Money and Metals

The Washington Post has the latest from the US trasury chief. "U.S. Treasury Secretary Henry Paulson on Monday played down hopes for "quick fixes" in the drive to persuade China to let its currency rise, damping market speculation about swifter Asian currency appreciation. 'It takes a while and I'm not looking for immediate solutions or any quick fixes to particular situations,' said Paulson."

"He spoke to reporters traveling with him following meetings at the annual International Monetary Fund and World Bank meetings. Paulson also participated in meetings on Saturday of finance chiefs from the Group of Seven, the United States, Britain, Canada, France, Germany, Italy and Japan, that called for currency flexibility and essentially aimed to drive up Asian currencies such as Japan's yen and China's yuan."

"Paulson's remarks about China gave the U.S. dollar a fresh boost as the market interpreted this as a sign that the United States would not step up pressure on Beijing to allow its currency to strengthen faster. The dollar edged up yen to a fresh five-month high of 118.23 yen."

The International Herald Tribune. "'China is at a crossroads,' said Lanxin Xiang, professor of international history and politics at the Graduate Institute of International Studies in Geneva. 'They are not quite sure which way to turn in the international monetary system. Should they take the Bretton Woods system seriously and engage, or should they reconsider the rules of the game?'"

"U.S. dominance of the international system makes Beijing suspicious, Xiang said, and many Chinese policy makers would prefer a regional approach that would nurture nascent structures like an Asian monetary fund and an Asian currency unit."

"'China is very cautious about this stuff,' Leon Brittan, a senior adviser at UBS and a former deputy president of the European Commission, said, referring to the Bretton Woods system. 'They want a seat at the table, but they probably don't want to become a major player because they don't perceive they have much to gain.'"

"Recently, there have been signs of some quite radical thinking from Beijing in regard to the international monetary system."

"'The U.S. dollar is no longer a stable anchor in the global financial system, nor is it likely to become one,' said Fan Gang, a member of the Monetary Policy Committee of the Chinese central bank. 'Thus it is time to look for alternatives.'"

"Ideas floated in this regard, Fan said, include an international currency based on the Special Drawing Rights of the IMF, the evolution of an Asian currency unit, a return to the gold standard or something 'in between' these proposals."

From MarketWatch. "Gold futures climbed nearly $10 an ounce Monday to close at their strongest level in three sessions as traders with an upbeat outlook on the precious metal took advantage of last week's losses to buy back into the market at lower prices.
'Gold is bouncing thanks to a deeply oversold condition,' said Peter Grandich."

"'The difference now is traders are looking to sell rallies versus buy dips,' he said, adding that 'gold will need to close above $610 to confirm the recent big slide was indeed just a correction.'"

"Gold for December delivery closed up $9.80 at $592.80 an ounce on the New York Mercantile Exchange, its highest closing level in three sessions. Earlier, the contract touched a high of $594.40 following a loss of nearly 6% last week."

"'The odds of a consolidation above $575 have increased with the bounce off last Friday's lows," said Nell Sloane, analyst at NSFutures.com. However, 'to shut off the selling pattern over a series of days will require a persistently lower dollar or a persistently higher equity market,' she said."

"'Without some strong wave of Indian buying, news of resurgent Chinese activity or some other major fundamental revival, we doubt that December gold will be able to rise above significant overhead resistance up at $600,' she said."

"Likely adding more support for prices is market speculation over the potential for a rise in European central bank gold sales, ahead of a deadline next week. 'With next week's deadline for the European central banks to complete their 2006 gold sales and lending, gold's volatility could amplify in the coming days due to uncertainty over what the 15 banks will do,' portfolio managers at U.S. Global Investors wrote in a weekly newsletter issued Monday."

"The latest estimates indicate that the banks have sold less than 350 metric tons of their 500 metric-ton quota for the year ending Sept. 27, 2006, they said.
'Contrary to some opinion, the central banks are not heavy sellers of gold at the moment, nor have they been,' said Julian Phillips, an analyst at GoldForecaster.com."

"'There has been no change in the gold and silver tide, which is still flowing,' he said. 'The question is, is this a remarkable opportunity or is there a bit further down to go?'"

"Also on Nymex, December silver rallied 41.5 cents, or 3.8%, to close at $11.29 an ounce, a reversal following last week's loss of more than 11%. October platinum found support from the strength in other precious metals to close at $1,166.90 an ounce, up $3.20. But December palladium closed at $311.55 an ounce, down $3.25 for the day."