Money and Metals

Bloomberg reports on the US dollar. "The dollar advanced from a 10-week low against the yen and rose from the weakest since January versus the euro after Federal Reserve Chairman Ben S. Bernanke said it is 'reasonable' to expect stronger growth in midyear. 'The market takes Bernanke's comment as hawkish,' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research."

"The dollar rose to 118.41 yen at 3:57 p.m. in New York from 117.93 yesterday when it reached 117.49, the weakest since Dec. 15. The U.S. currency traded at $1.3233 per euro from $1.3242 yesterday when it touched $1.3259, the lowest since Jan. 3."

"The yen also fell against the euro, British pound and currencies in Australia and New Zealand as the decline in industrial production and retail sales encouraged investors to put on carry trades following yesterday's unwinding. The Swiss franc, another so-called funding currency for the carry trade, dropped versus the dollar."

"At 0.5 percent, Japan has the lowest borrowing costs in the industrialized world compared with 5.25 percent in the U.S. and U.K. Switzerland's benchmark is 2 percent. The ECB's rate is 3.5 percent."

"'The BOJ is still dovish and they won't raise interest rates rapidly,' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. 'Investors are still willing to short the yen.' A short position is a bet on a currency's decline."

From MarketWatch. "Gold futures closed Wednesday with a loss of nearly $15 an ounce, with the market still reeling a day after a global stock-market sell-off. But prices finished higher for the month and most analysts remain convinced that the decline for the day was only a temporary setback in the metal's climb toward $700."

"'For many months now, gold has managed to correct very overbought conditions in a manner of a day or two, and it would not surprise me that it has done so again,' said Peter Grandich, editor of the Grandich Letter."

"Gold futures for April delivery dropped as much as $23.20 during Wednesday's session to a more than two-week low of $664 an ounce on the New York Mercantile Exchange. It closed at a one-week low of $672.50, down 2.1%, or $14.70. The last time the market saw a pull back like this was during the Jan. 3 to Jan. 5 period, when prices fell nearly $40 in two days, according to Neal Ryan, director of economic research at Blanchard."

"Despite the day's losses, the contract ended the month of February with a gain of $14.60, or 2.2%."

"May silver closed the day down 3.1%, or 45.5 cents, at $14.235 an ounce, touching $14.12 at its worst point. It also managed to post a gain for the month, 3.9% higher than the Jan. 31 closing level."

"'With the pullback in so many markets, it is fair to say that the gold and silver pullback is not about gold and silver,' said Julian Phillips, an analyst at GoldForecaster.com. 'These falls [have more] to do with short-term traders perceptions and technical selling,' he said."

"'This massive equity market liquidation [Tuesday] has sparked concern across the spectrum of markets as traders fear cash is the best position to be in,' said John Person, president of Nationalfutures.com. 'There could be a fall-out from large hedge fund losses, so traders are bailing on commodity positions,' he said."

"Indeed, 'there is a liquidation of assets across the board here -- funds forced to raise capital and the precious metals were not immune to this,' said Peter Spina, chief investment strategist at GoldSeek.com. He emphasized, however, that he considers the situation to be a 'temporary liquidation from these funds which require capital to cover losses.'"

"Other metals were mixed Wednesday, with platinum's April contract adding $3.10 to end at $1,256.40 an ounce. It was up more than 6% for the month. The June contract for sister metal palladium closed unchanged at $356.60 an ounce, up about $11 from a month ago."

"Crude-oil futures fell to a low of $60.30 a barrel Wednesday to catch up on losses posted in the after-hour session Tuesday evening as traders fretted about the potential for weaker energy demand."

"The perceived risk of owning Philippine, Indonesian and Thai dollar-denominated debt increased on concern a global slump in stocks will damage the creditworthiness of emerging markets."

"Credit-default swaps, used to speculate on the governments' ability to repay debt, rose as Asian equities fell the most in more than eight months. Five-year contracts based on $10 million of Philippine debt increased to $124,000 from $114,000 yesterday, according to data compiled by Bloomberg. The cost was as high as $141,000 earlier, according to Rabobank International."

"Benchmark indexes tracking the contracts in the U.S. and Europe rose yesterday by the most since they were created in 2004 on concern rising mortgage defaults in the U.S. and declines in stocks will damage companies' ability to repay debt. An equity market slump in China prompted concern that the world's fastest-growing major economy may slow."

"'The selloff in China's stock market yesterday served as a strong reminder to global investors that the high-yield market is overvalued,' said Ken Hu, who helps manage $100 billion at First State Investments in Hong Kong."

"Asian currencies including the Indonesian rupiah and Philippine peso weakened today as fund managers pared riskier investments. The rupiah slid 0.8 percent to 9,153 per dollar and the peso fell 0.3 percent to 48.53."

"The yield premium, or difference in yield, between the Indonesian government's 10-year benchmark bond and similar- maturity U.S. Treasuries widened 7 basis points to 1.66 percentage points, the most since Dec. 5, according to prices from Merrill Lynch & Co."

"Credit-default swaps based on Thai government debt increased 8 percent to $40,000 and those referencing Indonesian debt rose 9 percent to $124,000, according to data compiled by Bloomberg. The swaps were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default."

"'The perception of risk is increasing after China, driving yields higher,' said Vikki Guevara, Assistant Vice President at Philippine National Bank in Manila. 'We're just being lumped with other assets in the region.'"

"Asian credit ratings won't be affected by the slump in equities, said Takahira Ogawa, a Singapore-based director of sovereign ratings at Standard & Poor's. 'It's a short-term phenomenon,' he said. 'If there's a kind of very significant bubble in assets, it could cause implications for financial systems and markets. But at this stage, we see it rather as a price correction.'"

MarketWatch reports on the currency markets. "The yen rallied across the board Tuesday, gaining more than 2% to trade at a two-and-a-half month high against the dollar, as a rise in risk aversion triggered by an almost 10% slump on the Chinese stock market overnight encouraged traders to unwind carry trades."

" Meanwhile, the dollar fell to a two-month low against the euro on fears of the potential knock-on impact from subprime lending market woes and worries over Iran's nuclear plans. The greenback extended its losses after a government report showed larger-than-expected declines in orders for new U.S.-made durable goods last month."

"'A number of issues, such as Iranian tensions, the weakness in the U.S. subprime mortgage market and, most recently, a slump in Chinese shares all seem to have increased risk aversion,' said David Brown, an analyst at Bear Stearns. 'The recent focus on carry trades seems to have made it abundantly clear that rising risk aversion should be associated with a higher yen.'"

"In New York trading, the dollar was quoted at 117.93 yen, compared with 120.74 late Monday, after falling to an intraday low of 117.46 yen, the weakest since Dec. 15. The euro stood at $1.3251, compared with $1.3182. It had earlier risen to $1.3259, the highest level since Jan. 3."

"The British pound traded at $1.9648, compared with $1.9616. The dollar changed hands at 1.2165 Swiss francs, compared with 1.2317 francs."

"'If U.S. data continue to disappoint, the greenback may find itself in the unenviable position of being sold against the yen on further carry trade unwinding and sold against the euro on the impending [European Central Bank] rate hike,' said Michael Woolfolk, senior currency strategist at The Bank of New York."

"The dollar fell after the Commerce Department said new orders for U.S.-made durable goods plunged 7.8% in January as nearly every category of manufactured goods declined. The drop was the largest since October and exceeded the 5.5% decline expected by economists surveyed by MarketWatch."

"'Nothing in this data is dollar friendly,' said Kathy Lien, chief strategist at DailyFX.com. 'As a component of gross domestic product and a forward looking indicator for consumer consumption, the weak demand for big ticket items could start to trigger some concerns about the sustainability of the U.S. recovery for members of the Federal Reserve.'"

"'Today's durable goods number will fuel even more speculation that the recession [former Federal Reserve chairman Alan] Greenspan warned about this weekend could actually become a reality,' she said. 'The combination of low inflation, softer growth and problems in the subprime lending will make it difficult for the Federal Reserve to raise interest rates again this year.'"

"The yen was also boosted by news that Rodrigo Rato, managing director of the International Monetary Fund, warned that carry trades 'could lead to more entrenched exchange rate misalignments that worsen global imbalances.' Rato also said that while the size of carry trades was unknown, there was no 'simple solution' to the problem."

"In other trading, major emerging-market currencies came under heavy pressure on growing risk aversion among investors. The Turkish lira tumbled almost 3% to 1.4030 versus the dollar. The South African rand fell 1.9% and the Brazilian real dropped 1.2% versus the dollar."

"Gold futures closed lower Tuesday for the first time in three sessions on concerns that China's demand for commodities may weaken, and price losses worsened in electronic trading after U.S. stocks logged their biggest one-day loss in more than five years."

"The plunge sent many metals-mining shares to their lowest levels in a month.
Gold futures for April delivery closed down $2.60 at $687.20 an ounce, staging a partial recovery from a low of $677.50. It climbed as high as $692.50 during the session to mark a fresh seven-month, intraday high."

"Then in electronic trading, the contract touched a one-week low of $660 following a more than 500-point drop in the Dow Jones Industrial Average. 'A massive U.S. stock market meltdown affected gold prices in after-hours electronic trade,' said Jon Nadler, an analyst at bullion dealers Kitco.com."

"There's 'no question that a flight to liquidation in equities should help gold eventually, but the normal pattern of initial selling of assets across the board in a plunge of this type does impact gold on the negative side,' he said."

"On Monday, April crude closed at its highest level since July as continued defiance by Iran over its nuclear program underscored the metal's safe-haven appeal. Prices gained $6.80 over the past two sessions."

"China was a key theme Tuesday after the Shanghai market closed down almost 9% overnight, its biggest single day decline in a decade. Concern that the government is planning restrictive measures to address fears of a bubble in the stock market and hints from the head of the central bank that it may tighten policy triggered the move."

