Money and Metals

Reuters reports on the currency markets. "The dollar advanced broadly on Friday, as generally robust data from the U.S. housing and manufacturing sectors provided further evidence the economy is more resilient than many initially thought. That should reinforce the view the Federal Reserve may hold interest rates steady at 5.25 percent this year, and not cut them as previously expected."

"The dollar rose after a government report showed that while new-home sales posted their biggest drop in 16 years in 2006, sales picked up in December. That followed a report on new orders for U.S.-made durable goods, which increased by a larger-than-expected 3.1 percent in December."

"'These have supported the dollar because they have pushed out expectations of a rate cut in the middle of the year which had been universally expected up until a month ago,' said said Carl Forcheski, vice president of corporate foreign exchange at Societe Generale in New York."

"Next week, markets are bracing for a slew of U.S. economic data and events led by the FOMC meeting, the non-farm payrolls report, and a key manufacturing survey. That should help determine where the dollar and U.S. interest rates are headed this year."

"'The Fed won't shock anyone by leaving rates unchanged ... nor will the accompanying statement, citing improved near-term growth and a continued tightening bias, sentiments that the market has already heard from Fed speakers,' said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. 'That puts the focus on fresh economic reports, with a flood of data due,' he added."

"The Canadian dollar strengthened against the U.S. dollar on Friday, taking its cue from rising oil prices, but generally sticking to well-worn ground. The currency finished at C$1.1799 to the U.S. dollar, or 84.75 U.S. cents, up from C$1.1825, or 84.57 U.S. cents, at Thursday's close."

"Crude oil continued to rebound from its earlier lows, climbing 2 percent as cold weather persisted in the U.S. Northeast and as commodity traders who had bet on further losses covered their positions. 'The oil prices probably helped to put a better tone on the Canadian dollar and gave it some support,' said Matthew Strauss, currency strategist at RBC Capital Markets."

From MarketWatch. "Gold futures closed lower Friday, retreating from the previous session's intraday move to an eight-week high, but the precious metal chalked up a gain for the week. Gold has been 'rising initially from a technical point of view, but largely because of recent de-hedging, and lower-than-needed supply to satisfy slowly growing demand from traditional sources, including India,' said Julian Phillips, an analyst at GoldForecaster.com."

"'At $650, this demand should pause as the higher price levels are digested,' he said."

"Gold for February delivery closed down $3.40 at $644.70 an ounce on the New York Mercantile Exchange. Still, it finished the week 1.3%, or $8.30, higher after closing last Friday at $636.40."

"On Thursday, gold futures touched their highest level in two months, at one point breaking through a key resistance level at $650 an ounce. Still, the metal closed weaker as oil prices eased."

"'The first stab at $655 was indeed met with resistance,' said Jon Nadler, an analyst at Kitco.com. 'Bullion has been on the mend since Jan. 8, and each stage of the rebound from $608.30 has been methodically tested,' he said. But 'the market does find itself in a close-to-overbought condition and is shedding some momentum.'"

"Also on Nymex Friday, other metals finished lower. March silver dropped 11.5 cents to close at $13.375 an ounce, but it's ended 3.5% higher for the week."

"April platinum declined $6.50 to close at $1,181.50 an ounce, with March palladium falling $4.50 to end at $350.95 an ounce. Both contracts ended higher than last Friday's close."

"U.S. gold futures ended lower on Friday, after hitting their highest level this year in the previous session, hurt by selling related to options and contract expirations and a stronger dollar."

"Paul McLeod, vice president of precious metals at Commerzbank, noted February futures finished softer, but that was not uncommon shortly before the most-active contract expired."

"'I am not really reading that as a major change, or a switch in gold's momentum or direction. It's just a characteristic of the marketplace as it switches from the February contract to April,' said McLeod. 'I think $680 (spot basis) is the next major hurdle for us to get over,' McLeod said."

"The first notice day for the February contract is next Wednesday, and investors have to decide whether to roll the February futures into the April contract, creating additional buzz in the market."

"'I think there is more potential on the upside than on the downside. The medium-term trend is looking good,' a European trader said, adding gold might rise to $655 next week and then toward a high of $670."

"In market news, the International Monetary Fund said it had still not decided on new accounting guidelines for central bank gold loans, denying a claim that it had already made up its mind on this issue."

"Central banks are the world's largest holders of gold. A number of them agreed in 1999 to limit sales to prop up the precious metal's price after it fell under $300 an ounce."

"The market ignored a strike by workers at South Africa's Modikwa platinum mine in a dispute over benefits amid allegations of racial discrimination, but mine officials said output was continuing."