Wednesday, July 12, 2006


Gold, US$ Up On Tensions, BOJ Concerns

Once again, geopolitical problems are moving the metals market. "Gold futures rallied Wednesday, closing at their highest level in more than a month, as political instability in the Middle East, India and North Korea fuelled safe-haven demand."

"Gold for August delivery ended the session up $8.10 at $651.20 an ounce on the New York Mercantile Exchange, its highest closing level since May 30. Silver added 0.5 cent to $11.555 an ounce, platinum rose $13.60 at $1,267.60 an ounce and palladium was up 95 cents at $329.95 an ounce."

"As long as there is no resolution in the crises in Iran, Iraq, Gaza, and North Korea, 'gold will keep drawing safe-haven buyers under its protective wing,' said Jon Nadler, an analyst at 'The seasonal factors one could usually count on to slow the action in the trading pits are now taking a back seat to the anxieties created by aggravated world conditions,' Nadler said."

"Dale F. Doelling, chief market technician at Trends In Commodities, attributed the latest gains in gold prices to the underlying strength of the market. 'These events can cause brief periods of market volatility, but certainly this event alone will hardly have any long-term affect on the markets,' Doelling said. 'It will be interesting to see how much more is left in the current rally as the market has retraced about 50% of the decline and is back in overbought territory.'"

"The dollar rose sharply against the yen, boosted by a smaller-than-expected U.S. trade deficit in May and growing uncertainty about Japanese monetary policy. Oil prices closed near $75 a barrel."

"The dollar gained across the board after the U.S. government said its trade deficit widened in May to $63.84 billion, below an expected $64.9 billion shortfall. Its biggest advance came against the yen, already weaker overnight after remarks from Japan's finance minister about lingering deflation cast doubt about an expected Bank of Japan quarter-percentage-point interest rate hike on Friday."

"'The (Japanese) finance minister put the fuel on the fire and the trade number got the fire more heated,' said Brian Taylor, chief foreign exchange dealer with Manufacturers and Traders Bank. But Nihon Keizai Shimbun, Japan's biggest financial daily, reported in Thursday's edition that the BOJ is 'leaning toward' raising rates by a quarter percentage point when a two-day policy meeting ends on Friday."

"Late afternoon, the dollar was up 1.1 percent at 115.49 yen. The euro fell 0.56 percent to $1.2699."

Gold rose much more than the US$. The technician is right, the next few days will be critical in determining if we are resuming the bull market or not.

BTW, free week starts tonight at Elliott Wave. I think you can sign up through the links on my HBblog.
Overbought territory? How does he figure that?
I think we pay too much to how far gold moves in dollars. $80 to it's earlier price isn't much when you consider it's only about 10% away.

You should post that Fed paper "Is America Bankrupt?" as a topic.
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