Tuesday, August 15, 2006
Gold Seeing 'Flight To Quality Liquidation'
The US dollar weakened on economic data today. "Against the British pound, the dollar was unable to hold its gains Tuesday in New York trading. The greenback showed choppy trading against the pound during the early morning period. This came as UK core CPI data unexpectedly fell. However, the U.S. currency dropped against the pound amid the release of U.S. economic data. The greenback traded down to a 4-day low of about 1.8970."
"Earlier, U.S. PPI data reported lower than economists had predicted. The monthly PPI reading rose 0.1 percent in July, compared to the consensus of a 0.4 percent increase."
"Gold futures closed near a three-week low Tuesday to mark a four-session loss of more than $29 an ounce, extending declines as the Israel-Hezbollah cease-fire eased international worries. An unexpected decline in core wholesale prices and weaker-than-expected manufacturing data helped lower inflation concerns. The weak data prompted a drop in the odds of a September interest rate hike and weighed on the U.S. dollar, but failed to provided a boost for the precious metal."
"'As most of the war premium and some of the oil price-related surge are evaporating from the bullion market, gold prices are dropping to levels that are more in line with their pre-July 4th levels,' said Jon Nadler, at Kitco.com. 'In the absence of immediate crises, and not helped by subdued PPI figures..gold is aiming to rediscover just where its support levels are rooted,' he said."
"December gold futures closed down $6.40 at $632.90 an ounce on the New York Mercantile Exchange. Earlier in the session, the front-month contract hit a nearly three-week low of $630.50. The contract has now lost $29.10, or 4.4%, in the past four sessions."
"'The gold market is obviously seeing flight to quality liquidation in the wake of the Middle East cease-fire and, not surprisingly, because of the rather significant correction in oil prices,' Nell Sloane, an analyst at NS Futures, said in a daily commentary. 'In fact, the investment or flight to quality crowd seems to be consistently backing away from the market and is doing so in a moderately aggressive fashion,' she said."
"Elsewhere, the New York Federal Reserve Bank's Empire State Manufacturing index fell to 10.3 in August, the slowest growth pace since June 2005, from a revised 16.6 in July, while economists had been forecasting a decline to 13.9 from the initial estimate of 15.6. The data pushed the price of the September Fed fund futures contract up 0.01 to 94.73, which implies a 24% chance that the Fed will raise its target on overnight rates to 5.5% from 5.25% when it meets Sept. 20. Late Monday, the odds of a hike were 36%."
"As a result of the lowered outlook for a rate hike, the U.S. dollar fell vs. its major rivals, but that apparently wasn't enough to lift investment demand for gold."
"In other metals, September silver slipped 7.5 cents to close at $12.085 an ounce.
October platinum gained $8.10 to close at $1,241.40 an ounce and September palladium advanced $6.40 to end at $324.70 an ounce."
The Motley Fool has this report. "This past June, Rockville, Md.-based Rydex added six more currency-based exchange-traded funds to the market when it launched the CurrencyShares series of funds on the New York Stock Exchange. These ETFs, the CurrencyShares Australian Dollar (NYSE: FXA), British Pound Sterling (NYSE: FXB), Canadian Dollar (NYSE: FXC), Mexican Peso (NYSE: FXM), Swedish Krona (NYSE: FXS), and Swiss Franc (NYSE: FXF) funds, were created to track the price movements of world currencies."
"These new creations follow the first-ever currency ETF, the Euro Currency Trust (NYSE: FXE), which Rydex launched at the end of 2005. It was designed to rise in value when the euro strengthens relative to the U.S. dollar and fall when the euro weakens. These new ETFs work on the same principle."
"Even though these are currency funds, don't expect any cash income from them. If you sell your shares after a fund's currency strengthens relative to the U.S. dollar, you'll have a gain. There have been times when I've watched the dollar go down in value and wanted to benefit from that trend. With these new funds, investors can implement a strategy to do just that. But remember that you'll have to deal with swings in value in the capricious currency markets."
