Money and Metals

Bloomberg reports on the gold market. "Gold and silver prices in New York fell the most in three weeks as lower energy costs reduced the appeal of precious metals as a hedge against inflation. Oil fell below $75 a barrel today on speculation demand for jet fuel may decline after London police foiled a plot to blow up airplanes bound for the U.S. from the U.K. Gasoline tumbled the most since May."

"'Oil is getting pounded, and gold has been trading in lockstep with oil,' said metals trader Frank McGhee. Gold futures for December delivery dropped $16, or 2.4 percent, to $646 an ounce on the Comex. Silver futures for September declined 46.5 cents, or 3.7 percent, to $12.105 an ounce."

"Gold's volatility, or the rate at which a price moves up and down, was 30 percent in the past 100 sessions, the highest for that period since 1982."

"J.P. Morgan analyst John Bridges said gold was 'misbehaving' because investors appear to have decided that the terror threat 'has apparently been defused, the gold insurance can be foregone for a while, and they can refocus on summer holidays. We believe this highlights the complacency and short-term nature of much investment,' Bridges said."

"Kevin Kerr, editor of a newsletter published by MarketWatch, said gold's move was puzzling as it should have benefit from its traditional safe-haven role. 'The news is coming in so fast and furious that traders are almost in shock and are getting their bearings and deciding what to do next,' he said."

"The dollar rebounded from a two-month low against the euro before a report tomorrow that may show U.S. retail sales surged last month. The statistics may help the dollar by damping speculation the Federal Reserve is done raising interest rates."

"'There's been chatter in the market that perhaps the Fed might prove to be more vigilant in the face of inflation risks,' said Sophia Drossos, chief currency strategist at Morgan Stanley in New York 'We've definitely seen a paring of short dollar positions,' which are bets the currency will fall."

"Traders were betting the dollar would fall this week after the Fed met on Aug. 8, and have been disappointed that it didn't extended losses beyond $1.29, said Russell LaScala, head of spot foreign-exchange trading in New York at Deutsche Bank AG. 'The risk is tomorrow we get a strong number' in the retail sales report, said LaScala. 'It may give the impetus for another leg up for the dollar.'"

"The U.S. currency has lost 7.2 percent against the euro and 2 percent versus the yen this year on speculation the Fed will stop raising rates as central banks in Europe and Japan continue lifting their benchmarks."