Thursday, November 16, 2006


Gold Suffers On More Dollar Strength

Bloomberg reports on the currencies. "The dollar rose against the euro after a report showed manufacturing in the Philadelphia area advanced for the first time in three months and Federal Reserve officials highlighted inflation risks. The data reduced speculation that the Fed will cut borrowing costs early next year, boosting the allure of dollar-denominated assets."

"Fed Bank of St. Louis President William Poole said the U.S. economy is not 'out of the woods' on inflation. Fed Bank of Chicago President Michael Moskow said 'some additional firming' of policy may be needed.'"

"'There are still signs of growth in the U.S. economy,' said David Powell, currency strategist at research firm IDEAglobal in New York. 'The Fed is still concerned about inflation. The market is a little bit ahead of itself to price in a rate cut.'"

"The dollar rose to $1.2795 per euro at 2:56 p.m. in New York from $1.2828 yesterday. The U.S. currency touched an intraday high of $1.2785 after the release of the report. The dollar also strengthened to 118.19 yen from 118.02."

From MarketWatch. "Gold futures fell Thursday to tally a loss of more than $15 during a five-session losing streak as lower energy prices and strength in the U.S. dollar dulled safe-haven demand for the precious metal."

"Gold for December delivery closed down $2.10 at $621.70 an ounce on the New York Mercantile Exchange, retreating from a high of $629. The contract has now lost 2.4%, or $15.10 of its value after falling over five sessions."

"But 'the yellow metal is still struggling to clear $628-$630 short term...a successful breach should see gold target $642-$645,' analyst James Moore said."

"Gold prices were also pressured Thursday by a steep decline in crude-oil futures, which mirrored moves in natural gas. Natural-gas supplies rose last week for the first time in three weeks."

"Other metals closed mixed Thursday. December silver futures closed flat at $12.945 an ounce, January platinum rose $18.50 to close at $1,189.30 an ounce and December palladium added $3.45 to close at $322.25 an ounce."

"The dollar briefly came under pressure overnight after Wu Xiaoling, deputy governor of the People's Bank of China, said that China had been buying yen for its foreign-exchange reserves, but recovered when she went on to say that China had held the yen for years."

"'In an environment of increasing reserve accumulation, diversification of reserves is not zero-sum, the purchases of yen or euros for example, do not necessarily mean dollar sales,' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman."

"The Treasury Department's international capital-flows report released Thursday bear out that argument. The TICs data showed that while net long-term capital inflows into the U.S. fell to $65.1 billion in September from a revised $114.4 billion in August, Chinese holdings of Treasurys rose again in September to $342.1 billion from $339.1 billion in August."

"In fact, the TICs data indicate that 'Chinese investors have been net buyers of U.S. Treasurys every month since last November,' Chandler said."

"Venezuela's currency tumbled to a 2 1/2-year low against the dollar in street trading as a surge in demand for imports outpaced the government's dollar sales."

"The bolivar, which the government sets at an official exchange rate of 2,147.3 bolivars per dollar, sank as much as 1.5 percent today in street trading to 3,145 bolivars. That's the lowest level for the currency since April 13, 2004, when it traded at 3,180 per dollar."

"'There is demand for hard currency that needs to be met right now,' said Antonio Dalbano, a partner with Solfin Sociedad Corretaje de Valores CA in Caracas. 'The country is growing too fast. Dollars are needed.'"

OT topic continued on demographics...

Amazon book links:

Harry Dent

Daniel Arnold

Warren Brussee

BTW, haven't read the Dent book, but have read extended excerpts. The title may be misleading, but that's just because he predicted a boom before the bust.



We agree that the demographic factors aren't the end-all, but I doubt they're even on most people's radar (and IMO they should be). BTW, one of the authors points out that the "big spender" decline will be 8x greater in magnitude than occurred during the Great Depression. Any way you cut it that has to hurt.

Regarding Japan, too, I've never heard of a more plausible explanation as to why their economic struggles have gone on for such an extended period of time. Again, hard to have an expanding business with a contracting client base.

Thanks! May I also recommend 'Death of the West' by Pat Buchanan? I've never voted for him, but he put together some UN data in a very convincing way.

Interesting! Thanks, I'll check that out. I'm a voracious reader and I always need new material.
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