Wednesday, November 15, 2006


US$ Up On 'Optimistic' Fed

Bloomberg reports on the currencies. "The dollar rose against the yen after minutes from the Federal Reserve's rate-setting meeting showed the central bank remains focused on the threat of inflation. The dollar advanced earlier after weaker-than-forecast data from Japan led traders to buy the U.S. currency. A surge in New York manufacturing this month indicated the U.S. economy may be more resilient than investors had speculated."

"'The Fed is downplaying risks to growth and is fixated on inflation concerns,' said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments in Boston. 'This is rather hawkish.'"

"The dollar gained to 118.04 yen at 3:30 p.m. in New York, from 117.62 yesterday. The U.S. currency traded at $1.2826 per euro from $1.2810 late yesterday. The dollar rose to $1.8892 per British pound from $1.8955 late yesterday."

"'Most members judged that the downside risks to economic activity had diminished a little,' the Fed said in minutes of its gathering on Oct. 24-25 released in Washington today. 'All members agreed that the risks to achieving the anticipated reduction in inflation remained the greatest concern.'"

"'The Fed was a little bit too optimistic about the outlook of growth,' said Brian Garvey, senior currency strategist with one of the world's largest custodians of investor assets with $10.7 trillion. The decline in October retail sales shows 'the housing slowdown did trickle down into consumption. This contrasts with what the Fed said in the minutes.'"

From MarketWatch. "Gold futures closed lower Wednesday to register a four-session loss of 2% after a report said total global demand for gold fell in tonnage terms during the third quarter as price volatility dampened consumers' appetite. Gold for December delivery closed down $1.50 at $623.80 an ounce. The contract ended above the day's two-week, intraday low of $616, but it still tallied a four-session loss of $13 an ounce."

"'Consolidation remains the short-term theme for gold, particularly with oil locked between $58-$60/barrel and the dollar showing signs of stabilizing,' said James Moore."

"On Wednesday, a report prepared by precious-metals consultancy GFMS Ltd. on behalf of the World Gold Council said total global demand for gold fell 3% in the third quarter in tonnage terms from the same period a year ago, but it rose 37% in value.
Specifically, jewelry demand was down 4% at 592.1 metric tons and investment demand fell 10% to 110.8 metric tons, but industrial demand was up 5% at 114 metric tons with electronics consumption at a new quarterly record of 79.1 metric tons, the data showed."

"'The price volatility seen at the beginning of the quarter dampened consumer appetite, which was then followed by a stabilization in the price and a subsequent resurgence in demand from consumers toward the end of the quarter,' said James Burton, chief executive of the World Gold Council."

"On the other hand, the WGC report also said gold production fell 12% during the same quarter vs. 2005, he said in an e-mailed report."

"December silver futures rose 5.5 cents to close at $12.945 an ounce, recovering from an earlier low of $12.50. In a report released late Tuesday, GFMS said hedge-fund hunger could drive silver back up to $15 an ounce in the next few months, even as demand from fabricators of the precious metal is forecast to drop this year."

"The London-based researcher forecast fabricator demand will fall just over 3% this year from last year's revised level. But investment demand, which has driven prices higher in the past year, should keep rising and could drive silver back up to $15 an ounce over the next few months, it said."

"'Investment demand remains the main driver of the price,' said GFMS. Also on Nymex, January platinum futures closed down $2.40 at $1,170.80 an ounce, while December palladium lost 70 cents to end at $318.80 an ounce."

The Toronto Star. "The tight platinum mining sector in Canada is poised to get even smaller with the proposed sale of TSX-listed AfriOre Ltd. to British-based Lonmin PLC — the same company that last year bought Toronto's Southern Platinum Corp."

"The $498.75 million all-cash deal will see one of Canada's few platinum producers rolled into the world's third-largest, which has operations near AfriOre's massive Akanani platinum exploration project in South Africa."

"'We may continue to see consolidation of some of the juniors, but it's going to be very select,' said Fiona Childe a geologist with Tau Capital Corp. and spokeswoman for AfriOre. 'It's going to be the best assets,' unlike in the gold sector where 'every gold company thinks they're a takeout target right now, whether it's realistic or not.'"

Right. You can trust the Fed to protect the USD. LOL. They did a great job the last 5 years. Hey everyone, the dollar has a bright future!
This is slightly OT, but there's something profoundly disturbing about the Fed's statements if we're to take them for face value.

If the Fed believes that inflation will be offset not by rate hikes, but by decreases in consumer spending (due to the American consumer being tapped out) -- we're charging headlong into an era where the poor get much poorer and the rich get much, much richer. The mix of plentiful liquidity with the decreased financial capacity of the everyday consumer is a real downer of a mixture. Hard times are ahead for lots of people. And fat days are ahead for others.

And of course -- if they underestimate the coming slowdown in consumer spending... well then we've got 1929 all over again.

This is a dangerous game.
"Strong dollar" makes no sense to me. If all the currancies used for the comparrison are inflating their money base 10%/year and we inflate total dollar ammount by 12% this only shows up as a 2% decline in the dollar!?

On paper the dollar loses 12% of its purchasing power, but face value seems to be only suffering mild inflation.
Wow. Today seems like lunacy. Apparently the CPI still carries a lot of weight. It all seems so crystal clear what's actually going on here... I guess we just need more time... Long across the board on dollar hedges.
When I read things like this:

"US inflation cooled sharply in October, data has shown, raising hopes that the Federal Reserve now has the evidence it needs to start cutting interest rates soon.
Today's announcement increases the likelihood of 2007 cuts in the fed funds rate,"

I just want to laugh...
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