Money and Metals

MarketWatch looks at the metals. "Gold futures closed higher Friday to end the week nearly 5% higher, boosted by growing tension over Iran's nuclear activities as well as strength in oil from various threats to production. Strong U.S. employment data lifted the dollar, providing earlier pressure on gold which then limited the precious metal's gains."

"Gold for December delivery rose by $1.40 to close at $629.20 an ounce on the New York Mercantile Exchange. After climbing a total of over $22 in three sessions, it ended the week 4.7%, or $28.20, above last Friday's closing level of $601. December silver futures fell 1.5 cents to finish at $12.635 an ounce, but it was 4.6% above last week's close."

"Meanwhile, the dollar rallied against major currencies, touching one-week highs versus the yen and Swiss franc, after a government report showed the labor market is on fairly firm footing, damping expectations the Federal Reserve will lower interest rates soon."

From Reuters. "Spot platinum jumped nearly five percent to an eight-week high of $1,212 an ounce on Friday, boosted by talk of a launch of a platinum exchange traded fund and a break above key resistance, traders said. The launch of a ETF would potentially mean the issuer of the security would have to buy large amounts of platinum."

"'There's been a rumour doing the rounds, an imminent launch of a platinum ETF,' the trader said. 'There's been a lot of buying ahead of that and it picked up momentum after breaking through key resistance at $1,160.'"

"Precious metals have also been boosted this week by a run of weak data on the U.S. economy, suggesting the world's largest economy could be heading for a hard landing."

From Bloomberg. "The dollar rose the most in four weeks against the euro and yen after a government report showed the U.S. unemployment rate declined to a five-year low. The payrolls report suggested inflation will remain a greater threat to the economy than traders had speculated because of job creation, increased hourly earnings and a lower unemployment rate."

"Traders canceled bets a slowdown in the world's largest economy will push the Federal Reserve to cut borrowing costs from a 5 1/2- year high early next year. 'This is not the type of economy the Fed cuts rates on,' said Lara Rhame, a New York-based senior currency strategist at Credit Suisse. 'It adds up to higher yields. Given that foreign exchange is closely tracking the fixed-income market, it's very good for the dollar.'"

"The dollar rose 0.6 percent to $1.2710 per euro at 1:42 p.m. in New York, and touched $1.2684, from $1.2780 yesterday. The U.S. currency increased 0.9 percent to 118.12 yen, and reached 118.19, from 117.13 yesterday. The yen fell to 150.14 per euro from 149.70."

"China again ordered banks to set aside more money as reserves in its effort to curb lending and stop the world's fastest-growing major economy from overheating. China, which has raised interest rates twice since April, wants to prevent cash generated by a record trade surplus from funneling into investment projects. Premier Wen Jiabao vowed on Oct. 18 to keep controls on lending to cool a spending binge the World Bank warns could lead to overcapacity and falling profits."

"'The liquidity inflow situation is too much for the central bank to handle,' said Liang Hong, an economist at Goldman Sachs Group Inc. in Hong Kong. 'This won't be the last time that China tightens monetary policy.'"

The FX Street. "The Swiss franc has been under pressure for some time now because of developments in Swiss yields relative to Eurozone yields. And, with the US central bank on hold, the liquidity cycle has not yet reached a point where currencies such as the CHF will begin to strengthen."

"The inflation picture has thus changed significantly over the past few months. Back in June, CPI inflation was running at no less than 1.5%, at a time when large increases in producer and import prices were exerting growing pressure on the SNB already. Hence, the risk was that monetary policy would be tightened faster than was consistent with a gradual normalisation of policy."

"We now expect inflationary pressures to be very moderate in 2006 and 2007, with inflation averaging roughly one per cent in both years. This is more or less the same as the SNB is expecting. The bank’s latest policy report says that there is no reason to expect inflation to tick up in 2007 – 'An increase in inflation is not to be expected. A number of special factors whose individual significance is hard to assess are easing pressures on prices.'"