Money and Metals

The Associated Press reports on currencies. "The dollar slipped against the other major currencies Tuesday ahead of the Federal Reserve meeting that could offer insight on the future direction of interest rates. The Fed began a two-day meeting Tuesday to decide whether to adjust its key interest rate."

"The bank has kept rates unchanged at 5.25 percent for the past four meetings after a string of hikes that lifted the dollar. The currency has suffered at times from speculation that the next move will be a rate cut. 'Clearly there's some doubt creeping into the market as to whether or not the outlook for U.S. interest rates remains quite as robust as has been discussed of late,' said David Jones, chief markets analyst at CMC Markets in London."

"In afternoon New York trading, the euro bought $1.2961, up from $1.2956 late Monday in New York. The British pound rose to $1.9615 from $1.9595. The dollar fell against the Japanese currency, sliding to 121.62 yen from 121.94 yen. n other trading, the dollar bought 1.2518 Swiss francs, down from 1.2531 late Tuesday, and 1.1804 Canadian dollars, down from 1.1822."

From MarketWatch. "Gold futures closed higher Tuesday for the first time in four sessions, finding support from strength in oil prices and recouping much of the previous session's loss before this week's Federal Reserve decision on interest rates."

"Gold's 'resting from the over-bought condition created last week when $650 was penetrated,' said Ned Schmidt, editor of the Value View Gold Report. 'Now, as everyone knows, [the] gold market is waiting for the FOMC decision.'"

"Gold for February delivery closed up $1 at $644.20 an ounce on the New York Mercantile Exchange after touching a high of $646."

"'Consolidation should see gold spend more time in the $640-$650 area with oil prices again providing a certain degree of market direction, while technical support should be found at the $639 trendline,' said James Moore, an analyst at TheBullionDesk.com."

"But overall, bullion prices have been 'lacking fresh leads ... as the market beds down ahead of the' meeting of the Federal Open Market Committee, the Fed's policy panel, said economists at research firm Action Economics."

"It appears that gold has moved into 'its most advantageous technical position in quite some time with key long-term resistance of $650 now in clear sight,' said Peter Grandich, editor of the Grandich Letter. 'A close above $652 should give cause to momentum players to get along gold and a spike up to $700 is not out of the question,' he said."

"Other metals finished mainly higher on Tuesday, with the exception of March palladium, which fell by $3.70 to close at $341.25 an ounce, extending its $6 loss from the previous session. March silver climbed 12.5 cents to end at $13.375 an ounce and March copper futures closed up 1.95 cents at $2.5615 a pound. April platinum added $5.90 to close at $1,180.60 an ounce."


"'The market will also continue to monitor oil prices, as recent volatility in the crude market did spill over into other commodity markets, including gold,' according to Action Economics. Crude-oil futures rallied to a three-week high Tuesday after a report said Saudi Arabia is planning to cut production by another 158,000 barrels a day beginning Thursday, and that the kingdom has cut almost double the amount it agreed on at two recent meetings of OPEC."

The Street.com. " In addition to added speculative positions, at least part of the story involved transactions by currency dealers. 'I've seen evidence that some 'carry trades' in Asia are being unwound, and that's having a spillover into the gold market,' says Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard."

"The 'carry trade' involves selling short a low-yielding currency, such as the yen, and investing the proceeds in the government securities of a higher-yielding one, like the dollar or euro. The same theory is used for gold carry trades, with unwinds leading speculators to buy back short bullion positions."

"Turning to the technical analysis perspective, at least one observer sees a setup in the charts for a strong move up. 'A very bullish technical picture has developed,' says Peter Grandich, editor of The Grandich Letter, who notes that gold prices have withstood a stronger-than-expected greenback, as well as falling energy prices."

"Crude oil prices have declined about 10% since the beginning of the year, while spot gold prices have remained steady. Some investors purchase gold as a hedge against a rising price level, and the robust performance of bullion, despite the likelihood of reduced inflation concerns, looks encouraging for the bulls, Grandich explains."

"In the official sector, the European Central Bank announced net sales of 36 million euros of gold and receivables last week, or about 2.3 tons. The transaction reflects selling by one bank in the ECB system and purchases by another, with the latter no doubt encouraging the bulls."