Wednesday, April 18, 2007


"Sinking Dollar" Supports Gold

The Economic Times reports on currencies. "The euro surged past 1.36 dollars for the first time since December 2004 on Wednesday while sterling hit a near 26-year high against the dollar on fears for US economic prospects. 'The weakened dollar "reflects a combination both of concerns about the US economy, and at the same time the contrasting strength of the European economy which is growing much more rapidly,' Capital Economics analyst Jonathan Loynes said in London.

"Owing to strengthening European economies, particularly in Germany, the market is forecasting higher interest rates for the euro zone and Britain in the coming months."

"The euro reached as high as $ 1.3616 in early European trading before falling back to 1.3576 against 1.3564 late Tuesday in New York. The pound sterling struck 2.0133 dollars to reach its highest reading since June 1981. It later traded at 2.0040 against 2.0063 on Tuesday."

"'With the currencies like the British pound, euro and Japanese yen looking to benefit from rate hikes in the near future, the greenback is starting to lose its appeal in the global market,' said John Kicklighter at Forex Capital Markets."

From MarketWatch. "Gold futures closed a bit higher, but remained below the previous session's seven-week high of $695.50. The metals markets are 'vacillating on currency moves and searching for additional market data with which to take out some psychologically important levels,' $700 for gold, $1,300 for platinum and $14.50 for silver, said Neal Ryan, director of economic research at Blanchard."

"Gold for June delivery finished 80 cents higher at $693.30 an ounce on the New York Mercantile Exchange. It traded as high as $695.30 during the session."

"The metals market saw conflicting reports on activity at Freeport-McMoRan's Grasberg mine. Dow Jones Newswires reported that operations at the Indonesian unit are continuing as normal, despite a labor group's statement that a strike has halted all operations there."

"'Grasberg is the largest copper/gold mine in the world in terms of reserves and in the top three in terms of production,' said Ryan. 'Shutting down for a day isn't going to be too big an issue for the gold market (much more so for copper, where supplies are far tighter currently), but should this strike extend a few more days, we could be looking at more bullish news for gold prices entering the market.'"

"Indeed, 'should the dispute escalate to hit output, then it would be impacting an already tight concentrate market,' said William Adams, metals analyst at"

"Platinum was the biggest winner among the metals Wednesday, with its July contract up 2%, or $26, to close at $1,306.90 an ounce in New York."

"'Platinum has been particularly volatile the last few days as news has hit the market of a new [exchange-traded fund] being launched in Switzerland,' said Blanchard's Ryan. 'This one ETF being offered on a small bourse and available to only Swiss investors will not move the metal price a great deal on its own.'"

"But 'platinum and palladium are even thinner than gold and silver in terms of overall available supply and annual mine production. [So] should one or two ETFs socking away bullion in vaults begin to have some success, the impact on the market will be much more profound in platinum and palladium than in the gold and silver ETFs,' he said."

"Platinum's sister metal, palladium, saw its June contract tack on $2.45 to end at $382.80 an ounce. May silver finished down 4.5 cents at $13.975 an ounce."

"'In the final analysis, gold got its support for the day from the ever-reliably sinking dollar, a bit from oil, and the rest from the inflationary expectations that the biggest consumer price rise in 11 months has likely generated,' said Jon Nadler, analyst at Kitco."

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