"'A major downturn in Chinese equities markets and/or the Chinese economy could immediately and significantly affect the equally red-hot commodities sector (base metals, industrial materials, etc.),' said Nadler. 'It could also affect some of the major global economies, that of the U.S., perhaps the most,' he said. 'Gold would likely not be immune from a large-scale decline in its own market sector 'backyard'.'"

"Still, 'in regards to the Chinese economy, let us not forget how many episodes we have gone through such speculation over the past few years,' Peter Spina, chief investment strategist at GoldSeek.com said. 'Until this event takes place, I would not throw all my weight behind such an occasion.'"

"The action in the electronic-trading market is the thinnest traded market in metals, said Neal Ryan, director of economic research at Blanchard. 'So if everyone's in a panic-selling mode for whatever reason, it'll show up as being most influential on the price.'"

"'After the savvy traders have a chance to look back at what's happened in the last 24 hours and why, I think they'll see the downtrend for the dollar has started again after trading sideways the last year,' he said. 'And the powers that be will begin chatter about the U.S. cutting rates or at least [Federal Reserve Chairman Ben] Bernanke and Co. will comply enough to say that a possible rate cut is now on the table,' he said."

"In Tuesday's regular session, May silver managed to nearly recover from a drop to $14.42 an ounce to close at $14.69, down 14.2 cents. June palladium fell by $4.90 to close at $356.60 an ounce but April platinum closed $11.30 higher at $1,253.30 an ounce."

MarketWatch reports on currencies. "The dollar fell against major currencies Monday, hitting an almost two-month low versus the euro, on speculation reports this week will show signs of slower U.S. economic growth, boosting expectations the Federal Reserve will cut interest rates soon. At the same time, the yen rallied versus both the dollar and euro after Japan's Chief Cabinet Secretary Yasuhisa Shiozaki said that the end of falling prices was near."

"'The greenback is a touch weaker against the major currencies, and we doubt that this week's events will provide major support for the greenback either,' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman."

"Late in New York, the euro stood at $1.3182, compared with $1.3163 late Friday. In intraday trading, it rose to $1.3197, the highest level since Jan. 3. The dollar was quoted at 120.74 yen, compared with 121.03 yen. The British pound traded at $1.9616, compared with $1.9628. The dollar changed hands at 1.2317 Swiss francs, compared with 1.2332 francs."

"Currency traders have a wide range of economic data to sift through this week, including the Institute for Supply Management index, orders for durable goods, home sales, and a second reading of fourth-quarter gross domestic product. The Commerce Department will also report on the core personal consumption expenditure index, the Federal Reserve's preferred inflation measure."

"'Clearly the situation in Iran has already provided influence on a number of fronts including boosting both oil and gold prices, whilst a degree of dollar selling has also been seen at the same time,' said David Jones, chief markets analyst at CMC Markets, in a note."

"'Any suggestion that the U.S. will take direct action against Iran -- a point which is certainly gaining gravitas -- could initiate a further run of dollar selling and with the greenback currently sitting comfortably off recent lows, there's certainly scope for downside pressure to be felt,' he said."

"Adding pressure was a survey of 47 central banks by Central Banking Publications Ltd, a financial publishing company. The survey found nearly nine out of 10 central banks felt there was likely to be more reserve diversification. The 47 central banks control around 30% of global reserves."

"'We suspect that the [People's Bank of China] was probably not one as its $1 trillion of reserves is alone about 20% of the $5 trillion global total. But the news could clearly put some pressure on the dollar,' said Steve Barrow, chief currency strategist at Bear Stearns."

From Bloomberg. "The Japanese yen rose against 14 of 16 most-active currencies after Japan's Chief Cabinet Secretary Yasuhisa Shiozaki said prices are 'picking up.' The nation's economy grew at the fastest pace in almost three years in the fourth quarter. Bank of Japan policy makers last week doubled borrowing costs, saying higher rates would help sustain economic growth."

"'The Japanese government is going to allow the BOJ more flexibility in gearing rates higher,' said Greg Salvaggio, vice president of capital markets at currency-trading firm Tempus Consulting Inc."

"The yen also gained for a second day versus the dollar as Japanese companies repatriated overseas assets before the end of the fiscal year on March 31. 'There are signals of repatriation,' said Firas Askari, head of foreign exchange trading at BMO Capital Markets in Toronto. 'The dollar is poised for a little bit of a sell-off.'"

"Investors bought yen-denominated assets including stocks, and pushed the Tokyo-based Topix index to the longest winning streak since December. 'The annual repatriation on behalf of Japanese corporations is beginning to cause a temporary and artificial bid to the yen,' said Michael Woolfolk, senior currency strategist at the Bank of New York."

"Gold in New York rose, extending a rally to a nine-month high, as climbing energy costs boosted the appeal of the precious metal as a hedge against inflation. Gold has more than doubled and oil has almost tripled in the past five years."

"Gold futures for April delivery rose $3.10, or 0.5 percent, to $689.80 an ounce on the Comex division of the New York Mercantile Exchange, the highest close since May 17. Prices climbed 2.1 percent last week and have gained 8.1 percent this year."

"'The oil market and the general strength of commodities are helping gold,' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. 'Longer-term, there are still inflation concerns.'"

"Gold's rally may stall after seven weekly gains as demand eases, some analysts said. Investor demand for gold increased in the fourth quarter from the previous three months for the first time in a year, the producer-funded World Gold Council said earlier this month. UBS Ltd., Europe's biggest bank by assets, today raised its three-month forecast for gold to $750 from $700. Before today, gold has climbed 13 percent since Jan. 5."

"'There are questions about the durability of demand,' Platt of Archer Financial said. 'Most of the buying from an investment basis has been done. Buyers are going to be more cautious as gold moves into the $700 area.'"

"Silver reached the highest since in nine month. Futures for March delivery rose 9.5 cents, or 0.7 percent, to $14.69 an ounce after climbing to $14.86, the highest since May 12. Prices have gained 15 percent this year."

"Investment in the StreetTracks Gold Trust, the exchange- traded fund backed by physical gold, rose to a record $10.5 billion last week, making it one of the biggest single investment vehicles in gold. Only six mining companies, including Barrick Gold Corp., Newmont Mining Corp. and GoldCorp Inc., have bigger market values."

Here are some topic suggestions from readers on gold. "I would like to hear a bit from the gold bugs on the blog as I have been considering the purchase of a bit of the yellow stuff over the past month or so."

"Some of the questions I have for the gold bugs include the following:"

1. Physical vs. paper
2. Attractiveness of gold mining companies
3. What kind of physical is the best (which type of coins, wafers, or bars, and sizes)
4. Storage
5. Typical acquistion and liquidation costs
6. Where and how to sell physical
7. Gold strategy for the following allocation amounts:
a. less than $25,000
b. $25,000 to $100,000
c. $100,000 and greater.

"The acquisition of gold is more or less clear however the resale procedure is not clear. Where do you sell gold and how does the buyer get comfortable with the product you are delivering on the secondary market? How does the buyer confirm the gold being sold is not gold plated lead or pirate Maple Leafs? How to keep your gold from being scratched or damaged? Any other useful tid bits from real life experience."

"Since I am in Europe I have considered the use of a safe deposit box in Switzerland for long term storage of any gold I acquire. Is this a practical storage option? It seems to me that the conditions necessary to send gold to the stratosphere are the same conditions under which it is most likely to be confiscated or stolen from the owner."

"Please note that I am not an 'End Timer' and based on my experience in Russia in 1998 I do not believe for a minute the States will collapse into lawlessness however something in between the 1982 recession and the 1930’s depression is a real possibility."

"The guns and ammo option is not a bad one, however I do not see a lone gun in the house contributing much to one’s safety. I suggest that people of modest means invest in practical books of knowledge which may assist them in learning a trade or skill when the 'fry guy' and 'Walmart greeter' positions become obsolete."

One reply, "Physical vs. paper, paper can be created and confiscated with ease. I have both; physical for keeping and paper for trading. Gold miners, research companies individually or buy gold indexes (HUI, etc). I prefer companies with mines in western countries due to less risk of government appropriation."

"Storage; bank vaults if you trust the government not to steal it as FDR did. Otherwise, dig hole and make map, or store overseas through internet dealers/ETFs. Your swiss vault would work."

"Buying/selling, easy and cheap for paper, but subject to capital gains. You can buy physical from internet or coin dealers with varying markups less than 5%. Cash transactions so capital gains are on the honor system. Coin or bars; personal choice. I prefer bars because there is less premium. Resale: sell back to dealer. Authenticity: gold bars come with assay certificates from the big houses. Welcome to the world of gold investing."

Another added. "'Authenticity, gold bars come with assay certificates from the big houses.' So does housing (appraisers certficate) diamonds the same. Fraud is present everywhere. Buyer beware!!!"

One had this on storage. "Switzerland has the best buying/selling opportunities (outside of India) for small individual ownership. The cost of the lock box was ~1% of the value of the gold, but then there were no dings (surcharges) when you wished to sell the gold - tests for purity etc were not required."

"If the gold is something you might take with you, then the $$ value you wish to spend will dictate the investment. e.g. with a $1,000,000 to invest buy 400 oz standard bars , these bars are stamped marked and less expensive to test when you sell. If it is a $1000 then you might choose to buy a marginal gold producer stock."

"A marginal gold producer is one whose cost to produce an oz of gold is the same as the current price of gold. The reason is that a $100 increase in the price of gold is a 100X increase in the marginal producers profits. Marginal producer publicly traded stocks can be found by the handful on the Australian exchanges among others."

One had this suggestion. "Take this from a gold bug on the lunatic fringe of the gold bugs. I think if we are seeing a credit implosion what we will see is the demand for cash become astronomical. So when does gold become very 'dear'? It is when the minority, the creditors and the informed feel they are getting ripped off by being paid back in in dollars. (The old saw about creditors being chased by debtors demanding the abilty to repay)."

"In my mind that happens after a deflationary crash and an inflationary response by the powers that be. How do you know when that is going to happen? According to some it will be when the futures price of gold trade lower than the spot price."

