Money and Metals

Bloomberg reports on the US economy. "The Institute for Supply Management's manufacturing index rose to 51.4 in December from 49.5 in November, when activity contracted for the first time in more than three years. Spending on construction dropped 0.2 percent in November after a 0.3 percent drop in October that was smaller than originally reported, the Commerce Department said today in Washington."

"The figures suggest the economy will extend the five-year economic expansion into 2007, weathering a slump in housing and a factory decline that weakened growth in the past three quarters. The dollar rallied, stocks extended their advance and bonds pared gains."

"Canada's dollar touched a nine-month low as crude oil prices tumbled and traders predicted the currency's decline will extend into the new year. The currency tends to follow the price of commodities, which account for about 54 percent of Canada's exports. Crude oil, which peaked in July, declined today as mild weather in most of the U.S. reduced heating-fuel consumption."

"'The commodity price picture is unlikely to be supportive for the currency going forward,' said Marc Levesque, chief North American strategist at TD Securities Canada Inc. in Toronto."

"Crude oil fell $2.41 to US$58.64 per barrel early in the afternoon in New York and natural gas was down 13.4 cents at US$6.165 per million British thermal units, while copper sagged 20 cents to US$2.67 a pound and gold faded $7.40 to US$630.60 an ounce."

"'It's all driven on resources, it's all a vicious cycle,' Chyanne Fyckes, chief investment manager at Stone Asset Management said. 'As long as the resources keep going down, the (Canadian) dollar will go down.'"

From MarketWatch. "Gold futures fell Wednesday, prompting a drop in the February contract from its strongest intraday level in a month to a close at its lowest level in more than a week as strength in the U.S. dollar dulled demand for the precious metal. Silver's March contract retreated from a nearly three-week high."

"There's a 'feeding frenzy of fear in paper equities' that's 'drawing traders away from gold and silver' Wednesday, said Ned Schmidt, editor of the Value View Gold Report. 'Funds are simply totally afraid of not being fully invested in the first week of the new year.'"

"Gold for February delivery closed down $8.20 at $629.80 an ounce on the New York Mercantile Exchange, marking its lowest closing level since Dec. 26. The contract reached a high of $647.20 earlier in the session, the contract's strongest intraday level since Dec. 5."

"March silver shed 26.5 cents to $12.91 an ounce, falling back from the day's high of $13.24 an ounce, its strongest level since Dec. 15. January platinum fell by $6.90 to end at $1,132.40 an ounce while March palladium closed up $3.55 at $342.05 an ounce. 'Dollar movements will be closely watched in the coming sessions,' said James Moore, an analyst at TheBullionDesk.com."

"Offering some earlier support for gold was talk in the market that one of the legacy central banks in the euro zone has been buying gold. The European Central Bank played down the speculation, saying that some gold was purchased for technical purposes but that the move does not represent a break with policy."

"Members of the Federal Open Market Committee agreed unanimously in December that inflation remained the primary risk to the economy, although they acknowledged that the economy may have been a 'touch softer' than they had previously believed, according to minutes of the Dec. 12 meeting released Wednesday."

"While all the central bankers continued to see inflation as the primary threat, several members argued that 'subdued' data meant that 'the downside risks to economic growth in the near term had increased a little and become a bit more broadly based than previously thought.'"

"Most members seemed to agree on the basic economic outlook, concluding that the slowdown in housing had not yet had any major ripple effect on consumer spending. The risks of a broader drop in spending would rise, however, 'if housing prices were to decline significantly.'"