Money and Metals

The Street.com reports on what moved the metals markets today. "Gold got another oil-fueled boost Monday after BP announced it would cut output by 400,000 barrels a day, 8% of total U.S. production, in order to deal with a pipeline leak in Alaska. Prices for the benchmark December gold contract closed up $3.20 an ounce at $659.20 on the Comex. Gold has been tracking the price of oil lately, and crude oil was recently trading up $2.04 a barrel at $76.80."

"'Oil above $76 is definitely a help,' says Jon Nadler, an analyst at Kitco. But the gold market is also being buoyed by the weak July employment data released Friday, he notes. The data suggest the Fed may end its 17-step series of rate hikes when it meets Tuesday, boosting the prospects for a weaker U.S. dollar."

"Nadler, however, is not so sanguine about the Fed. 'I think they might just do one final tweak because they are much more spooked about the prospect of real stagflation than many believe,' he says. 'If they do hike rates, we are good for a $15 to $20 drop in the gold price.'"

From Dow Jones Newswire. "Analysts at MKS Finance said gold had a dull start to the week with any rallies met with profit-taking. After coming off of its session highs, gold appeared to drift slightly lower through the remainder of the session."

"'The release of the FOMC decision tomorrow after the Comex close with a pause
in the hike cycle expected should be, in our view a catalyst for the yellow
metal in the short-term,' said the analysts."

"The silver market remained in a narrow range but was unable to end in
positive territory on Monday. The benchmark September contract settled 22 cents lower at $12.265 an ounce. During the session the contract traded in a tight $12.18-$12.49 range."

"The platinum group metals complex ended the session subdued with the
most-active October contract settling $10.90 higher at $1,266.90 an ounce.
September palladium settled up 5 cents at $327.55 an ounce."

The Sydney Morning Herald. "The Australian dollar closed stronger, despite a bank holiday in parts of the country, as the US dollar dropped-off on expectations the US Federal Reserve would keep interest rates on hold this week."

"'I suspect that once we get past the Fed decision, which will be early on Wednesday morning, there is quite a significant risk we'll see the Australian dollar making more ground against the US dollar and there's a chance that we'll see that building towards 77 cents fairly quickly,' Grange Securities research director Stephen Robert said."

From Reuters. "With the ink barely dry on another unexpectedly weak U.S. payrolls report, some traders are looking beyond Tuesday's Federal Reserve meeting to guess when the central bank might start trimming interest rates."

"Many strategists say a rate cut could come between the fourth quarter of 2006 and mid-2007 as policy-makers respond to dwindling economic expansion, as shown by last week's report that U.S. gross domestic product grew just 2.5 percent in the second quarter, well down from 5.6 percent in the first."

"Friday's July jobs report 'is the first real hard data besides the second quarter's weak GDP report that supports the Fed's slowdown forecast,' said Scott Anderson, senior economist at Wells Fargo in Minneapolis."

"Still, strategists said the policy-setting FOMC will likely issue a sharply worded statement that contains hawkish verbiage about inflation and does not rule out future hikes. 'We do not believe one payroll report can help forecast what the Fed will do come September and October,' said Wells Fargo's Anderson. 'The next hurdle for the Fed will be confirmation that inflation pressures are beginning to ebb. It is this next hurdle with which we think the Fed may have more of a struggle.'"

From Bloomberg. "Borrowing by U.S. consumers unexpectedly accelerated in June as credit card debt jumped, a Federal Reserve report showed today. Consumer credit, or non-mortgage loans to individuals, rose $10.3 billion to $2.19 trillion following a revised $5.89 billion increase in May. The two-month gain was the biggest since September-October 2004."

"Americans are making greater use of their credit cards to finance purchases because rising interest rates and a cooling housing market make it harder for them to take out home-equity loans. Higher prices at filling stations are also prompting consumers to take on more debt, economists said."

"'The jump in consumer credit coming at a time when consumers are hard hit by soaring gasoline costs could indicate some financial woes on the part of borrowers,' said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi. 'It looks as if consumers are relying more on credit cards now that other avenues of credit such as mortgage refinancing have been shut off to them.'"

"The Mortgage Bankers Association's index of applications to buy a home or refinance an existing loan dropped 1.2 percent in the last week of July to the lowest level in more than four years."

"Instead, consumers are turning to credit card debt. American Express Co., Bank of America Corp., JPMorgan Chase & Co. and Citigroup all reported higher second-quarter profit from credit cards, partly because a new law making it harder for Americans to file for bankruptcy protection led to fewer defaults."