Monday, November 27, 2006


"Shifting Of Assets Keep US$ Weak"

The Associated Press reports on the US dollar. "The dollar weakened to a new 20-month low against the euro Monday, as traders bet the gap between European and U.S. interest rates will keep narrowing. The possibility of China reducing its dollar holdings also caused the U.S. currency to drop."

"The euro bought $1.3128 in late trading in New York, up from $1.3079 late Friday. Earlier Monday, the euro reached $1.3172, its highest point since March 2005. The euro crossed the key $1.30 mark late last week, when many traders were off for the Thanksgiving holiday. Light volumes often cause market volatility. Still, even as U.S. traders re-entered the currency markets on Monday, the dollar held at low levels."

"'The naysayers are suggesting the move occurred only because of low liquidity. But we're still here. The move is real, it has some strength to it," said David Durrant, chief strategist at Julius Baer Investment Management. 'The dollar bears are going, 'I told you so,' and the dollar bulls are standing there in disbelief.'"

"'What's undermining the dollar is that U.S. economic data has been soft, and European data has been stronger than expected,' said Michael Woolfolk, senior currency strategist at Bank of New York. 'The pendulum is swinging back towards a Fed rate cut.'"

"According to market watchers, China isn't the only country looking to reduce dollar holdings. 'We've heard out of China, Russia, Sweden, and other central banks the desire to hold smaller proportion of reserves in U.S. dollars,' Woolfolk said."

"On Monday, the People's Bank of China set its currency's rate at 7.8402 yuan per dollar, the strongest level since the current exchange system was set up in July 2005. Against the Japanese currency, the dollar fell as low as 115.40 yen on Monday _ its lowest point since August. It then recovered to 116.08 yen by late trading, up from 115.78 yen late Friday in New York."

"The dollar fell to 1.2067 Swiss francs from 1.2105, and to 1.1324 Canadian dollars from 1.1331."

From Reuters. "Eurogroup Chairman Jean-Claude Juncker said on Monday he was not concerned by the current level of the euro and that a critical point was 'lengths away.'"

"Investors are also gearing for U.S. economic data scheduled for release later in the week, analysts said. 'If there is any sign of an across the board (economic) softening we could see the dollar get hammered again,' said Ron Simpson, director of currency research at Action Economics in Tampa, Florida."

From MarketWatch. "Gold futures closed higher Monday, gaining more than $11 an ounce as the dollar continued lower against most of its major foreign-exchange rivals on concerns about the outlook for U.S. growth. Gold for December delivery closed up $11.60 at $640.60 an ounce on the New York Mercantile Exchange after reaching a high of $641.60."

"'Should gold overcome the $642 barrier and close consistently above it in coming days could well be the signal that brings it back to $680 (or higher) before December draws to a close,' said Kitco's Jon Nadler. 'To be sure, there will be lots of news and retrospective year-end jockeying on behalf of the greenback,' he said."

"Other metals were also higher Monday, with December silver futures gaining 45 cents to $13.49 an ounce. In addition, January platinum fell $6.60 to $1,147.40 an ounce, surrendering early gains and continuing the volatile trend seen last week. Sister metal palladium saw its December contract fall by $1 to $325 an ounce."

From Fortune. "Traders said they expected gold to continue to move in a narrow range, as investors await Federal Reserve Chairman Ben Bernanke's comments about the economic outlook Tuesday and the U.S. gross domestic product data on Wednesday."

"'People felt confident to buy gold during the unexpected weakness from Wednesday to the present on the dollar. It was just straightly a shifting of assets. There is very little else to say,' said George Nickas, a futures broker at FC Stone."

"U.S. crude, meanwhile, was trading above $60 on Monday after Saudi Arabia's oil minister said OPEC might cut output further at its Dec. 14 meeting."

IMO, it was a pretty big deal that the US$ didn't rally after the holiday. Throw in what happened on Wall Street and the Wal-Mart news, and the economy looks terrible.

Interesting that gold is leaving the platinum group behind.
I've said before that gold will move higher based primarily on people's savings versus credit. It will be an "investment" in the sense that they are attempting to produce a source of capital that can be put to work at a later time. I am not buying gold to hopefully have the price go up.

I am buying gold to transfer my savings into something that won't disappear when banks go bust. They don't even have to go bust. They just need the Fed to create more Fed Reserve Notes (notes for what I might add...there is nothing to exchange them in return).

I don't honestly understand how people can read one blog (HBB)and all agree that the bubble is bursting, yet not grasp the fact that the money that will be disappearing is their money tucked away in the "safe" CD, bond, MM, whatever. They are getting paid interest on those things because it was loaned out. It is not there. The FDIC orchestrates their "bailout" fund in much the same manner as fractional reserve lending. They aren't making money with it just sitting around. Yes, this will be interesting. And yes, gold can be an investment.

Patching a hole in the roof of your house is an investment. It provides a steady stream of shelter. Buying a suit for a job interview is an investment. If you land the job, you've secured a steady stream of income.

An investment or speculation has as much to do with the intent as the result. Separating the two is missing out on some key points. I am sure that the entire post was nothing people reading this blog don't already know.
Kerk93, I couldn't agree more. I've mentioned a few times that I am planning to cash out IRA's (pay tax and penalty) at the beginning of the year to acquire more physical. Many at HBB don't understand the gravity of the situation and the systemic financial risk associated with the housing bubble. We know the housing crash will be fully apparent to all in denial by Q2 2007, and a simultaneous stock market crash or at the least, a well overdue correction, will send the US economy into a recession sometime next year.
PMs are looking very strong. I keep expecting a pullback but the USD just can't seem to rally. CBs are trying to jawbone the USD up but it isn't working. This could be the beginning of the move below support that so many of us have been expecting. Vindication, in this case, is sad and will bring hardship to our country. Still, those who can protect themselves with PMs will do so.
Just remember dollar bears, we didn't create this. the dollar in the constitution is a measure of gold and silver. the dollar we have today is not a dollar.
IMO, it was a pretty big deal that the US$ didn't rally after the holiday.

Yeah, what happened to "all news is good news"? Could be the top is in.

Many at HBB don't understand the gravity of the situation and the systemic financial risk associated with the housing bubble.

Wow, just got back from a much needed week of holiday, and didn't check metals or markets all week. Looks like things are getting *very* interesting!
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