"Essentially meaning people value the real over the paper. What I am doing right now is developing a cash liquidity moat around my precious metal holdings. Some guns and tinfoil aint bad either. Please google Dr Fekete for some more ideas on the future and spot prices."

CNN Money reports on the precious metals markets. "U.S. gold futures rose 1 percent and silver jumped to a nine-month high on Friday as investors poured money into the precious metals markets before the weekend because of heightened geopolitical tensions and firmer energy prices. At 10:23 a.m. EST, most-active gold for April delivery on the COMEX division of the New York Mercantile Exchange was up $6.90 at $689.90 an ounce, trading in a range between $676.20 and $690.90, the loftiest level since July of last year."

"The April contract has gained more than 13 percent since it hit a low of $607.20 in early January, and is now within $10 to the key psychological mark of $700."

"'People would feel more comfortable being long gold with the potential risk involved with the Iranian problem,' said Carlos Perez-Santalla at Hudson River Futures. Perez-Santalla said that the dollar's weakness and the market's ability to hold on to its $23 gain Wednesday also fueled buying."

"Oil climbed above $61 to its highest level this year on the Iran situation and after the United States, the top fuel consumer, reported an unexpected drop in gasoline stocks."

"Neal Ryan, director of economic research at Blanchard and Co., said that gold jumped because of preweekend positioning, short covering after Wednesday's rally and strengthened energy prices. 'Over the last month and a half, the investment demand for physical metals has significantly picked up' for both silver and gold, Ryan said."

"Silver jumped more than 2 percent on Friday. COMEX March silver rose 30.0 cents to $14.550 an ounce, trading in a range between $14.190 and $14.630, the highest level since May of last year."

"NYMEX April platinum gained $10.00 to $1,240.00 an ounce. NYMEX March palladium jumped $4.80, or 1.4 percent, at $355.50 an ounce."

From MarketWatch. "Confident that sub-$300 gold is a bogeyman of the past, miners of the precious metals are increasingly doing away with hedging contracts designed to insure against a drop in prices. Producers reduced their hedging positions by 25% last year, the sharpest drop in at least five years, to 40.2 million ounces, said a study published Friday by Mitsui & Co."

"Taken another way, dehedging totalled 13.4 million ounces, or more bullion than European central banks sold last year."

"Miners have been shying away from using financial instruments like forward contracts, which act as agreements to sell gold at a certain price in the future, to manage their gold sales. These contracts protect them from a drop in prices, but don't work so well if prices go up."

"'While dehedging in 2007 is not expected to be of a similar magnitude to what it was in 2006, little appetite exists for new hedging,' said Edel Tully, head of precious metals research at Mitsui's Mitsui Global Precious Metals."

"On Thursday, Barrick Gold Corp. said it had completely eliminated its corporate hedge book and planned to eliminate its remaining floating spot price contracts by the end of the second quarter. Barrick, the world's largest gold producer, accounted for 70% of dehedging activity last year, the study said."

"The dollar fell against other major currencies Friday, weighed down by concerns over Iran's nuclear ambitions and traders locking in gains after the greenback's recent rise."

"'It appeared a couple of factors combined to weigh on the greenback, as traders cited a speculative market seen long of dollars going into the session, and the effects of geopolitical concerns,' said foreign-exchange strategists at research firm Action Economics. 'The apparent heating up of rhetoric from Iran of late has resulted in the unwinding of a good number of these positions going into the weekend.'"

"Late in New York, the euro stood at $1.3163, compared with $1.3122 late Thursday. The dollar was quoted at 121.03 yen, compared with 121.51 yen. On the week, the dollar lost marginally against the euro, down 0.2%, but gained 1.4% versus the yen.
The British pound traded at $1.9628, compared with $1.956. The dollar changed hands at 1.2332 Swiss francs, compared with 1.2384 francs."

"Elsewhere, the yen recovered modestly as traders reduced bets against the Japanese currency. The yen has continued to play victim to carry trades, in which speculators borrow the yen at low costs and reinvest in higher-yielding currencies and assets elsewhere, this week after Bank of Japan Governor Toshihiko Fukui said interest rates are to rise very gradually."

Bloomberg reports on currencies. 'The yen dropped to a record low against the euro and approached the weakest in four years versus the dollar after Bank of Japan Governor Toshihiko Fukui said his board will hold interest rates 'as low as possible.'"

"'The BOJ opens the door for the carry trade to come back,' said Tim O'Sullivan, chief foreign exchange trader at Forex.com. The yen declined to 121.57 against the dollar, from 120.93 yesterday, approaching the four-year low of 122.19 reached on Jan. 29."

"The dollar pared its advance against the euro as the European currency's strength against the yen prompted investors to buy it back against its U.S. counterpart, said Steven Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto."

"The U.S. currency traded at $1.3122 per euro from $1.3139 yesterday. The dollar earlier rose to as high as $1.3081, the strongest since Feb. 14, as speculation increased the Federal Reserve will keep borrowing costs at a six-year high after a report yesterday showed U.S. inflation accelerated last month."

"The dollar also cut its advance after a report said Iran has conducted uranium enrichment in defiance of the United Nations Security Council. 'The knee-jerk reaction is to sell the dollar,' said Kathy Lien, chief currency strategist at DailyFX.com. 'The concern is that if Iran failed to suspend its nuclear program, the risk of a U.S. military engagement may increase. But the market's response was limited as the Iran news has been on for months.'"

"The news also helped the Swiss franc, considered a safe- haven currency from geopolitical risks, rebound against the dollar and rise from an all-time low versus the euro. The franc traded at 1.2386 per dollar, recovering from an intra-day low of 1.2437. The Swiss currency also rebounded to 1.6253 per euro from 1.6264 yesterday, after earlier tumbling to 1.6291, the weakest since the euro's debut in January 1999."

"New Zealand's dollar headed for its third weekly gain, helped by speculation the yield gap with nations such as Japan won't narrow soon, underpinning demand for the currency."

"New Zealand's 7.25 percent official cash rate is 6.75 percentage points higher than Japan's benchmark. The gap may widen as there's an 83 percent chance the Reserve Bank of New Zealand will raise its key rate next month, according to an index calculated by Credit Suisse."

From CNN Money. "U.S. gold futures finished a dollar lower on Thursday as investors took a breather after solid gains in the previous session, but analysts said the precious metal could turn around and test the $700 an ounce psychological mark soon."

"Most-active gold for April delivery on the COMEX division of the New York Mercantile Exchange settled down $1.00 at $683.00 an ounce, traded in a range between $678.70 and $684.70."

"Stephen Platt, analyst at Archer Financials, cited profit taking for gold's pullback on Thursday and said that the market might need to consolidate a bit before moving higher. 'Given yesterday's activity, I have to be a believer that we are still going to be working higher and probably make a test of that $700 area,' Platt added."

"U.S. crude futures rose more than 1 percent to finish near $61 a barrel on Thursday after government data showed a sharp fall in fuel supplies last week."

"Mike Guido, director of hedge fund marketing at Societe Generale, said there was a 'very strong consensus in the market to see higher prices,' driven by geopolitical tensions, expectations for a weaker dollar and strong inflow to bullion exchange-traded funds."

"'As long as you stay above these levels, $670 to $675 [April gold basis], you're carving out a platform for a new higher range,' Guido said. 'Probably a target for $700 in the short term,' Guido said."

"Spot gold was quoted at $676.95 an ounce, down from $679.25 an ounce, its late Wednesday quote in New York. London's afternoon fix was $676.60."

"In precious metals, silver followed gold to end lower after hitting its highest levels in more than two months on Wednesday. COMEX March silver closed down 2.30 cents at $14.250 an ounce, traded in a range between $14.160 and $14.365. Spot silver was quoted at $14.215, compared with $14.255 from its late Wednesday quote. Silver was fixed in London at $14.250."

"NYMEX April platinum finished down $3.20 at $1,230.00 an ounce. Spot platinum was quoted at $1,228.50. NYMEX March palladium settled up $6.55, or 1.9 percent, at $350.70 an ounce. Spot palladium fetched $349.50."

"Newmont Mining Corp., the world's second-biggest gold producer, said fourth-quarter profit tripled as a rally in metals prices more than offset a drop in output and higher operating costs at its mines."

"Net income rose to $223 million, or 49 cents a share, from $62 million, or 14 cents, a year earlier, Denver-based Newmont said today in a statement. Sales rose 13 percent to $1.46 billion. The price of gold from Newmont's mines jumped 31 percent even as sale of the metal fell 4.6 percent and costs rose."

"CCEO Wayne Murdy cut the company's sales estimates three times in 2006 because of lower output in Uzbekistan and Ghana, sending Newmont shares down 17 percent in the past year. 'Questions still remain in terms of their cost structure,' Ian Nakamoto, director of research at MacDougall, MacDougall & Mactier Inc., which manages C$4 billion ($3.45 billion) in Toronto, said before the announcement. 'Obviously costs are increasing and it's a matter of the price of gold outpacing the escalation in manpower and energy costs.'"

"The company sold gold on average for $619 an ounce during the quarter, up from $472 a year earlier. Gold futures on the Comex division of the New York Mercantile Exchange rose 27 percent to $616.95 an ounce on average during the quarter, and reached a 26-year high of $732 an ounce on May 12."

MarketWatch reports on the precious metals. "Gold futures rallied to a seven-month high on Wednesday, after data showed consumer inflation rising at a faster-than-expected pace in January, boosting the lure of gold as an inflation hedge. Gold for April delivery closed up $23 at $684 an ounce, its highest close since July 7, on the New York Mercantile Exchange."

"'A powerful reversal lifted gold out of its Tuesday slump and values closed today's session at levels not seen since last spring,' said Jon Nadler, an analyst at bullion dealers Kitco.com. 'Spot gold ignited on the heels of core CPI [consumer price index] statistics and after Tehran's outright refusal to halt uranium enrichment and the pursuit of nuclear power,' Nadler said."

