Friday, January 05, 2007


Metals Dive On US Jobs Report

The Associated Press has th ecurrency numbers. "The U.S. dollar traded mixed against other major currencies in European trading Friday. The euro traded at $1.2995, down from $1.3086 late Thursday in New York. Later, in midday trading in New York, the euro fetched $1.3007."

"Other dollar rates in Europe, compared with late Thursday, included 118.79 Japanese yen, down from 119.08; 1.2368 Swiss francs, up from 1.2329; and 1.1755 Canadian dollars, down from 1.1775. The British pound traded at $1.9291, down from $1.9443."

"In midday New York trading, the dollar bought 118.77 yen and 1.2364 Swiss francs, while the pound was worth $1.9310."

From Bloomberg. "Gold in New York fell the most in three months after a report showed U.S. job growth was stronger than economists expected, boosting the dollar and eroding the appeal of the precious metal as an alternative investment."

"Gold declined after the government said U.S. companies added 167,000 jobs in December, more than the 100,000 expected in a Bloomberg News survey. The dollar jumped to a six-week high against the euro and Treasury 10-year notes fell the most in a month."

"'You're getting liquidation on the back of the strengthening dollar,' said Michael Guido, director of hedge- fund marketing at Societe Generale SA in New York. 'Obviously this number is a big surprise.'"

"A growing economy may force the Federal Reserve to raise rates from 5.25 percent, helping to support the dollar, Guido said. Interest rates have remained unchanged since June after two consecutive years of increases, and some analysts had speculated the Fed would make cuts this year if the economy slowed. 'This job report is implying a much tighter Fed policy,' Guido said."

"A decline in energy prices and other commodities also reduced the appeal of the precious metal as a hedge against inflation, said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. Crude oil is headed for its biggest weekly decline since April 2005 in New York as mild U.S. weather curbed demand from the world's largest energy consumer and fuel stockpiles jumped."

"'Commodities, including oil and metals, are moving lower and that doesn't help gold,' McNeill said."

From MarketWatch. "Gold futures tumbled 3% Friday, prompting the benchmark February contract to tally a loss of more than $31 for the week and close at its lowest level in more than two months as the dollar picked up ground following a surprise increase in U.S. job creation in December."

"Gold for February delivery closed $31.10, or 4.9%, below last week's closing level of $638 an ounce. The contract finished at $606.90 an ounce Friday, down $19.30, or 3.1%, for the New York Mercantile Exchange session after touching $603, the contract's lowest level since late October."

"Ned Schmidt, editor of the Value View Gold Report, pointed out that the higher employment means that the FOMC will not likely lower interest rates any time soon, and 'in the Street's mind, that means the dollar will remains strong.'"

"But 'that thinking ignores the real fundamentals: trade deficit, dollar over-owned, central banks diversifying away from the dollar,' he said. 'That all means this sell off is way over done,' he said, adding: 'do not panic when the Street is panicking.'"

"Other metals were broadly lower. March silver futures touched a more than two-month low of $12.12 an ounce before closing down 60.5 cents, or 4.7%, $12.23. It lost 5.5% for the short trading week. Nymex was closed on Monday and Tuesday. January platinum lost $23.50 to end at $1,109 an ounce, losing 2.7% for the week, and March palladium shed $10.45 to close at $335.10 an ounce, down 1% from last Friday."

Todays move should put gold under its 100 DMA again. On top of all the other data, there is some LATAM weakness from the copper producers:

'Brazilian stocks fell on Friday for a third day, plunging 3.6 percent after strong U.S. jobs data forced emerging market investors to reevaluate bets that the Federal Reserve could trim U.S. interest rates in the near term.'
Let's see. Folks are worried that inflation may pick up and the FED may have to raise rates. The financial powers say Gold is an inflation hedge, but gets sold on news inflation symptoms may pick up. Hmmm. Yeah, that makes sense.

I don't buy gold necessarily as a hedge against inflation. I buy it because I think it is the best insurance for the time when banks begin going bust. I don't know when that will be. I'm sure that bankers looking at their numbers do, but those who think they have money in the bank will be one of the last to know. I don't want to be that guy.
I buy gold because I see the whole world going bust, with the US leading the way. The ensuing scramble for "real money" will temporarily make gold the world's next great bubble.
I saw silver hit just above 12.12 today, so I went to the shop and bought more silver. If it continues to fall to about upper 10.00 (if support below 12 fails) next week, I'll buy the remaining allotment for the month. Oh - I did the math, and I bought below spot, at about 11.72.

Mish has a new post up on commodities charts. Looks like we are definitely headed for at least one more killer buying opportunity, as gold & silver are definitely breaking down. Sweet!

Interesting article
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