Friday, February 02, 2007

 

Gold "In Consolidation Mode"

MarketWatch reports on the metals markets. "Gold futures dropped nearly $12 an ounce Friday as growth in fourth-quarter U.S. payrolls sent the U.S. dollar higher, but the metal still ended slightly higher for the week. After seeing such strength during the last several sessions, 'the market could not extend itself and quickly, the nervous buyers have exited seeking to book profits as the U.S. dollar found some strength,' said Peter Spina, chief investment strategist at GoldSeek.com."

"'There is no reason to believe this is nothing more than just a temporary pullback to shake out some weak hands,' he said."

"Gold for April delivery closed down 1.7%, or $11.50, at $651.50 an ounce on the New York Mercantile Exchange, following a drop to $648. The contract had gained $5.10 on Thursday to mark its third-straight winning session, trading as high as $667, the contract's strongest intraday level since Aug. 9."

"'Today we find the funds making the play,' said Julian Phillips, an analyst at GoldForecaster.com, in an e-mail Friday morning. 'Seeing no follow through from the physical side and from the long-term investor, the funds are hesitant to move in, so demand has dropped ahead of the weekend,' he said. 'The fall below support in the mid-$650s could pull it back a little further, but we are now in consolidation mode for the weekend at least.'"

"Putting pressure on gold, the dollar traded higher against other major currencies Friday, reversing early losses sparked by a government report showing the U.S. economy created fewer-than-expected jobs last month. Payroll growth in the fourth quarter was stronger than expected."

"'Gold has once again succumbed to a bear attack, a feat that coincidentally continues to happen on the day U.S. employment figures are released,' said Peter Grandich, editor of the Grandich Letter. 'I believe it will be a bear trap and we shall see a reversal next week that leads us to a rally to $700,' he said."

"'Sometimes investors have to get used to these counter-intuitive moves in the metals and currencies markets,' said Neal Ryan, director of economic Research at Blanchard, pointing out that analysts have been blaming gold's retreat on profit taking and other factors even though 'every other indicator' should be pushing the price higher."

"'These types of moves should be looked at as the perfect entry point for an investor,' he said."

"Other metals prices dropped on Friday. March silver dropped 2.6%, or 35 cents, to close at $13.375 an ounce, unchanged from the level it closed at a week ago. April platinum closed down 2.5%, or $29.30, at $1,163.50 an ounce. March palladium fell $6.65 to close at $338.25 an ounce. Both contracts ended lower for the week."

"A report that Red Kite Management, a $1 billion metals trading hedge fund, wants to extend the notice period for investor redemptions after losses of as much as 15% in January, may be affecting metals trading as well, analysts said Friday."

"Red Kite, run by Michael Farmer, Oskar Lewnowski and David Lilley, asked investors in its metals fund to approve an amendment that would require 45 days notice before money can be withdrawn, according to a copy of a Jan. 31 letter from the firm obtained by MarketWatch. 'If anything, that makes things look even more bullish in my mind,' said Ryan of the news."

"When asked, Grandich said that it's possible that the decline in gold is related to this news on Red Kite, 'but I suspect with gold at its highest level in months, any losses they could have related to gold would be from the short side,' he said."

"'I do think it's an indication of what can happen in the overall hedge-fund industry when the bubble bursts in the stock and credit-derivatives markets,' he said.
And hedge-fund concern is 'far more possible in regards to copper, given how much the hedge funds were long that market, the big decline and the further sell off today,' Grandich said."

From CNN Money. "Gold futures fell nearly 2 percent in New York Friday, a day after they hit a 5-1/2-month high, hurt by a jump in the dollar and news that the United States had no plans to go to war with Iran."

"Gold futures hit a low of $650 after U.S. Defense Secretary Robert Gates told reporters that 'we are not planning a war with Iran.'"

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