"Last week, Federal Reserve Chairman Ben Bernanke told lawmakers that the Fed expects core inflation to drift lower, but cautioned that the Fed is poised to raise rates if necessary to contain inflation"

"Generally, when people think the Fed's going to raise rates, gold goes down, said Peter Schiff, president of Euro Pacific Capital. Today's rally in gold 'might be an indication that the Fed and Bernanke are losing credibility and that the Fed is all talk and no action,' Schiff said. 'The Fed is afraid of raising interest rates, but it can't let the market know that. Gold's saying we don't believe you. You're still on pause. The Fed wants to maintain the illusion that they're going to raise rates, because the economy can't stand it,' Schiff said."

"A recovery in crude-oil prices also boosted gold. Crude futures rose sharply to trade back above $60 a barrel as traders eyed developments in Iran and braced themselves for weekly data on supplies. Crude for April delivery was up $1.25 at $60.12 a barrel on its first day of trade as the front-month contract on the New York Mercantile Exchange."

"Other metals prices also rose on Nymex. March silver futures rose 44.3 cents to $14.273 an ounce, April platinum surged $14.10 to $1,233.20 an ounce and March palladium was up $4.40 at $344.15 an ounce."

"William Adams, analyst at BaseMetals.com, said that 'the precious metals have been pushed higher in recent weeks by aggressive investment interest. The market may not have to wait too long to see sentiment turn bullish across the board,' Adams said. 'Don't forget that the January-February period last year was relatively subdued, and it wasn't until March that the rally took off.'"

From Reuters. "The yen fell against the dollar and euro for a fourth straight day on Wednesday, after the Bank of Japan raised key interest rates for the first time since July but suggested further tightening would be gradual."

"That left investors still willing to fund carry trades using yen, where investors borrow in Japan where rates are low and then sell the yen to buy higher-yielding currencies. That strategy will remain appealing as long as Japanese monetary policy remains predictable and financial market volatility stays low, strategists say."

"A key measure of U.S. inflation that showed prices rose at a faster pace than expected in January also supported the dollar as it reinforced the view that U.S. interest rates will not fall any time soon."

"This view was reinforced by the minutes of the January 30-31 meeting of the Federal Open Market Committee, which suggested policymakers were uncertain inflation was firmly on a downward path. 'We got a bit of a boost from the higher CPI numbers this morning,' said Ronald Simpson, managing director of global currency analysis for Action Economics. 'We've got the BOJ behind us and they raised rates, but again, going from 0.25 percent to 0.50 percent isn't going to scare away too many of those accounts interested in the carry trade,' he said."

"'(Federal Reserve Chairman Ben) Bernanke has a dovish tone, so I'm not sure that the market is confident we would see a (rate) hike before a hold or even a cut,' said Peter Rosenstreich, financial market strategist at HedgeStreet."

"In other trading, the yen fell to a one-month low against the New Zealand dollar, the highest yielder among major currencies, as the carry trade returned into focus. The kiwi also hit seven-week highs versus the greenback."

The Financial Times reports on Japans rate move. "The Bank of Japan’s policy board on Wednesday voted eight to one to raise interest rates a notch to 0.5 per cent, pointing to strong economic growth data as it made the first increase since July."

"The yen slipped against the dollar and euro after the BoJ announcement, reflecting investors’ doubts the move would do much to shore up the currency. The yen had initially strengthened ahead of the BoJ announcement after Japanese media reported that Toshihiko Fukui, the BoJ governor, had recommended a 25 basis point increase in rates. But it reversed course immediately after the official announcement and fell on the day by 0.4 per cent to Y120.45 against the dollar."

"The BoJ’s decision to raise rates came as the result of strong growth in the fourth quarter, when gross domestic product expanded by 4.8 per cent on an annualised basis. That was the only significant positive piece of data released since last month when the board voted six to three against a rate increase."

"Masaaki Kanno, chief economist at JP Morgan in Tokyo, said: 'It is a little puzzling to explain why five board members changed their mind.' He said the GDP data on its own, by definition backward looking, was not enough to explain a rise in terms of the bank’s stated forward-looking framework."

"However, leaving aside what he said was the bank’s failure properly to explain its rationale, Mr Kanno said the board was justified in raising rates. He said it had stressed the second pillar of its policy framework, which concentrates on risks. These included the possibility of an asset price bubble and, particularly, risks associated with the weak yen, he said."

"'This is an indirect warning from the BoJ: 'Don’t expect a weak yen forever.' he added."

"Takatoshi Ito, a member of cabinet’s council on fiscal and economic policy, said before the meeting: 'If they raise rates they better have a good rationale for doing so.' He said the government probably would not complain but would hold the BoJ accountable if things went wrong."

"The Liberal Democratic party has been particularly adamant that it is too early to contemplate a rate rise. Even after five years of recovery, it says, the economy is fragile and has not yet definitively escaped from deflation."

"The BoJ could face a rough patch over the next few months when inflation, as measured by the core consumer price index, is likely to turn negative. The bank will argue that this is due to technical factors related to oil prices, included in Japan’s headline index."

"Economists said the bank would almost certainly leave rates unchanged for the next several months."

marketWatch reports on the precious metals markets. "Gold futures fell sharply on Tuesday, as a steep drop in crude-oil prices and a rise in the U.S. dollar weakened demand for the precious metal. Gold for April delivery closed down $11.80 at $661 an ounce on the New York Mercantile Exchange."

"Gold prices were 'hammered by relentless profit-taking and perceptions that oil may slide further, while the dollar may gain in the short term,' said Jon Nadler, an analyst at bullion dealers Kitco.com."

"Crude for March delivery was last down $1.59, or 2.7%, at $57.80 a barrel on the New York Mercantile Exchange. 'No one should treat the falling oil market with a mere casual glance,' Nadler said. If crude oil prices collapsed to $50 a barrel, for example, gold would find long-term support at around $550 an ounce."

"'We would still consider the probability of gold first trending higher at this time, but can't rule out an early summer during which signs of peace break out and the angst premiums of various safe-haven assets disappear for a while,' Nadler said."

"Other metals prices were mixed. March silver closed down 16 cents at $13.83 an ounce, while April platinum gained 8.70 to close at $1,219.10 an ounce. March palladium ended down $2.05 at $339.75 an ounce."

"The strong performance of the American dollar on Tuesday also weakened demand for gold. The dollar rose against the yen, reflecting growing expectations that even if the Bank of Japan decides to lift borrowing costs this week, Japanese interest rates are likely to remain at relatively low levels."

From Bloomberg. "The yen approached the lowest level in more than 14 years against the British pound as the Bank of Japan began a two-day monetary policy meeting under pressure from politicians to keep borrowing costs low."

"The Japanese currency also dropped for a third day versus the dollar and euro. The Bank of Japan's credibility as an independent inflation fighter was questioned after policy makers kept the benchmark interest rate unchanged last month."

"'There is enough firepower from the political community to pressure the BOJ to put rates on hold,' said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. 'I don't think the BOJ will raise rates this time. People are looking for opportunities to sell the yen.'"

"The yen fell to 119.99 versus the dollar at 4 p.m. in New York from 119.56 yesterday."

"Losses in the yen could be limited as calculations by Credit Suisse Group show a 62 percent chance of an increase to 0.5 percent, compared with 63 percent yesterday and 33 percent a week earlier."

"'When the interest-rate gap between the U.S. and Japan narrows, the yen appreciates,' said Steven Englander, head of currency strategy for the 10 major industrialized nations at Merrill Lynch & Co. in New York. Even though a 0.25 percentage point rate increase sounds 'miniscule, it looks as if the flow does matter to the market.'"

"The government reported on Feb. 15 that Japan's economy expanded at an annualized pace of 4.8 percent in the fourth quarter from the previous three months, exceeding economists' estimates for a 3.8 percent expansion."

"The yen may rebound toward 119 per dollar if the Bank of Japan boosts borrowing costs, said Naomi Fink, senior currency strategist at BNP Paribas SA in New York. 'We see less and less reasons why the BOJ should remain on hold,' given the upside surprise in growth."

"'Fukui didn't signal clearly that they are going to hike,' said Lara Rhame, a senior currency strategist at Credit Suisse in New York. 'You are going to see a bearish trend in the yen reemerge if the BOJ sounds dovish' in the press conference tomorrow."

"The yen has declined 3.5 percent against the dollar and 5.8 percent versus the euro in the past six months."

"The Swiss franc, another funding currency for the carry trade, dropped against the dollar, euro and pound today. Switzerland's benchmark interest rate is 2 percent, the second- lowest among industrialized nations after Japan."

"New Zealand's dollar may fall on speculation Japan's central bank will increase its benchmark rate today, reducing the appeal of borrowing cheaply in yen to invest in higher-yielding currencies."

"Reserve Bank of New Zealand Governor Alan Bollard said on Jan. 25 unless he saw moderation in housing and demand, it was likely he would raise interest rates. The New Zealand dollar has risen 5.5 percent the past three months as investors anticipate a rate rise in the first half of this year."

"The yield on the benchmark 10-year government bond was unchanged at 5.93 percent. The yield is 1.22 percentage points more than the equivalent U.S. maturity. Three weeks ago the yield gap was 1.11 points."

"Volatility on options on the Australian dollar versus the yen should decline after Australia's Bureau of Statistics reports wage figures for the fourth quarter and the Bank of Japan concludes its monetary policy meeting."

"The wage growth figures will be followed tomorrow by Australia's Reserve Bank Governor Glenn Stevens' testimony before a Parliamentary committee in Perth, Australia. The two-day meeting by the Bank of Japan will end later in the day in Tokyo."

"'The wage cost index will have more market moving impact than Stevens' testimony,' said Richard Franulovich, senior currency strategist in New York at WestPac Banking Corp., Australia's fourth largest bank. 'The risk is that we do see stronger than expected wages for the quarter. This is the only thing that could force the hand of the central bank to raise rates in the future.'"

