Money and Metals

Reuters reports on the US dollar. "The U.S. dollar recovered some ground on Thursday, after two days of falls, as investors who had sold the currency short on a bet it had more room to fall were forced to buy it back in the wake of stronger-than-expected economic data. The dollar recovered from earlier losses after the Philadelphia Federal Reserve Bank said its index of business conditions in the U.S. Mid-Atlantic region climbed in August to the highest level in more than a year."

"'I solely believe (trading) is technical at this point and the market bailing on short dollar positions,' said Joe Francomano, vice president of FX at Erste Bank."

"Traders had said there was a chance of a short-term rebound in the dollar since market positioning was already heavily skewed against the greenback but in favor of other currencies such as the euro and sterling."

"Even with the enexpectedly robust Philly Fed data however, Fed funds futures on the Chicago Board of Trade still showed investors pricing in just an 18 percent chance that the Fed will raise interest rates at its next meeting in September. Last week the market was pricing in almost an even money chance at one point."

"The Fed left rates on hold at 5.25 percent last month after raising its funds rate at 17 straight meetings since June 2004. Sterling was down 0.5 percent at $1.8871, under pressure all day after British retail sales unexpectedly fell in July."

"That added to losses made when minutes released on Wednesday of the Bank of England's last rate-setting meeting suggested the bank was in no hurry to repeat this month's surprise rate hike to 4.75 percent."

Dow Jones Newswire. "The continuing tumble in crude-oil prices took a toll on New York precious metals Thursday, with long liquidation occurring and the loss accelerating in gold when sell stops were hit, traders and analysts said. December gold settled down $13.70 to $625.30 an ounce on the Comex, while September silver gave up 29 cents to $11.995."

"Shortly after Comex gold closed, the Chicago Board of Trade's full-sized December gold futures were down $13.90 to $625, while full-sized September silver was down 28.5 cents to $12.002. Several market watchers said, the metal took its cue from the energy complex, as September crude fell to as low as $70 a barrel, its weakest level since June 21. The euro then gave up its gains late in the day, adding to gold's woes."

"'This is mainly an energy situation,' said Scott Meyers, senior trading analyst with Pioneer Futures. 'The energies got clobbered for another day. If you look at the charts, they're very similar. The energy sell-off is starting to spill over to the metals.'"

"'The sell-off in energy is affecting precious metals despite the weakness in
the dollar,' said analyst Mike Zarembski, who cited spec selling in particular. commented."

"'We are seeing a lot of liquidation in precious metals, base metals and energy,' said one trader. 'There seems to be kind of a widespread liquidation' A couple of dealers also cited thin liquidity during the summer vacation season as a factor contributing to the metals' weakness. 'It's mid-August,' said one. 'Liquidity dried up some months ago and it's even worse now."

"Meyers and a trader reported that sell stops in Comex December gold were hit around $630. The $630.50 low from Tuesday was a roughly three-week bottom. Meyers said he would put the next support around $615."

"One trader characterized gold as consolidating at the moment. 'Oil has been continuing to slide,' he said. 'We've been waiting for this, after oil's weakness yesterday. Then today, it's spilled over into commodities (as a whole). Gold is taking it on the chin, too.'"

"Platinum got pulled lower with crude and other metals, said a desk trader.
October platinum settled down $17.70 to $1.233.30 an ounce."