Thursday, December 28, 2006


Gold Holds Gain On US Dollar Rebound

MarketWatch reports on the metals trading. "Gold futures closed higher Thursday for a fourth straight session, finding support from a mixed dollar and firmer oil prices after data showed a bigger-than-expected drawdown in crude supplies in the latest week. Gold for February delivery finished up $6.60 at $636.90 an ounce on the New York Mercantile Exchange."

"'Gold is showing a strength beyond oil or the dollar which will stand apart from these other markets,' said Julian Phillips, analyst at 'As we enter into 2007 we do expect to see rising volatility, uncertainty, tensions all sufficient to cause concern enough for gold and silver to become safe haven assets in their own right.'"

"Gold held higher even as the dollar came off its worst levels following a batch of data. The dollar was last trading down 0.1% against the euro and 0.1% against the British pound but was up 0.2% against the yen."

"Jon Nadler, analyst at bullion dealers, said traders were speculating that gold would be even higher if the market had full participation levels, which should return next week. 'In the interim, bullion is zeroing in on quite a decent average value for the trading year that concludes tomorrow,' and could attempt a return to $645 to $652 in the opening weeks of the new year, he said."

"Other metals were mixed. Silver rose 1.5 cent to $12.94 an ounce. Platinum closed higher, but palladium ended lower."

From Reuters. "The dollar slipped on Thursday, but pared losses after stronger-than-expected U.S. data suggested a far more resilient economy than a recent run of reports had indicated."

"U.S. existing home sales for November, the Chicago manufacturing index for December, and the Conference Board's reading on consumer confidence all topped market forecasts, helping the dollar recover some ground after earlier losses."

But the dollar remained under pressure against the euro and other major currencies aside from the yen after a member of the European Central Bank Governing Council, Yves Mersch, said earlier that euro zone interest rates remain low in historical terms."

"Many strategists are downbeat on the prospects for the dollar in 2007, given expectations that the Federal Reserve may cut interest rates to shore up a soft economy, as other central banks such as the ECB ratchet rates higher. 'The market is not predisposed to going on a dollar buying binge right now,' said Michael Woolfolk, senior currency strategist at Bank of New York."

"The dollar rose 0.15 percent against the yen to 118.95 yen. Asia-based traders said Japanese importers actively bought the dollar on Thursday, the last business day of the year for many companies in Japan. Traders said moves were exaggerated, with many currency dealers away from their desks for year-end holidays."

"Meanwhile, the Australian and New Zealand dollars both posted strong gains as investors continued to pour funds into high-yielding currencies. The kiwi dollar, which boasts the highest cash yield in the industrialized world at 7.25 percent, hit a fresh one-year high of $0.7062."

"There is no major economic data due on Friday, suggesting that trade will wind down even further ahead of the New Year's day holiday on Monday. Next week will bring a raft of big economic data releases including the closely watched U.S. nonfarm payrolls report."

From Bloomberg. "Japanese bonds had the biggest two- day decline in more than a year after central bank Governor Toshihiko Fukui suggested in newspaper interviews that policy makers may be considering an interest-rate increase next month."

"Fukui said it would be appropriate to raise borrowing costs 'slowly but in a timely manner' once the economy and consumer prices are moving in line with expectations, he told the Wall Street Journal."

"The yield on the benchmark 10-year bond rose 2 basis points to 1.66 percent as of the 6:05 p.m. close in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. Yields have risen 9.5 basis points over yesterday and today, the most since the two-day period ended Dec. 5 last year, when they climbed 11 basis points. Bonds yesterday had the biggest drop in more than six months as a Jiji Press story signaled policy makers were poised to boost borrowing costs"

"'It's not time to be aggressive on Japanese government bonds,' said Tsutomu Kawasaki, a fund manager who helps oversee the equivalent of $19 billion in Japanese debt. 'The new-home sales report made me think positively on the outlook for the U.S. economy,' which is good for Japan's growth prospects."

The funds are buying again; you remember the ones that sold to bet on the USD, and said they might buy back under $600. So much for that.
A European central bank bought gold?
Gold finished 2006 up 23%.
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