"The rate differential between the Australia and Japan helped strengthen the Australian dollar to ten-year highs versus the yen last month. Australia's benchmark lending rate of 6.25 percent. The yield on Australia's benchmark 10-year note is 5.77 percent, while benchmark 10-year note in Japan yields 1.69 percent."

"The Australia's currency traded at 94.35 yen per Australian dollar in New York, up from 94.03 yesterday. The currency traded to 96.45 yen on Jan. 24, its strongest levels since May 1997, when the currency traded at 96.73 yen."

"The strengthening of the Australian dollar versus the yen triggered options traders to purchase yen calls to protect against a possible snap back upward in the value of the yen."

Reuters reports on the markets. "Gold surged to a seven-month high today because of investor buying as the dollar weakened, and analysts expect the precious metal to push higher over coming days and weeks. In early trade spot gold was quoted at $670,90/$671,70 an ounce versus $669,00/669,70 an ounce late on Friday in New York. Earlier it hit an intraday peak of $673,20, the highest since July 17 2006 when it traded at a $676 high."

"'It’s largely dollar weakness,' said David Thurtell, analyst at BNP Paribas. 'We’re going to see more dollar weakness and if that’s the case the outlook for gold is good.'"

"The dollar fell to a six-week low against the euro and five-week low against the yen on speculation that the US Federal Reserve could cut interest rates in coming months after a run of weaker than expected US economic data. Analysts said violence in Iraq and bombs on a train going to Pakistan from India are also a plus for gold, seen as a safe-haven against rising security risks."

"Markets are also watching peace talks between the US, Israel and Palestine. 'Traders will be watching ... to see if the three-way summit between US/Palestinian and Israeli officials will ease existing middle-east tensions,' TheBullionDesk.com said in a note."

"Japanese buying in holiday-thinned trade was part of the reason behind today’s gold price rise, which was partly checked by a subdued oil prices, traders said."

"Crude oil prices slipped on expectations for warmer weather in the US, despite current cold weather that has raised heating oil demand in the world’s largest energy consumer. 'Everything except the oil market is lining up for gold,' Thurtell said. 'The production data is weak too.'"

"A strike at DRDGOLD’s Blyvooruitzicht mine where workers started a pay strike last Tuesday, has worried the market. The mine, which usually produces about 576 ounces of gold per day, has been able to maintain some production by processing stockpiled ore and surface material, DRDGOLD said."

"Platinum was at $1015/1220 an ounce, down from an earlier three-month high of $1219 late New York trade on Friday. Platinum prices slipped after miners at the world’s second biggest platinum producer, SA-listed Implats, ended a strike they started last Friday at the firm’s biggest mine over medical issues."

"Earlier news that miners returned to work today at the Modikwa mine in SA, after a strike that lasted more than three weeks also put downward pressure on platinum."

"Palladium was softer at $338/342 from $339/344 an ounce and silver $14.02/14.07 from $13.95/14.00."

The Daily FX. "With the US markets closed for Presidents’ Day and many Asian markets closed for the Lunar New Year, trading has been extremely quiet in the foreign exchange market. News from Japan, the UK and the Eurozone have been driving the dollar’s fluctuations and we expect this to continue for the remainder of the week since consumer prices is the only piece of notable US economic data on the calendar."

"The Federal Reserve’s wait and see attitude comes in stark contrast to the European Central Bank’s clear and vocal plans to raise interest rates next month. This dynamic has narrowed the spread between the December 2007 Eurodollar (US) and Euribor (Eurozone) interest rates by 9 basis points over the past week."

"The recent disappointments in US data including last week’s Philly Fed survey, jobless claims, housing starts, consumer confidence and producer prices have pushed out expectations for an interest rate hike by the Federal Reserve from the first quarter of this year to the second or third quarter at the earliest."

From Bloomberg. "The New Zealand dollar rose amid speculation Reserve Bank Governor Alan Bollard will increase the official cash rate to a record high next month, buoying demand for the currency."

"Thirteen of 14 economists surveyed by Bloomberg News anticipate Bollard will raise the benchmark rate a quarter-point to 7.5 percent on March 8. New Zealand's benchmark rate is second to Iceland's among countries with the top credit rating at Moody's Investors Service, helping the New Zealand dollar, known as the kiwi, rise 5.5 percent the past three months."

"'The yield differential is really high and the trend is very upbeat for the kiwi,' said Tony Allen, currency trader at ANZ National Bank Ltd. in Wellington. 'We're just a stand-out at the moment.'"

"New Zealand's dollar bought 70.23 U.S. cents at 9:49 a.m. in Wellington from 69.94 cents late in Asian trading yesterday. It reached 70.30 cents yesterday, the highest since Jan. 26, and could reach 70.50 cents today, Allen said."

"Bollard on Jan. 25 said unless he saw moderation in housing and demand, it was likely he would raise interest rates."

"Mexico's currency gained as expectations of slowing inflation boosted the allure of peso- denominated assets, attracting dollar flows. The peso, the second-worst performer against the dollar among Latin American currencies this year, rose on easing concerns soaring prices for tortillas, the mainstay of the Mexican diet, will accelerate inflation."

"'We're seeing calm return to the market after a bumpy start to the year,' said Luis Flores, an economist at IXE Grupo Financiero SA in Mexico City. 'Expectations inflation is easing may fuel additional gains in local assets.'"

"Mexico's peso increased 0.3 percent to 10.9688 per dollar at 2:48 p.m. New York time from 10.9970 on Feb. 16. The gain in the peso today pared this year's decline to 1.5 percent. The yield on the government's 8 percent peso bond due in December 2015, down 0.23 percentage point so far this month, today was unchanged at 7.7 percent, according to Santander Central Hispano SA."

The Associated Press reports on currencies. "The dollar lost some ground against the euro and yen Friday as investors scrambled for position ahead of a three-day break. After seesawing in narrow ranges throughout the New York session, the dollar exited slightly lower versus its two big rivals. Another mixed bag of U.S. economic data didn't offer the dollar much support, but didn't appear to hurt it much, either."

"Late Friday afternoon in New York trading, the euro stood at $1.3134 from $1.3143 late Thursday, while the dollar was at 119.33 yen from 119.43 late Thursday. The euro traded at 156.75 yen from 156.96 Thursday. The dollar was at 1.2344 Swiss francs from 1.2340, while the U.K. pound was at $1.9498 from $1.9539 late Thursday."

"'The big surprise was really the housing numbers...and the market's reaction in general was knee-jerk negative,' said Michael Woolkfolk, senior currency strategist at the Bank of New York. But after traders 'had a couple of minutes to digest the numbers, they were more willing to look at a three-month moving average,' he said of the housing data in particular."

"'Clearly the housing market in America continues to slide, but at a moderate pace,' Woolkfolk noted."

"The producer price index for finished goods fell 0.6 percent in January, matching economists' forecasts, the Labor Department said Friday, after rising 0.9 percent in December and 1.8 percent in November. But the core PPI, which excludes volatile food and energy prices, increased 0.2 percent, also in line with economists' forecasts."

From MarketWatch. "Gold futures closed higher on Friday, reversing early losses, as a recovery in the crude-oil market boosted demand for the precious metal. Gold for April delivery closed up $1.40 at $672.80 an ounce on the New York Mercantile Exchange. Gold posted slight gains on the week."

"Crude-oil futures rose Friday, as energy traders were unwilling to leave positions uncovered ahead of the three-day President's Day weekend in the United States. Crude for March delivery closed up $1.40 at $59.39 a barrel on the New York Mercantile Exchange."

"'Firm oil, dollar dissatisfaction, low mine output, and geo-political tensions should keep gold underpinned,' said James Moore, an analyst at TheBullionDesk.com."

"Other metals prices were mixed. March silver closed up 2.8 cents at $13.99 an ounce. 'I continue to believe speculative players may look to push silver higher in the coming session in order to generate a rally in gold,' Moore said."

"April platinum ended down $6.50 at $1,210.40 an ounce, and March palladium dropped $1 at $341.80 an ounce."

"The London Bullion Market Association released clearing statistics for January and the daily average was 17.1 million ounces of gold, down 14%, significantly lower than the daily turnover levels we saw from April to the end of 2006, said Neal Ryan, director of economic research at Blanchard. Similar reductions of trading volumes took place in silver in January as well, with transfers down over 8%."

"'It will be interesting to see if this trend of fewer ounces moving around in London continues,' Ryan said. 'The physical metals activity on the LBMA OTC dominates the gold market and this is potentially a very bullish signal if ounces transferred continue to fall again after spiking in 2006.'"

MarketWatch reports on the precious metals trading. "Gold futures fell Thursday following a gain of nearly $5 an ounce in the past two sessions, but prices managed to recoup much of the day's losses by the session's close as traders digested news of record gold demand in 2006, with a wary eye on the dollar's outlook and a mixed batch of U.S. economic data."

"'Gold prices have been testing and probing this $670-$675 per ounce level now for a week' said Neal Ryan, director of economic research at Blanchard. 'When you see gold test and retest a certain upside support over a week period, prices are eventually going to break one way or another and it's our believe that the break will be to the upside, especially in light of the methodical $70 increase we've seen in gold the last month since we called a bottom Jan. 5th,' he said."

"Gold for April delivery closed down 60 cents at $671.40 an ounce on the New York Mercantile Exchange, bouncing back a bit after reaching a low of $666.50 during the session. Other metals prices followed gold lower. March silver closed slightly lower at $13.962 an ounce. April platinum lost 20 cents to end at $1,216.90 an ounce, while March palladium dropped $3.05 to close at $342.80 an ounce."

"Looking ahead, 'the dollar, oil prices, inflationary pressures, Fed and ECB rate decisions, etc. will be what causes [gold] price fluctuations on a daily basis, but it's the new reality of a different supply/demand equation in the precious metals markets that will keep prices moving up from left to right on a long term chart,' said Ryan."

