Money and Metals

The Associated Press reports on the curency trading. "The dollar climbed sharply against the pound Wednesday amid doubts over the prospect of further British interest rate hikes. The U.S. currency traded mixed against the euro and yen. The pound dropped to $1.9672 in afternoon New York trading, down from $1.9825 in New York late Tuesday. On Tuesday, it had traded as high as $1.9917, reaching its highest level since September 1992, when Britain left the European Exchange Rate Mechanism."

"The pound, which appeared headed for the $2 mark near the end of last year but then retreated, has been helped recently by a surprise Bank of England interest rate increase this month. However, minutes of its meeting released Wednesday showed that the Bank's Monetary Policy Committee voted for the raise only by a 5-4 margin. That balance reduced expectations of further rate hikes from the bank."

"Meanwhile, the 13-nation euro slipped to $1.2961 from $1.3021 late Tuesday. The euro has been supported by perceptions that the European Central Bank will continue raising interest rates while the Federal Reserve keeps its rates on hold, as it has over recent months."

"In other trading, the dollar bought 1.2487 Swiss francs, up from 1.2414 late Tuesday, and 1.1790 Canadian dollars, down from 1.1800."

From Bloomberg. "The yen gained the most in two weeks against the euro, rebounding from a record low, as a German official said the Japanese currency's decline may be a topic of discussion during next month's Group of Seven meeting."

"The currency's 'lasting weakness is a cause for concern,' Bernd Pfaffenbach, a deputy German Economy Minister, said in an interview today in Davos, Switzerland. Traders started driving the yen higher in New York earlier today after Reuters reported that European governments want the G-7 to strengthen its criticism of the yen's decline."

"'Europe would like to see a stronger message on the yen and people have started to bail out' of wagers on euro gains versus the yen, said C.J. Gavsie, managing director for currency trading at BMO Capital Markets in Toronto."

"'I assume we will address the yen's weakness again on the sidelines of the G-7 meeting' in Essen, Germany, said Pfaffenbach, who is German Chancellor Angela Merkel's chief adviser on the Group of Eight industrialized nations."

"Gold in New York climbed to the highest in seven weeks as rebounding oil prices boosted the appeal of precious metals as a hedge against inflation. Oil prices have more than doubled from five years ago. Gold reached a 26-year high in May as oil reached a record in July."

"'Gold will tend to run with crude oil,' said Matthew Zeman, a precious metals trader at LaSalle Futures Group in Chicago. 'If you get a nice reversal in crude, gold is going to follow suit. Crude oil has taken a beating and the gold market held up pretty well,' said Zeman. 'That's a sign of strength in the market.'"

"Gold has gained 6.8 percent since Jan. 5 on speculation the U.S. dollar will weaken and oil prices will rebound. Positive technical price charts are spurring buying, said Ron Goodis, retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. 'You start creating believers once you start crossing certain levels,' said Goodis, who bought gold when it was trading in the low $630s on Jan. 22, after being bearish on the metal for the past month. 'This market is under-accumulated. If the market pulls higher, you have to change your views.'"

"'I'm very bullish on gold,' said Frank Holmes, chief executive officer of U.S. Global Investors Inc. in San Antonio, which manages the $876 million World Precious Minerals Fund. 'It's in a long, secular bull market. It's quite amazing to see that the gold ETFs are now bigger than all the gold-equity funds combined.'"

From MarketWatch. "Gold futures moved higher Wednesday, finding support just under $640 an ounce to mark their highest closing level since early December, with investors eyeing mixed trading in the U.S. dollar and a partial recovery in oil prices. Gold had gained nearly $12 in the previous session."

"'While profit-taking has been seen and the market remains vulnerable to movements in the dollar and energy market, gold for the time being does seem well supported,' said James Moore, an analyst at TheBullionDesk.com."

"Gold for February delivery closed up $2.30 at $648.20 an ounce on the New York Mercantile Exchange, having recovered from an intraday low of $639 to finish at a level it hasn't seen in seven weeks."

"'With the dollar running into pressure and oil prices stabilizing above $50 a barrel, the outlook for gold remains positive,' said Moore. He pegged gold's next target as a 'band of resistance" from $648 to $656 an ounce.'"

"'The oil markets may have gotten the relief that eluded them during the past few weeks,' said Jon Nadler, at bullion dealers Kitco.com. 'This does not imply that gold itself can bank on support near $650 ... but it certainly gives a bit of a heads-up indicator to the folks who have their eyes fixed on the inflation radar.'"

"Other metals were mixed in Nymex action. March silver closed 1.3 cents higher at $13.273 an ounce, to extend Tuesday's 2% rise. April platinum dropped $10.10 to end at $1,173.10 an ounce, with March palladium closing down $1.20 to $349.15 an ounce."