Friday, June 23, 2006


Gold Stronger Ahead Of Fed Meeting

Reuters has a currency report. "The Canadian dollar eased versus the U.S. currency on Friday, stretching the lower boundaries of its recent range as expectations of a widening U.S.-Canada interest rate gap drew yield seekers to the greenback. Canadian bonds eased alongside U.S. Treasuries in a quiet, rate-driven session."

"The currency finished at C$1.1236 to the U.S. dollar, or 89.00 U.S. cents, down from C$1.1189 to the U.S. dollar, or 89.37 U.S. cents, at Thursday's close."

"Trading action on Friday was volatile, as it has been all week, as traders mulled shifting interest rate outlooks in both Canada and the United States."

"Gold and metals reversed early losses and finished higher on Friday, overcoming a strong dollar and concerns about economic growth ahead of the Federal Reserve's rate-setting meeting next week. Newfound optimism on Wall Street, rising crude oil prices and a bullish broker note on copper all helped metals erase their morning negative bias."

"Gold for August delivery rose $2.60, or 0.4%, to close at $588 an ounce. Among other metals, silver for July delivery gained 0.1 cents, or 0.7%, to $10.28 an ounce."

"Many observers say the severe corrections experienced by metals and commodities over the past month reflect concerns that rising interest rates the world over will curb growth and subdue inflation, which include surging commodities prices. In the U.S., the Fed is no longer expected to pause its two-year-long campaign to hike rates at the end of June. Meanwhile, the U.S. economy is already expected to decelerate and many worry that the Fed might overshoot, slowing U.S, and global growth too much."

"With the Fed now expected to deliver another quarter-point hike at the end of a two-day meeting next Thursday, 'metals continue to be confused about the direction of the economy and are certainly still somewhat limited by 'fear of the Fed',' writes Nell Sloane, metals analyst."

"The market is currently pricing in 100% odds that the Fed will hike by a 25 basis points next week, and 14% odds that it will hike by 50 basis points, according to Miller Tabak. 'While gold prices (and equity markets) may already have factored in a quarter point adjustment as a certainty, we are not so sure that things will fare equally well in the face of a larger rate increase,' writes Jon Nadler."

This was a positve end for gold on the week. It held it's technical ground, rising today even though the US$ was up.
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