"Ryan points out that a report shows that gold production in Zimbabwe fell in 2006, down 50% since 2004. 'Zimbabwe isn't a particularly large producing gold country, but combine that with news from South Africa that has shown monthly year-on-year declines of 12.4% in December, 7.6% in November, 5.5% in October, and 5% in September, along with declines in Australia, Peru, Chile, Indonesia, etc. and you begin to get an appreciation for the larger picture,' he said."

"'Gold could go to $1,000 per ounce and these countries and companies couldn't pull one more ounce out of the ground than they are currently,' he said. 'I believe that we reached a peak production in the late 90s that will possibly be matched in some years, but never eclipsed.'"

"Meanwhile, demand for gold in 2006 was a record $65.3 billion, despite a fall in tonnage and reduced supply, according to figures released by the World Gold Council on Wednesday. 'Prospects for both jewelry and investment demand in the first half of the year are good, although any return of excessive price volatility could hinder jewelry purchases,' the World Gold Council said."

From Bloomberg. "Gold prices in New York fell from the highest in almost seven months as declining energy costs reduced the appeal of the precious metal as a hedge against inflation. 'Gold tried to very valiantly put a new high, but now we've taken $2 off on crude,' said Frank McGhee, head trader at brokerage Alliance Financial LLC in Chicago. 'We're just tracking' oil, he said."

"'Gold has moved too high, too quickly and, to be blunt, the wrong types of investors own it,' John Reade, an analyst at UBS AG in London, said in a report today. 'Large long positions on the futures exchanges are deterring longer-term holders from buying gold.'"

"Jewelry consumption dropped 16 percent last year and demand for gold bars declined 13 percent after gold soared to a 26-year high of $732 an ounce in mid-May, according to the London-based research company GFMS Ltd. Gold may fall to $650 an ounce over the next month, Reade said."

"Treasurys closed higher Thursday, pushing the benchmark yield to a 5-week low, after the latest Philadelphia Federal Reserve survey showed unexpected weakness in regional manufacturing this month and added to recent economic reports depicting the economy in a largely unfavorable light."

"Although Thursday's reports are important to the fixed-income market, other factors are driving trade, including heavy buying by Asian central banks and accounts that will be closed much of next week for the Chinese New Year holiday, according to Thomas di Galoma, head of U.S. Treasury trading at Jefferies & Co. In addition, there is a large amount of debt maturing Thursday that needs to be reinvested."

"Earlier the Treasury Department reported that monthly capital flows to the United States reversed in December to the first outflow in a year-and-a-half. The news is worrisome to bond investors concerned that foreign central banks may be scaling back their holdings in dollar-denominated assets."

"Federal Reserve Chairman Ben Bernanke, (who) spoke to a House panel on Thursday, said inflation will ebb over the next two years. House Financial Services Chairman Barney Frank asked Bernanke why a rate cut 'wasn't at least as likely' as a rate hike in coming months. In response, Bernanke said 'there were risks in both directions' with housing as a major downside risk, but strong spending as an upside risk."

"The New Zealand dollar may rise on speculation figures today will show house prices held near a record for a third month, suggesting the economy is expanding fast enough to warrant an interest rate increase in March."

"Growth in the housing market and increasing domestic demand made an increase in New Zealand's 7.25 percent official cash rate 'likely' at the central bank's monetary policy review on March 8, Reserve Bank Governor Alan Bollard said on Jan. 25."

"'Unless there is a substantial fall in house prices,' the New Zealand dollar will probably extend its gains, Michael Gordon, currency strategist at Westpac Banking Corp. in Wellington. Still, 'the market has pretty much priced in the risk of a rate hike so there won't be much further upside.'"

The Associated Press reports on currencies. "The U.S. dollar hit a six-week low versus the euro and fell against other rivals Wednesday after the head of the Federal Reserve said inflation worries were easing. A combination of disappointing U.S. data and solid economic reports from abroad had put pressure on the dollar in Asian and European trading. When Fed Chairman Ben Bernanke's comments on Capitol Hill failed to live up to some investors' expectations, the dollar extended its earlier losses."

"Late Wednesday in New York trading, the euro stood at $1.3125, up from $1.3031 late Tuesday, while the dollar was changing hands at Y120.78 from Y121.22 Tuesday. The euro traded at Y158.55 from Y157.96 Tuesday. The dollar was at 1.2400 Swiss francs from 1.2478, while the U.K. pound was at $1.9618 from $1.9459 late Tuesday."

"In his semiannual testimony on Capitol Hill, Ben Bernanke told the Senate Banking Committee that incoming economic data suggests there will be a 'gradual ebbing of core inflation.' 'Based on Bernanke's testimony, the Fed appears comfortably on hold for now,' said Peter E. Kretzmer, senior economist at Bank of America."

"Brian Dolan, head of currency research at Forex.com, said the market's knee-jerk reaction to sell the dollar on Bernanke's comments was partly attributable to market expectations that the Fed chairman would be hawkish on growth and inflation. '(Bernanke's remarks) were on the dovish side, while the market was expecting something more hawkish, perhaps about prospects for accelerating economic growth,' Dolan said."

"Meanwhile, sterling recovered Wednesday following the release of the Bank of England's Monetary Policy Committee Inflation report stating that consumer price inflation in the U.K. should fall below 2 percent by the end of the year."

"Yet with BOE Governor Mervyn King saying Wednesday that there are still 'substantial risks' around the 2007 inflation outlook, the report was not as dovish as some had feared, and therefore lifted sterling back above the $1.95 mark during the London session. It climbed above $1.96 in New York."

From MarketWatch. "Gold futures climbed Wednesday, sending their benchmark contract above $676 an ounce for the first time in six months and gaining momentum from Ben Bernanke's statement that inflation pressures were easing."

"Gold for April delivery rose $3.50 to close at $672 an ounce on the New York Mercantile Exchange. It climbed as high as $676.40 earlier, its strongest intraday level since Aug. 2, which saw a peak of $677.10."

"A close above the $675-$676 spot price target 'should give confirmation that $700, and then the $730 levels, are the next objectives,' said Peter Spina, chief investment strategist at GoldSeek.com."

"Yet along with general profit taking below the technical breakout level along with some Spina cited 'strong hands which appear to be working overtime to keep this rally from extending.' He added, 'it is unclear if they have the power to spook investors from taking this market higher at this time or require some more consolidation just below.'"

"'Gold's internal strength continues to shine on its march to $700,' said Peter Grandich, editor of the Grandich Letter. 'We could see a groundswell of momentum players join in above $675 that could lead to a major spike to $725-$735 faster than most would believe.'"

"Elsewhere on the commodity markets, crude-oil futures, which have provided most of the direction for gold recently, dropped Wednesday after U.S. dollar revealed that distillate supplies fell much less than expected last week, despite the severe winter weather in much of the nation."

"Other metals prices climbed, with March silver touching a two-month high of $14.13 an ounce before closing at $13.965 an ounce, up 5 cents. April platinum climbed 0.9%, or $11.10, to end at $1,217.10 an ounce and March palladium added $1.25 to close at $345.85 an ounce."

FX Street reports on currencies. "The dollar fell against other major currencies Tuesday after a government report showed the U.S. trade gap widened more than expected in December. The trade gap widened by 5.3% in December to $61.2 billion, the Commerce Department said Tuesday. Analysts surveyed by MarketWatch had expected the deficit to increase to $59.5 billion. For all of 2006, the U.S. posted a record trade deficit of $763.6 billion."

"The data are 'dollar bearish,' said T.J. Marta, fixed-income strategist at RBC Capital Markets. 'This report will likely cause a further downward revision to' fourth-quarter gross domestic product, he said."

"In New York trading, the euro stood at $1.3022, compared with $1.2961 late Monday. The dollar was quoted at 121.28 yen, compared with 121.94 yen. The British pound traded at $1.944, compared with $1.9474. The dollar changed hands at 1.2486 Swiss francs, compared with 1.2532 francs. The euro fetched 157.97 yen, compared with 158.05 yen."

"'Market players remained wary of putting on additional short positions ahead of this week's GDP numbers and next week's BOJ meeting,' said Boris Schlossberg, senior currency strategist at DailyFX.com. The yen also found some support after reports that North Korea agreed to shut down its nuclear facilities in return for energy aid and security guarantees, he said."

"'Last year relations between Pyongyang and Tokyo were sorely inflamed when the latter test fired several missiles in the Sea of Japan and claimed that it detonated nuclear device underground. Tonight's news removes the one nagging geo-political threat in the region and should be a long term political positive for the yen,' he wrote in a note."

From MarketWatch. "Gold futures closed higher Tuesday, recouping some of their recent losses and sending their benchmark contract to its highest level in six months as a record U.S. trade deficit fueled a decline in the dollar. But prices ended below the day's best level with news of disarmament plan for North Korea likely easing some of the interest in gold as a safe-haven investment."

"Gold for April delivery closed up $1.20 at $668.50 an ounce on the New York Mercantile Exchange. It traded as high as $673.70, the contract's strongest intraday level since early August."

"Gold prices spent the session trading steady to higher 'in spite of news that North Korea has agreed to accept aid in exchange for shutting down its nuclear reactor,' Todd Hultman, president of DailyFutures.com, said."

"'The number that likely lit the fuse under gold today was the much wider-than-anticipated December trade gap,' said analyst Jon Nadler. 'Reality certainly set in this morning as the U.S. currency took a dip against the euro, itself boosted by reports of better than 3% GDP growth in the euro zone,' Nadler said."

"Other metals prices followed gold higher. March silver closed up 1.5%, or 20 cents, at $13.915 an ounce after reaching a two-month high of $14. March palladium added $6.85 to end at $344.60 an ounce and April platinum climbed $14.70 to close at $1,206 an ounce."

"'Looks like today might signal the week for silver to break out above $14 per ounce finally,' said Neal Ryan, director of economic research at Blanchard, which has 'been waiting on this one and expecting it to outperform gold and platinum for a while now.'"

The Shanghai Daily. "Many people have been asking why the dollar hasn't crashed yet. Will the United States ever face a bill for the string of massive trade deficits that it has been running for more than a decade?"

