Wednesday, November 29, 2006


Late US$ Move Knocks Gold, Silver

Bloomberg reports on the US dollar. "The dollar advanced the most in three weeks against the euro after a government report showed U.S. economic growth last quarter was quicker than previously estimated. The U.S. currency rebounded from a 20-month low it sank to earlier today as evidence of economic strength may persuade the Federal Reserve to keep interest rates on hold for a longer stretch."

"Today's report 'gives some investors an excuse to pare their short dollar positions,' meaning bets on dollar losses, said Christian Dupont, a senior currency trader at Societe Generale SA in Montreal. 'It is definitely too early to talk about a rate cut now.'"

"The U.S. currency advanced to $1.3147 per euro at 11:44 a.m. in New York, from $1.32 yesterday, snapping a six-day slide. Its 0.4 percent gain was the biggest since Nov. 3. The dollar weakened to $1.3218 earlier today, its lowest since March 2005. It traded at 116.23 yen from 116.17 yesterday."

"'Yesterday and today the U.S. dollar was in a position where it was broadly oversold,' said Max Tessier, at CIBC Global Asset Management, which manages $2 billion in currency assets."

"Canada's dollar fell as a government report showed factory prices and raw material costs declined a third straight month and traders expressed concern the country's trade surplus will resume shrinking."

"The currency declined against all 16 major currencies after Statistics Canada said the price of raw materials in October fell 2.8 percent, more than the 1.5 percent economists had forecast. 'There was a push early in the morning that sent the U.S. dollar stronger while Canada weakened,' said Eric Lascelles, senior strategist at TD Securities in Toronto. 'That can be attributed in large part to the economic data that came out.'"

"The Canadian dollar dropped to 87.92 U.S. cents at 3:10 p.m. in New York from 88.45 cents late yesterday."

" A separate report from the U.S. Commerce Department showed sales of new homes in the U.S. declined more than economists forecast, by 3.2 percent in October, to an annual rate of 1.004 million. The report added to evidence that the U.S. housing slump has not ended."

"'It doesn't bode well for Canada, given that Canada is joined at the hip with the U.S.,' said David Mozina, a senior currency strategist at Lehman Brothers."

The Associated Press. "Gold prices slipped Wednesday, as traders took more profits from rises earlier in the week. However, the dollar was probing higher as gold was about to close Wednesday, said Jim Quinn, commodity floor analyst with A.G. Edwards. Just before gold's close, the euro hit a low for the day of $1.3133 after reaching as high as $1.3217 earlier. Thus, said Quinn, gold went from being 50 cents lower to roughly $2 lower just ahead of the final bell."

"'The very late move in the dollar prompted a little bit of selling,' he said. 'The market impacted the most was silver, because silver had put in a pretty good session all day. You had some profit-taking come into the market.'"

"February gold settled down $1.90 to $641.80 a troy ounce on the New York Mercantile Exchange. March silver settled down 5.2 cents to $13.76 an ounce. January platinum settled up $1.80 at $1,152.40 an ounce. March palladium fell $1.15 to $327.50 an ounce."

From MarketWatch. "'Gold has again stalled at the $640 technical resistance remains, but with the FX market overlooking Bernanke's relatively positive speech last night and oil prices starting to work higher as winter demand picks up, the outlook for gold remains positive with $650 being the metals target once the $640-$642 congestion is cleared,' said James Moore, analyst at TheBullionDesk in London."

"There's also renewed speculation about central banks buying gold after comments from the former deputy governor of the Reserve Bank of India, saying that country should increase its exposure to gold within its reserve holdings, according to Moore."

"There was further support in data showing core inflation rose slightly faster than expected, at 0.2%, in October. This kept the year-over-year gain in the core personal consumption expenditure price index at 2.4%, well above the Federal Reserve's implied cap of 2%.

Economists had been expecting core prices to rise just 0.1%, according to a survey conducted by MarketWatch."
Ben, how's those technicals? $640 was reportedly a resistance level, and gold blew through that this morning.
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