Thursday, September 28, 2006


Oil Leads Commodities Up

MarketWatch reports on the US dollar. "The dollar traded higher Thursday, touching a one-week high versus the yen and two-week high against the British pound, continuing its recent rebound as investors shrugged off an unexpected downward revision to U.S. growth in the second-quarter."

"David Gilmore, a partner at Foreign Exchange Analytics, said the dollar was moving against the yen as the Japanese currency continued to react to recent comments from new Finance Minister Koji Omi that there wasn't any reason to take any action on the euro/yen rate. 'People are sort of betting on Japan and the yen still being the source of funding for the carry trade,' in which investors make profits by borrowing lower-yielders and reinvesting in higher-yielding currencies and assets, Gilmore said."

"Meanwhile, the British pound came under heavy pressure after news that the U.K. Office of National Statistics made a serious error in its inflation data calculations and has 'slashed its estimate of annual inflation,' said Boris Schlossberg, senior currency strategist at FXCM."

"Also on Thursday, the greenback slipped below 7.90 versus the Chinese yuan for the first time since Beijing revalued its currency last year."

From the Standard. "The US dollar bought less than 7.9 yuan for the first time since a link to the US currency ended in July last year."

"US Treasury Secretary Henry Paulson said Wednesday in Washington that he asked Senators Charles Schumer and Lindsey Graham to delay a vote on imposing duties on Chinese goods. Sanctions are 'not the right way to negotiate with China,' he said. 'Quiet diplomacy always works in Sino-US politics,' said Wang Qing, head of economics and strategy for Greater China at Bank of America Corp in Hong Kong. 'If the senators pass the bill, it'll be a major setback.'"

"Dealers said a powerful correction may be looming due in part to the yuan's recent rapid gains. 'The market appears to be convinced the central bank is willing to allow the yuan to rise at a faster pace,' said a dealer at a major domestic commercial bank. 'But the market also believes the central bank will reach the goal by widening the yuan's trading band instead of straight-line gains.'"

"One-year contracts show traders are betting the yuan will strengthen to 7.6430 in a year, compared with 7.6545 Wednesday. That would mean the currency would rise 3.2 percent in that period. The yuan's gain may slow on speculation China's central bank will engineer two-way moves in the currency, said Royal Bank of Scotland Hong Kong- based strategist Ben Simpfendorfer."

From Dow Jones Newswires. "Gold futures continued their recent bounce Thursday, with traders and analysts citing improved physical demand and chart-based factors, with the metal getting an additional boost as oil kept recovering from its recent lows."

"December gold rose $7.60 to settle at $610.90 an ounce on the Comex division of the New York Mercantile Exchange, while December silver added 3.5 cents to $11.735."

"Some of the selling pressure from earlier in the month abated when the Comex December futures' bottom of $576.60 on Sept. 15 remained above the June lows, said Tom O'Brien, analyst and editor of 'The Gold Report' newsletter. Now, the contract is poised to return to $619, perhaps in the next couple of days, O'Brien said."

"'When you hold support, the market has proven there are no more sellers in the market,' he said."

"Looking at the market on a fundamental basis, 'Oct. 16 is the first holiday in India,' O'Brien said, referring to the Diwali holiday. Then comes what is referred to as the 'wedding season' in November and December. 'Those jewelers come into the market right now to buy the gold,' he said. 'That's real support. That's real physical buying.'"

"A gold trader also cited both technical strength and improving physical demand, but added that a recovery in crude oil since the beginning of the week has given gold an extra push higher. 'There has been good physical demand lasting for the last one-and-a-half to two weeks,' he said. 'That paved the way. And technically, we held the $570-ish area.'"

"'Oil held a trendline. And when oil bounced, gold bounced,' said one trader. 'And because it had strong fundamentals, which is the physical demand, specs started to get slightly more positive on gold.'"

"While silver's gain Thursday was modest, O'Brien suggested that the metal technically has been stronger than gold for a while now. During a recent correction lower, December silver stopped at $10.55 on Sept. 15, well ahead of its June 14 low of $9.64."

"'That is showing silver has a little more strength than gold,' O'Brien said. However, silver had a heavy one-day sell-off of more than $1 on Sept. 11. Thus, he said, 'it's going to take a little bit more work' for the metal to break out of a current band of resistance that he puts all the way from $11.20 to $12.32. Like gold, December silver hit its strongest level since Sept. 11, peaking overnight at $11.86 an ounce."

"Meanwhile, October platinum gained $7 to $1,146 an ounce and January rose $13 to $1,160. The rollover continues ahead of first notice day for October at the end of the month. December palladium added $4.10 to $324.10 an ounce."

"'They are just following oil up,' said a Platinum Group Metals trader. 'It's all on the back of oil right now. That's pulling gold and everything else up.'"

And there is this report:

'The US government is losing patience with hedge funds, signalling the end of glory days for an unregulated industry with $1,700bn to hand and the ability to operate with near total freedom across the globe.'

'The Securities and Exchange Commission (SEC) bared its fangs yesterday, launching a probe into Amaranth Advisors after it nearly collapsed this month when a lone trader lost $6bn betting on gas futures.'

'It is an emerging threat because of the dollar value and the number of institutions actively taking a look at this," said Chip Burrus, the FBI's assistant director. "People that aren't expecting to have this type of a risky investment in their portfolio end up taking a bath," he said.'
lot's of new ETFs for commodites and currencies are out now. I'll link them alter.
"People that aren't expecting to have this type of a risky investment in their portfolio end up taking a bath" said Chip Burrus, the FBI's assistant director.

The reality is many of the "sophisticated" investors "qualified" by the SEC to invest in these hedge funds have no concept of risk. They only understand reported pre-tax returns. BTW, high returns are better than low.

What makes them sophisticated is that they have plenty of money to lose. They only understand risk after the fact. The same goes for the fund of fund managers that take their cut with very little value added.
Only when it is your money, or someone's that you personally know, does it take on risk. Managing money that doesn't have a face/family of 4 tied to it makes it feel like Monopoly money. Sure, losing hurts...not as large of a bonus. That isn't the real killer.

It appears that the gov't is getting nervous. As long as the masses can go about their merry way, they only have mild disdain for those raking in huge profits while skimming the top off of your hard earned savings. With housing going down, the same occurring in the equity market will roil the masses beyond belief.

With elections almost upon us, an equity collapse will not bode well for any of the folks in power. Unfortunately, the blame will be thrown around pointing at everyone but the culprits. The culprits are us, the people. Politics may not be as exciting as Paris Hilton, but it has a direct impact on your freedoms and life.

I can't work and save what I earn without worrying about losing purchasing power, plain and simple. That is not a free society. You can put whatever ism you want on it, but certainly not free. Free is working hard and enjoying the fruits of your labor, not trying to figure out how to play the game when the ACTUAL rules are not public.
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