Money and Metals

The Associated Press reports on currencies. "The U.S. dollar exited active trading Thursday little changed from a day earlier as investors squared their positions ahead of important U.S. employment data out Friday. The greenback briefly dipped to a three-week low against the yen on a report Thursday morning that pointed to a weak U.S. manufacturing sector."

"But after declining in a knee-jerk fashion, the dollar slowly climbed back against the yen and most other currencies, as the market re-examined the data and decided it did not warrant a broad dollar sell-off."

"'No one was surprised that manufacturing remains a sore spot in the U.S. economy,' said Michael Woolfolk, senior currency strategist at Bank of New York. The manufacturing sector, he said, was expected to be 'a soft patch that would continue, going into this year.'"

"Woolfolk said investors also felt it would not be wise to push the dollar too low ahead of Friday's nonfarm payrolls data for January. The report will also include important benchmark revisions to previous months, and could stir up price action in the dollar."

"Late Thursday, the euro stood at $1.3025 from $1.3032 late Wednesday, while the dollar stood at Y120.70 from Y120.72, according to EBS. The euro stood at Y157.19 from Y157.33 late Wednesday. The dollar was at CHF1.2434 from CHF1.2438, while the U.K. pound was at $1.9675 from $1.9653 late Wednesday."

From AFX News. "Gold headed towards fresh six-month highs, buoyed by fund buying as oil prices moved higher and the dollar moved down. The dollar's recent slump has prompted hedge funds to turn their attention to gold as it is seen as a hedge against inflation."

"At 5.05 pm, spot gold was quoted at $658.10 an ounce, up from the $651.90 level seen in late New York trades yesterday. The metal had hit a six month peak of 654.60 usd on Wednesday."

"'There is also quite a palpable sense of confidence that gold has found whatever drivers it had been searching for to enable it to break out of the congestion we witnessed in the 635 to 650 usd area,' said Kitco analyst, Jon Nadler."

"Although gold has been moving in line with oil, some analysts believe should oil fall, the value of gold would still be maintained. 'The yellow metal is also showing signs of detaching slightly from its recent correlation with oil, and is now on course to test the July 17 highs of around 676 usd,' said James Moore, analyst at TheBullionDesk.com."

"Prices have increased despite the International Monetary Fund's recent announcement that it could raise finance by selling around 400 tonnes of gold."

"Although any IMF selling would increase supplies and hypothetically depress prices, the news had little impact. 'The bullish market sentiment currently appears to be focused on the dollar and oil price movements, had this news been released amidst a bearish market it could possibly have had more of an impact,' said analysts at Barclays."

From MarketWatch. "'There appears to be enough thrust behind this move to take us to and beyond $700 over the next few weeks, months,' said Peter Spina, chief investment strategist at GoldSeek.com. 'The market is readjusting itself based off strong fundamental factors and with rising energy prices and a weakening dollar, this just accelerates the process,' he said."

"April gold closed up $5.10 to $663 after a high of $667, the contract's strongest intraday level since Aug. 9. 'As expected, gold has broken above key resistance at $650 and now appears to be making a beeline toward $700,' said Peter Grandich, editor of the Grandich Letter. He predicted it could see that price level before the end of the first quarter."

"At the same time, 'there is no denying the underlying strength gold is seeing here,' said Spina, pointing out that even when energy prices drop and the dollar strengthens, gold's been holding up. 'It is difficult to deny that gold is trading more independent of prior-market correlations,' he said. 'The metal is in demand and accumulation is driving it back to its 2006 peak.'"

"That gold prices climbed past $650 'in the face of reported talks to sell some IMF gold holdings is yet another indicator of how strong gold really is,' said Grandich."

"April platinum rose $10.50 to close at $1,192.80 an ounce and March palladium gained $4.35 to end at $344.90 an ounce."

"March silver added 15.5 cents to close at $13.725 an ounce. Silver's 'marching ahead at a more aggressive pace.,' said Spina, adding that the $15 level 'is easily within sight and the potential for $18 or higher by mid 2007 is well within reach.'"

The World Bank. "The International Monetary Fund should sell gold worth $6.6 billion and invest the proceeds in higher-yielding assets as part of a strategy to put its finances on a sound, long-term footing, an expert panel recommended on Wednesday."

"The panel included Alan Greenspan, former chairman of the US Federal Reserve, and Jean-Claude Trichet, president of the European Central Bank. It estimated that the sale of 400 tons of gold would create an endowment fund that would earn the IMF $195 million a year in additional revenues after inflation."

"The IMF holds 3,217 tons of gold in total. The panel recommended that the world’s central banks reduce their planned gold sales - set out in an international accord - by an equivalent amount so as to offset the effect of the IMF sale on the world gold market. [The Financial Times (UK)]"