market Committee] meeting could also prove pivotal for gold. The FOMC is expected to increase U.S. interest rates again next week. Both Nedoss and Nadler said that the expected rate hike is already priced in the market."

"Other metals also closed higher. Silver added 15 cents at $10.42 an ounce. Platinum added $25.40 at $1,193.90 an ounce, and palladium rose $10.50 at $314.50 an ounce."

This was a big technical day for gold and the 'weak-kitten' view of the US$ is re-asserting itself. Never mind the 'psychological' $600 number. The technicians were watching $560-580 and gold held. Two more trading days in a pivotal week.

Think about this when you consider the yuan rising versus the $:

'Not only is the US in debt to China to the tune of dizzying amounts of dollars and not only does the Chinese government hold many billions of US dollars but there is very little mention of how the US' colossal debt is going to be repaid.'
US dollars but there is very little mention of how the US' colossal debt is going to be repaid.'
# posted by Ben Jones : 3:27 PM

It's Not.

US dollars but there is very little mention of how the US' colossal debt is going to be repaid.'
# posted by Ben Jones : 3:27 PM

It's Not.

Oh it'll be repaid, they're just a little behind schedule in printing the money to pay it with.
In deference to you John-Law ...Per your moniker ,I have got quite the educaton.

"Those who don't learn from history are doomed to repeat it"

The real John Law.
Economist from the 18th century who basically was the father of finace who created his own fiat system.
Started selling stock in the Mississippi Co.
Shares became so inflated people waited for days, caused accidents to see him, to buy shares.
Gold/Silver was devalued by the bank to induce faith in the new paper.At the peak RE,rentals, even a hunchback made money renting out his hump for street deals to use to write on.
Once the insiders got wind ,and tried getting metals for their shares it was made illegal to own more than 20# silver.
People starting buying jewelry ,and silver plate to get out.
New script was issued ,and rejected.
The collapse caused lost fortunes....
It so mirrors the current state of affairs I think it a important read.....
seems "kfed" (the 'fed' part is strangely ominous...) wants to keep the penny. I hereby predict a bubble in pennies amongst the Shitney Beers crowd.
I hereby predict a bubble in pennies amongst the Shitney Beers crowd.

Funny thing is we have never minted a "penny" we have a one cent coin. I should not expect a reporter to know such things though.
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