Tuesday, January 16, 2007


Gold In "Economic Tug-Of_war"

The Associated Press reports on currencies. "The dollar fell against the euro and pound Tuesday after a disappointing U.S manufacturing report and economic data out of Europe weighed against the U.S. currency. The 13-nation euro bought $1.2923 in afternoon New York trading, up from $1.2915 late Friday in New York. U.S. financial markets were closed for Martin Luther King Jr. Day. The British pound also rose to $1.9626 from $1.9581."

From Bloomberg. "The yen dropped to a 13-month low against the dollar yesterday and may decline further before a government report that is forecast to show Japanese consumer confidence fell last month."

"Investors sold the yen yesterday after Kyodo News reported that the Bank of Japan is 'unlikely' to lift interest rates this week. The Japanese central bank has concluded it is necessary to continue monitoring consumer prices and consumption before raising rates, Kyodo reported, citing unnamed sources familiar with the matter."

"'The market isn't convinced' about a BOJ rate increase this week, said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. 'You are going to see the yen stay very soft this quarter.'"

"The yen traded at 120.64 per dollar at 6:41 a.m. in Tokyo. It touched 120.77 yesterday, the weakest since 121.06 yen on Dec. 12, 2005. The Japanese currency also traded at 155.85 per euro. It touched a record low of 158.06 per euro Jan. 3."

The Financial Times. "The Chinese ministry responsible for promoting exports has backed a further appreciation of the renminbi, removing one of the last remaining institutional lobbies in Beijing against a stronger currency."

"A think-tank attached to the commerce ministry said that an 'appropriate or modest' appreciation of the renminbi would benefit China’s economy and trade 'in the long run.'"

"In the near term, a 3 per cent appreciation of the renminbi every year will not have an obvious or apparent influence on the overall increase of China’s trade,' said the report, which was posted on the ministry’s website."

"New Zealand's dollar dropped after figures showed inflation was less than expected in the fourth quarter, reducing the need for the central bank to raise interest rates as soon as next week. Consumer prices fell 0.2 percent in the three months ended Dec. 31 for an annual increase of 2.6 percent, Statistics New Zealand said in Wellington today."

"The New Zealand dollar bought 69.08 U.S. cents at 10:52 a.m. in Wellington from 69.56 immediately before the report and from 69.63 cents in late Asian trading yesterday. The currency has gained 12 percent in the past six months on optimism Reserve Bank Governor Alan Bollard will raise the official cash rate from a record high 7.25 percent as soon as this month."

"'Data to hand suggests some near-term relief for Reserve Bank inflation concerns,' Daniel Wills, treasury economist at ASB Bank Ltd. in Auckland, said before the report was released."

The Street.com. "Gold was caught in an economic tug-of-war Tuesday, with traders weighing a dipping oil price against higher inflation figures out of the U.K., leading to a choppy session. February-dated contracts lost a dollar to close at $625.90 an ounce on the Comex division of the New York Mercantile Exchange."

"Saudi oil chief Ali Naimi indicated production cuts by OPEC might not be necessary, thus leading to a softer price for crude. Oil dropped $1.78 to $51.21 a barrel. That news provided support for the bear case."

"At the same time, even though reduced energy costs may mean lower inflation going forward, prices were rising their fastest in more than a decade in Britain, with the consumer price index hitting 3% growth in December. Because the advance was well above the Bank of England's target rate of 2%, it was making a bullish case for gold."

"'The recent 3% level recorded in Britain means that it takes only about a decade to melt away a third of one's wealth,' writes Jon Nadler, an analyst at Montreal-based bullion dealer Kitco."

"Turning to the official sector, the European Central Bank said it sold 28 million euros of gold and receivables, or about 1.9 tons, last week."

"In the precious metals patch, CIBC World Markets dinged silver producer Coeur d'Alene Mines down to a rating of sector-perform from sector outperform. Silver closed at $12.68 an ounce, down 26 cents, while Coeur was losing 2.7% recently."

"Meanwhile, the U.S. Mint says that full-year sales of its 24 karat (99.99% pure) one-ounce buffalo coins outstripped those of the more established 22 karat (91.7% pure) eagles for 2006. Dealers snapped up 323,000 buffalos, which only went on sale at the end of June, compared to 261,000 ounces of gold eagles. But the tide may be turning for the eagle. By mid-January the Mint says it sold 9,000 buffalos and 24,000 ounces of eagles."

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