Money and Metals

Forex News reports on the Fed minutes. "The dollar weakened across the board after markets digested the minutes of the FOMC’s August 8th meeting in which the committee voted on leaving policy unchanged. The Board deemed that the 'full effect of previous increases in interest rates on activity and prices probably had not yet been felt, and a pause was viewed as appropriate to limit the risks of tightening too much.'"

"Additionally, 'with energy prices possibly leveling out, aggregate demand moderating, and long-term inflation expectations contained, core PCE inflation likely would decline gradually from its elevated level, though the upside risks to inflation were significant.'"

From Bloomberg. "The dollar extended a drop against the yen and fell versus the euro after minutes from the Federal Reserve's Aug. 8 meeting showed policy makers said inflation 'remained contained.'"

"'The market had set itself up for hawkish minutes,' said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. 'I don't think the monetary policy is there to be supportive of the U.S. dollar.'"

"The Fed's recognition of the weakening housing market was 'weighing on the dollar,' said Samarjit Shankar, at Mellon Financial Corp. Yet the Fed is 'not ruling out a future tightening.' With a rate increase still on the table 'there's a significant upside risk for the dollar' on stronger-than- expected data later in the week, Shankar said."

"'I expect the euro to continue to rally, not only against the yen but against the dollar,' said Michael Woolfolk, senior currency strategist at the Bank of New York in New York. 'All you have to do is take a look at interest-rate differentials, which continue to move in favor of the euro.'"

From MarketWatch. "Gold futures fell in tandem with oil Tuesday to tally a two-day loss of more than $11 an ounce, then moved higher in the electronic trading session as investors weighed the prospects for metals demand and mulled the minutes from the Aug. 8 Federal Reserve monetary policy meeting."

"'The FOMC minutes detail the growing fears of the weakening U.S. economy while trying to downplay inflationary pressures,' said Peter Spina, chief investment strategist at GoldSeek.com. The choice remains clear: 'you must sacrifice the economy or the dollar,' he said, explaining that higher rates will help support the ailing dollar while crippling the fragile economy and 'it does not appear this will be their route.'"

"The market could be 'looking at rate cuts in 2007,' and this will 'drive another nail into the dollar's coffin,' Spina said. The falling value of the dollar 'will be another strong driving force for the gold market as we look into 2007 and beyond.'"

"Gold for December delivery climbed back over $620 an ounce in electronic trading Tuesday evening in New York, trading up $1.90 at $621 immediately after the Fed minutes were released. Before the details on the Fed meeting were released, December gold closed down $4.80 at $619.10 an ounce."

"December silver closed at $12.322 an ounce Tuesday, reversing from an earlier low of $12.02 to close up 12.5 cents. October platinum closed down 20 cents at $1,227.50 an ounce and December palladium fell $4.85 to end at $342.90 an ounce."

"Adding pressure to gold prices Tuesday, the U.S. consumer confidence index fell to 99.6 points in August from a revised 107 in July, according to the Conference Board.
'Stagflation is indeed the name of this game, normally good for gold, but not today,' said Kitco's Jon Nadler."