"Including interest payments on past deficits, the tab for 2006 alone was over US$800 billion, roughly 6.5 percent of US gross national product. Even more staggeringly, US borrowing now soaks up more than two-thirds of the combined excess savings of all the surplus countries in the world."

"Foreigners are hardly reaping great returns on investing in the US. On the contrary, they typically get significantly lower returns than Americans get on their investments abroad."

"If America's competitive position is so weak, what magic is holding up the dollar?"

"The first answer, of course, is that the trade-weighted dollar has fallen; by more than 15 percent in real terms since its peak in early 2002. Yet the US deficits have persisted, and even risen, since then."

"The real driving force has been two-fold. First and foremost, America's government and consumers have been engaged in a never-ending consumption binge. The epic boom in housing prices of the last 10 years has spread deep into the American middle class.
Unemployment is at a cyclical low, and the economy appears to be less volatile than at any point in modern history. So it is not surprising that private consumption continues to hold up even as US economic growth has shifted into lower gear."

"It is less easy to rationalize why the US government is continuing to run budget deficits despite a cyclical boom."

"Of course, it takes two to tango. In order for the US economy to run deficits with the world, other countries must be willing to spin off a counterbalancing supply of savings. Ben Bernanke, the US Federal Reserve chairman, once famously pinned the whole US current account deficit on a 'global savings glut.'"

"But it would be more accurate to say that there is a global investment shortfall, with investment trending downwards despite the upward trend in global growth."

"What then is future of the dollar? As long as the status quo persists, with strong global growth and stunning macroeconomic stability, the US can continue to borrow and run trade deficits without immediate consequence."

"Over time, the dollar will still decline, but perhaps by no more than a couple of percent per year. Nevertheless, it is not hard to imagine scenarios in which the dollar collapses. In principle, one can also think of scenarios in which the dollar shoots up, but overall these seem less likely. But some day, the US may well have to pay the bill for its spendthrift ways."

Bloomberg reports on the gold market. "Gold prices in New York fell from a six-month high after the dollar strengthened, reducing the precious metal's appeal as an alternative investment. The U.S. dollar rose against 15 of 16 major currencies tracked by Bloomberg. Gold futures for April delivery fell $5, or 0.7 percent, to $667.30 an ounce on the Comex division of the New York Mercantile Exchange. Prices climbed 3.2 percent last week to the highest since August."

"Gold also fell as a drop in energy costs reduced the metal's appeal as a hedge against inflation. Crude-oil prices tumbled as much as 4.2 percent to below $58 a barrel after Saudi Arabia told Asian refiners to expect more shipments next month. Oil reached $60.80 on Feb. 9, the highest since Jan. 3."

"'The combination of the dollar being up and a decent decline in oil puts pressure on gold,' said Tom Hartmann, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. 'If oil weren't down as much, gold would be seeing more support.'"

The Street.com. "Gold prices took a dip Monday as the greenback rallied in anticipation of bullish comments by Federal Reserve Chairman Ben Bernanke later this week. April-dated contracts eased $5 to close at $667.30 an ounce on the Comex."

"The bullion ETFs that hold inventories of gold, iShares Comex Gold Trust and streetTracks Gold Shares, were down 0.8% and 0.7%, respectively."

"'The market is expecting a more hawkish tone from Federal Reserve Chairman Ben Bernanke, opening the door to monetary tightening,' says Alan Gayle, senior investment strategist at Trusco Capital Management, in Richmond, Va."

"Gayle notes that late last year, a disconnect existed between the bond market, which saw future weakness in the U.S. economy, and the Fed, which seemed to see strength ahead. During January, fixed-income investors fell more in line with the stated view of Fed board members."

"A robust economy would likely steer policymakers toward hiking interest rates, which would in turn help support the greenback."

"The yen rose from a record low against the euro after finance ministers and central bankers from the Group of Seven nations warned against making 'one-way bets' versus the Japanese currency."

"Japan's yen also gained against the Australian dollar and Swiss franc and pared its losses versus the U.S. dollar as European Central Bank President Jean-Claude Trichet said Feb. 10 the trades are 'not appropriate,' after a two-day G-7 meeting in Germany. The yen initially dropped after G-7 officials stopped short of saying its weakness is a threat to the global economy."

"'It will be a day of reckoning when the trade gets unraveled,' said Tim O'Sullivan, chief foreign exchange trader at Forex.com, a unit of online currency trading company Gain Capital in Bedminster, New Jersey, which has about $250 million worth of funds under management. 'The G-7 officials are certainly not comfortable with that. This triggered the yen to move higher.'"

"The yen traded at 121.78 per dollar from 121.71 on Feb. 9, after earlier dropping to an intra-day low of 122.10, close to the weakest in more than four years at 122.19 on Jan. 29."

"Gains in the yen may be limited as European officials at the G-7 meeting failed to persuade the U.S. and Japan to call for it to strengthen. G-7 officials, in a communiqué released at the close of their meeting on Feb. 10, urged investors to recognize that Japan's economic recovery is 'on track.' The statement didn't refer to the yen."

"The G-7 meeting's outcome is 'negative for the yen,' said Marios Maratheftis, a currency strategist at Standard Chartered Plc in London. 'We expect the yen to come under pressure and it will continue to underperform.'"

"The yen has declined 4.5 percent versus the dollar in the past six months and 6.2 percent versus the euro as investors borrow cheaply in Japan and exchange funds for higher-yielding assets abroad, in a practice known as the carry trade."

From Andy Mukherjee. "If Vietnam ends up imposing Thai- style capital controls, as some Asia analysts expect, the world's richest nations must take some of the blame. In its statement last weekend, the Group of Seven industrialized nations had a real chance to exert some pressure on the Bank of Japan by saying just how big a threat the super- cheap Japanese currency was to the world economy."

"Its silence drove the yen lower against the euro and the U.S. dollar yesterday, making financial stability an even more uphill task for countries such as Vietnam that are struggling to keep their heads above the deluge of cheap money."

"Vietnam would probably not be losing the fight against inflation if global liquidity were correctly priced, which it might have been without Japan making it possible for hedge funds to borrow at half a percent for three months."

"With inflation running at about 7 percent in 2006, the State Bank of Vietnam didn't raise interest rates last year. 'This partly reflected concerns over the costs of funding the central bank's U.S. dollar purchases in its bid to nudge the Vietnamese dong exchange rate lower, even as foreign flows into its stock markets accelerated,' S&P analyst Tan Kim Eng wrote."

"The Ho Chi Minh City bourse's VN Index, which has more than tripled over the past year, has been the world's best-performing benchmark in U.S. dollar terms in that period."

"It's facile to argue that Vietnam's central bank should have used higher interest rates to contain inflation. That would have exerted further pressure on the dong to strengthen. And appreciation in the home currency, if allowed by the central bank, would have further whetted foreign investors' appetites by giving them a higher return on their dollar investments."

"Thailand made this mistake. It raised interest rates to tame inflation and ended up getting more inflows from overseas. After the baht rose 16 percent in less than a year, threatening to stall exports, the Bank of Thailand panicked and imposed capital controls in December."

"'Central bankers in the developing world do not control the price of money in the developed world,' says V. Anantha- Nageswaran, head of research for Asia and the Middle East at Julius Baer Holding AG. 'Hence, paradoxically, the more they raise interest rates, the more attractive they become.'"

"In separate reports, analysts at Australia & New Zealand Banking Group and JPMorgan Chase & Co. last week raised the specter of capital controls in Vietnam. The restrictions, it is being speculated, would mirror the botched Thai move, which required foreign investors to pay a penalty for withdrawing funds before a year."

"It isn't just emerging markets that are reeling from cheap global money. New Zealand Finance Minister Michael Cullen's comment last week about a mortgage levy shows the frustration. A tax on home loans, a proposal that Cullen said was at a 'a very preliminary stage' of consideration, will make borrowing more expensive and cool the overheated property market."

"Trying to achieve the same objective through a conventional interest-rate increase will only end up making the New Zealand dollar more attractive to the carry traders, who would leap to buy the nation's currency by borrowing in yen."

"According to my Bloomberg, borrowing in yen to buy the New Zealand dollar has, over the past six months, given investors an annualized return of -- hold your breath -- 38 percent in U.S. dollar terms at a very favorable reward-to-risk ratio."

"'In a world where capital moves more freely than ever before and carry trades are increasingly popular, it perhaps makes sense that policy makers will have to start using targeted measures as opposed to general rate hikes,' says Shahab Jalinoos, Singapore-based head of Asian currency strategy at ABN Amro Bank NV."

"From South Korea to India and China, authorities are becoming aware that they must use tools other than interest-rate increases to meet their monetary-policy objectives. If emerging markets succeed in their endeavor, there may be a little less incentive for carry trades, Jalinoos says."

"And what if they fail? 'By the end of the year or next, capital controls would be fashionable,' says Julius Baer's Anantha-Nageswaran."

"The G-7 should have named the weak yen for what it is: a threat to the global economy."

Reuters reports on currencies. "The yen extended losses on Friday as doubts grew about whether finance officials at the Group of Seven meeting in Germany this weekend would take any action to stem the Japanese currency's decline. The yen fell against the euro for the fourth straight day and against the U.S. dollar for the third session in a row."

"European policy-makers have been calling for the G7 to tackle the yen's weakness as it makes European exports more expensive in Japan and makes Japanese exports cheaper in Europe. However, officials from Washington and Tokyo have played down the issue."

"'There is not much to do before the communique comes out,' said Enrico Caruso, chief currency trader at a currency hedge fund. 'Something coming out on the carry trade would be the most disastrous for the market as no one has positioned for it.'"

"The dollar was up 0.5 percent at 121.62 yen, rising as high as 121.75, according to Reuters data, it's highest since Jan. 31. The euro was down 0.2 percent against the U.S. dollar at $1.3008, surrendering gains made after European Central Bank President Jean-Claude Trichet on Thursday signaled a ECB interest rate rise was likely in March."

