Tuesday, September 26, 2006


Metals 'Bloodied But Unbowed'

MarketWatch reports on the US dollar. "The dollar was trading mostly firmer against major currencies Tuesday, touching a one-week high versus the euro, after a report showed U.S. consumer confidence rebounded in September. Gains in the dollar may be limited as traders await economic reports on durable goods and new home sales as well as revised second-quarter U.S. growth later in the week, said Michael Woolfolk, senior currency strategist at the Bank of New York."

"'There is little doubt that the going will be treacherous this week for dollar bulls, the market appears willing to sell dollars on the slightest indication of weakness,' he said."

"Meanwhile, the euro initially gained, before tumbling against the dollar after a German business-climate poll indicated that the nation's business leaders are less optimistic about the prospects for the economy compared with the current situation."

"Also on Tuesday, the Chinese yuan finished at its strongest level against the dollar since last year's revaluation. The yuan, also known as the renminbi, closed at 7.9150 against the greenback, compared with Monday's close at 7.9212."

"'The dollar still gets support in the short-term,' said Matthew Strauss, senior currency strategist at RBC Capital Markets Inc. in Toronto. 'It is too early to price in an interest-rate cut' by the Fed."

"Interest-rate futures show traders are pricing in a 12 percent chance the Fed will cut its benchmark rate, now at 5.25 percent, to 5 percent by year-end. The likelihood of a cut was about 19 percent yesterday. 'We don't think they need to hit the panic button, because overall growth is pretty good,' said Jeffrey Young, head of currency research in New York at Citigroup Inc."

"'The data are building a case that the euro zone growth rate has probably peaked,' said Adrian Foster, director of currency sales at Dresdner Kleinwort in Singapore. 'The euro is a sell on rallies.'"

"Gold futures rose Tuesday as strong overseas demand for the precious metal combined with the end of European central bank sales, lifting the benchmark gold futures contract to its highest level in two weeks. 'While some more backing and filling is possible, gold has once again withstood a sharp and violent correction – a trademark pattern in secular bull markets,' said Peter Grandich."

"Gold for December delivery closed up $1.20 at $597.100 an ounce on the New York Mercantile Exchange reversing from an earlier low of $591.60. The contract touched a high of $599.50, its loftiest intraday level since Sept. 14. Silver's December contract gained 17 cents to close at $11.495 an ounce."

"'The scheduled official [central bank] sales are now over, and India is back, and buying,' said Jon Nadler, at bullion dealers Kitco.com. Sept. 26 marked the end of 2006 gold sales under the Washington Agreement, a handshake-pact among 15 central banks that set limits on each year's sales of the metal from sovereign vaults."

"'It turns out that the rumors of massive year-end sales by the signatories of the central bank gold agreement were rumors,' said Julian Phillips, an analyst at GoldForecaster.com. 'We could see a total for the year of only 415 metric tons (including unannounced sales) – still well short of the 'ceiling' of 500 metric tons,' he said."

"'Of far greater importance is the fact that only (plus or minus) 600-700 (metric tons) remain of the announced sales for sale over the next three years,' he said."

"'The metals complex is bloodied but unbowed and, if I'm right, the metals will find their footing leading to a rally that will get a lot of traders' attention," said Dale Doelling, chief market technician at Trends In Commodities. 'Strong physical demand, a U.S. dollar working its way lower on a weakening U.S. economy and a belief that heighten geopolitical concerns worldwide are only a question of when, not if, all remain supporting factors for gold,' said Grandich."

"It's important to note: 'the yellow metal is not out of the woods yet, particularly with gold's recent correlation with oil, and remains vulnerable to bouts of fund liquidation,' said James Moore, analyst at TheBullionDesk.com in London."

"Given that, traders need to 'continue to take into account the sustained closings we have had under the moving average levels and allow for the possibility of a further spike to the downside absent surprise geopolitical developments or some terrible economic data,' said Nadler."

"'All we did was trade down to support just above the $590 area, then bounced off of that, from a technical perspective,' said Dave Meger, senior metals analyst with Alaron Trading. 'We saw a little buying come into that price level, and that created a little short covering.'"

"But the futures stalled at $599.50, just shy of the $600 psychological area, Meger continued. October platinum settled down $1.60 at $1,131.60 an ounce. December palladium settled up $1.45 at $318.65 an ounce."

Back over $600 -- just can't keep a good metal down!
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