"Strangely, Rydex seems to have had no yen for a Japanese currency fund. That's too bad, since a Japanese yen fund would have rounded out the major currencies."
"Earlier, U.S. PPI data reported lower than economists had predicted. The monthly PPI reading rose 0.1 percent in July, compared to the consensus of a 0.4 percent increase."
"Gold futures closed near a three-week low Tuesday to mark a four-session loss of more than $29 an ounce, extending declines as the Israel-Hezbollah cease-fire eased international worries. An unexpected decline in core wholesale prices and weaker-than-expected manufacturing data helped lower inflation concerns. The weak data prompted a drop in the odds of a September interest rate hike and weighed on the U.S. dollar, but failed to provided a boost for the precious metal."
"'As most of the war premium and some of the oil price-related surge are evaporating from the bullion market, gold prices are dropping to levels that are more in line with their pre-July 4th levels,' said Jon Nadler, at Kitco.com. 'In the absence of immediate crises, and not helped by subdued PPI figures..gold is aiming to rediscover just where its support levels are rooted,' he said."
"December gold futures closed down $6.40 at $632.90 an ounce on the New York Mercantile Exchange. Earlier in the session, the front-month contract hit a nearly three-week low of $630.50. The contract has now lost $29.10, or 4.4%, in the past four sessions."
"'The gold market is obviously seeing flight to quality liquidation in the wake of the Middle East cease-fire and, not surprisingly, because of the rather significant correction in oil prices,' Nell Sloane, an analyst at NS Futures, said in a daily commentary. 'In fact, the investment or flight to quality crowd seems to be consistently backing away from the market and is doing so in a moderately aggressive fashion,' she said."
"Elsewhere, the New York Federal Reserve Bank's Empire State Manufacturing index fell to 10.3 in August, the slowest growth pace since June 2005, from a revised 16.6 in July, while economists had been forecasting a decline to 13.9 from the initial estimate of 15.6. The data pushed the price of the September Fed fund futures contract up 0.01 to 94.73, which implies a 24% chance that the Fed will raise its target on overnight rates to 5.5% from 5.25% when it meets Sept. 20. Late Monday, the odds of a hike were 36%."
"As a result of the lowered outlook for a rate hike, the U.S. dollar fell vs. its major rivals, but that apparently wasn't enough to lift investment demand for gold."
"In other metals, September silver slipped 7.5 cents to close at $12.085 an ounce.
October platinum gained $8.10 to close at $1,241.40 an ounce and September palladium advanced $6.40 to end at $324.70 an ounce."
The Motley Fool has this report. "This past June, Rockville, Md.-based Rydex added six more currency-based exchange-traded funds to the market when it launched the CurrencyShares series of funds on the New York Stock Exchange. These ETFs, the CurrencyShares Australian Dollar (NYSE: FXA), British Pound Sterling (NYSE: FXB), Canadian Dollar (NYSE: FXC), Mexican Peso (NYSE: FXM), Swedish Krona (NYSE: FXS), and Swiss Franc (NYSE: FXF) funds, were created to track the price movements of world currencies."
"These new creations follow the first-ever currency ETF, the Euro Currency Trust (NYSE: FXE), which Rydex launched at the end of 2005. It was designed to rise in value when the euro strengthens relative to the U.S. dollar and fall when the euro weakens. These new ETFs work on the same principle."
"Even though these are currency funds, don't expect any cash income from them. If you sell your shares after a fund's currency strengthens relative to the U.S. dollar, you'll have a gain. There have been times when I've watched the dollar go down in value and wanted to benefit from that trend. With these new funds, investors can implement a strategy to do just that. But remember that you'll have to deal with swings in value in the capricious currency markets."
"Strangely, Rydex seems to have had no yen for a Japanese currency fund. That's too bad, since a Japanese yen fund would have rounded out the major currencies."
# posted by Ben Jones @ 2:32 PM 