From Bloomberg. "Canada's dollar rose the most in more than seven months and bonds declined after a government report showed employers added more jobs in January than expected, suggesting an economic slump may be easing."

"Some questioned the statistics' accuracy. Previous government data had shown the economy barely growing, making the job gains unusual. 'Today's job numbers have provided a very good excuse to investors to buy the Canadian dollar,' said Meg Browne, senior currency strategist at Brown Brothers Harriman. 'The currency needed a pullback after a recovery in the crude oil prices. Investors are choosing to ignore this talk of data credibility, or a revision.'"

"Canada's dollar advanced 0.85 percent to 85.34 U.S. cents at 2:56 p.m. in Toronto from 84.55 cents yesterday. It was the biggest gain since June. 29, and the largest daily rise among the 16 primary currencies Bloomberg tracks. One U.S. dollar buys C$1.1719. Yesterday, the Canadian currency touched 84.20 cents, the lowest since Nov. 21, 2005."

"Brazil's real fell as investors refrained from buying local assets following calls from the president's Worker' Party for the central bank to change monetary policy to weaken the currency and spur growth."

"'It's not that anything radical will happen, but when you see the central bank president coming under pressure like this, it makes people nervous,' said Paulo Fujisaki, foreign exchange analyst at Socopa Corretora in Sao Paulo."

"The real fell for a third day, dropping 0.7 percent to 2.1080 reais per dollar at 2:31 p.m. in New York, after most trading had ended in Brazil. The Brazilian currency on Feb. 6 touched 2.0745 reais per dollar, the strongest since May 11. It has gained 1.3 percent against the U.S. currency this year, making it the best performer of the 16 major currencies. Dollar purchases by the central bank on the spot market today also contributed to losses in the currency, Fujisaki added."

"Brazilian President Luiz Inacio Lula da Silva's party has demanded that the central bank make changes to its monetary and currency policies, according to a statement posted on the party's Web site yesterday. 'A new monetary and exchange rate policy by the central bank is a necessary condition for the sustained growth of the Brazilian economy,' the statement said."

"Gold prices in New York rose to the highest in more than six months as a jump in energy costs boosted the appeal of the precious metal as an inflation hedge. Gold futures for April delivery rose $9.50, or 1.4 percent, to $672.30 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $673.90, the highest since July 17. The metal is up 3.2 percent this week."

"Oil reached $60.80 a barrel, the highest since Jan. 3, after Occidental Petroleum Corp. suspended most production at the Elk Hills field in California. Oil is up 16 percent in the past three weeks as freezing weather in most of the U.S. sparked demand for heating fuel."

"Gold also attracted buyers after prices topped $667, said Michael Guido, director of hedge-fund marketing at Societe Generale SA in New York. 'This move is about a technical formation and investor interest,' Guido said. 'Targets are being readjusted to $685 and $700.'"

"Gold has risen in five consecutive weeks after prices tumbled 4.9 percent in the week ending Jan. 5."

"'A lot of funds are jumping in and buying,' said Walter Otstott, a senior commodity broker at Dallas Commodity Co. 'I anticipate a run to $700 before you get any significant degree of profit taking.'"

"Gold's performance in January attracted investors who were tentative, Otstott said. Last month, the metal rebounded above the December highs after falling below the lows. 'It's called an outside reversal month,' Otstott said. 'It gets a lot of people like me who are waiting for gold to prove itself more excited. It changes their attitude and they start to add on more positions.'"

From MarketWatch. "'I think it's market investors realizing that there is a confluence of very bullish news all hitting the gold market at the same time, which will provide for a sustained price rally,' said Neal Ryan, director of econmic research at Blanchard. March silver gained 13 cents to $13.90 an ounce."

The Associated Press reports on currencies. "The dollar fell against the euro on Thursday after the European Central Bank signaled that it would increase its key interest rate in March to stem inflation threats. However, the U.S. currency rose against the yen and British pound. The 13-nation euro bought $1.3038 in afternoon New York trading, up from $1.3006 in New York late Wednesday, after the ECB left its interest rate unchanged at 3.5 percent but set the stage for a March increase."

"Bank President Jean-Claude Trichet warned that 'strong vigilance remains of the essence so as to ensure that risks to price stability over the medium term do not materialize,' language that, in the past, has signaled a rate rise the following month."

"The British pound fell to $1.9580 from $1.9692 after the Bank of England also kept its key interest rate unchanged at 5.25 percent. The dollar rose to 121.05 yen from 120.66 yen on Wednesday as talk faded that the Japanese currency would be a key topic at this weekend's meeting of the Group of Seven finance ministers."

"In other trading, the dollar bought 1.2461 Swiss francs, up from 1.2417 late Thursday, and 1.1824 Canadian dollars, down from 1.1852."

"Oil prices surged by $2 a barrel late in the day Thursday, as energy traders rushed back into the market amid frigid temperatures in the United States and political tension overseas."

"Light, sweet crude for March delivery rose $2 to settle at $59.71 a barrel in late trading on the New York Mercantile Exchange, after peaking at $59.87. It was the highest settlement price since Dec. 29, 2006, when crude closed at $61.05 a barrel."

"Factors such as renewed warnings out of Iran, violence in Nigeria, and frigid temperatures in the United States kept prices afloat Thursday — leading traders to believe that $60 a barrel may not be as insurmountable as they thought."

"'This is trend-chasing. It's very nervous, short-term, speculative trading. People were guessing that a top was in the market, and now they've been disappointed that prices didn't fall further,' said Tim Evans, energy analyst at Citigroup Global Markets."

From MarketWatch. "Gold futures closed above $660 on Thursday, underpinned by a rise in energy prices and a fall of the U.S. dollar against the euro. Gold for April delivery closed up $5.50 at $662.80 an ounce on the New York Mercantile Exchange."

"Blanchard's CEO, Donald Doyle, Jr., said in a note to clients: 'A weak U.S. dollar, increasing oil prices, and ever-present geopolitical tensions will continue to affect precious-metals prices, but analysts at Blanchard and Company, Inc. say that any market correction will present investors with a buying opportunity as they expect prices to surge due to continuous improvement in market fundamentals.'"

"The market continues to get more information each day on slumping mine supply across the globe, additional de-hedging, slowing central-bank sales and new central-bank purchases, Doyle said, and these are major factors that will push gold to last year's highs within the next few weeks."

"Other metals prices were mixed. Silver closed up 6 cents at $13.77 an ounce. Platinum declined $4.70 to end at $1,198.30 an ounce. Palladium closed down $4.20 at $341 an ounce."

Bloomberg reports on currencies. "The yen dropped the most against the dollar in about a month after a Japanese finance ministry official said foreign-exchange won't be a major topic at this weekend's Group of Seven meeting. Japan's yen also posted the biggest one-day loss since December against the euro after the official, who spoke in Tokyo on condition of anonymity, said the G-7 probably won't have a 'big' debate about currencies when they meet in Essen, Germany, on Feb. 9-10."

"U.S. Treasury Secretary Henry Paulson yesterday signaled he doesn't share European officials' concern over the Japanese exchange rate. 'There is no broad consensus,' said Christian Dupont, a senior currency trader at Societe Generale SA in Montreal. 'An official statement on the yen isn't warranted. This doesn't bode well for the yen. The economic fundamentals in Japan are still weak.'"

"The yen fell to 120.63 per dollar at 4:01 p.m. in New York from 120.10 yesterday. The Japanese currency also declined to 156.96 per euro from 155.94. The yen declined against 15 of 16 most-actively traded currencies tracked by Bloomberg, outperforming only Brazil's real."

"The dollar weakened against the euro after a U.S. government report showed labor costs grew at a smaller-than-forecast 1.7 percent pace last quarter, down from a revised 3.2 percent rate in the prior period. It compared with the median forecast of 2.1 percent in a Bloomberg survey. The dollar fell to $1.3012 per euro from $1.2985 yesterday."

"The euro also gained on speculation European Central Bank President Jean-Claude Trichet will signal an interest-rate increase next month."

"Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank may need to raise its benchmark interest rate as recent stronger economic growth increases the risk that inflation won't moderate."

"'With growth prospects of the economy improving, there is some risk that we may not see a return to price stability unless monetary conditions are further tightened,' Plosser said in a speech today to the Greater Philadelphia Chamber of Commerce."

"Plosser, who took over at the Philadelphia Fed in August and doesn't vote on policy this year, said he's 'not convinced that underlying inflation is on a downward trend.' He said a recent easing of price pressures may be the temporary result of a decline in oil prices, which may rise again."

From MarketWatch. "Gold futures closed lower Wednesday, failing to hold their ground at the $660-an-ounce level as a retreat in oil prices pared the metal's safe-haven appeal."

"'You could revive the old 'gold slips on oil' once again,' said Jon Nadler, an analyst at bullion dealers Kitco.com. 'Crude's failure to capture $60 is about as significant for the time being, as gold being unable to get over $660,' he said."

"Gold for April delivery closed $1.40 lower at $657.30 an ounce on the New York Mercantile Exchange. It's up $5.80 from Friday's closing level, but the contract remains below Thursday's close of $663, which marked its loftiest level in nearly six months."

"'Technical resistance has again caused gold to stall,' said James Moore, an analyst at TheBullionDesk.com. 'But the combination of dollar weakness and energy-led inflation concerns, coupled with strong physical and fund buying paints a very positive picture, suggesting once the selling is satisfied gold will be quick to move higher, and could potentially look to target $676 in a short space of time,' he said."

"Analysts at Action Economics said in a research note that gold has been seen as a hedge against any negative sentiment toward the dollar ahead of a meeting of Group of Seven finance ministers in Germany. In the past, officials at G7 meetings have remarked on the need to address global imbalances, thereby triggering a fall in the U.S. currency."

"Rounding out the action in metals Wednesday, March silver rose 3.5 cents to close at $13.71 an ounce, while April platinum gained $12.70 to end at $1,203 an ounce and March palladium rose $1.15 to close at $345.20 an ounce."