Wednesday, May 16, 2007
Bullish Gold Sentiment "Almost Nil"
MarketWatch reports on metals. "Gold futures dropped $13 an ounce to close Wednesday at their weakest level in two months, as better-than-expected U.S. housing starts and industrial production in April lifted the dollar to an almost three-month high against the yen, weakening demand for the precious metal."
"Gold for June delivery lost 1.9%, or $13, to close at $661.50 an ounce on the New York Mercantile Exchange, a level not seen since March 19. 'We believe the fall in gold reflected the performance of the dollar,' said Julian Phillips, an analyst at GoldForecaster.com."
"July silver also dropped 2.9%, or 38.5 cents, to close at $12.93 an ounce. That was its lowest closing level since March 5."
"The dollar rallied across the board Wednesday, touching its highest level in almost three months against the yen after reports showed stronger-than-expected U.S. housing starts and industrial production for last month."
"'Funds are obviously increasing their yen carry trade loans given the weakness in the Japanese yen,' said Ned Schmidt, editor of the Value View Gold Report. 'Those monies are flowing into paper assets. All of this is creating an excellent buying opportunity' for gold, he said."
"'While it's the worst seasonally favorable period for gold (May-August), numerous technical indicators are screaming for a major bottom as early as today or on a wash-out to $650,' said Peter Grandich, editor of the Grandich Letter. 'The bullish sentiment among gold timers is almost nil -- another bullish factor that says we're close to a major bottom,' he said."
"'The emergence of support around $665 yesterday is encouraging, with further support expected at $662 to $660 and around the 100-day moving average at $658.75,' said James Moore, metals analyst at TheBullionDesk.com. 'However, further failures to climb towards key resistance pegged at $694 might encourage another round of long liquidation from fund players,' he said."
"Other metals prices were lower Wednesday. June palladium shed 95 cents to close at $357.50 an ounce and July platinum fell $13.80 to end at $1,325.80 an ounce."
From Bloomberg. "The yen traded near a three-month low against the dollar on speculation signs of weakening growth will keep the Bank of Japan from lifting borrowing costs at a faster pace this year."
"'The BOJ is hesitant to hike interest rates aggressively as economic data have been on the soft side,' said Brian Dolan, research director at Forex.com. 'The market doesn't expect the BOJ to do anything in the near term, which encourages yen selling.'"
"The yen traded at 120.79 per dollar and 163.26 per euro at 6 a.m. in Tokyo. The Japanese currency fell 0.5 percent against the dollar yesterday and touched 120.84, the weakest since Feb. 26. The yen also reached an all-time low of 163.90 per euro yesterday."
"The dollar traded at $1.3515 per euro. The U.S. currency strengthened 0.6 percent yesterday against the euro, the most since March 5. The U.S. currency tumbled to a record low of $1.3681 per euro on April 27, and has lost 2.3 percent this year against the euro on bets the U.S. economy will trail Europe's."
"New Zealand's dollar fell on speculation the U.S. economy is performing better than expected, reducing the prospect of a cut in interest rates there and luring investors back to the dollar."
"The U.S. currency rose to its highest in almost three months against the yen after reports showed industrial production increased more than expected and housing starts unexpectedly advanced, diminishing chances the Federal Reserve will cut rates."
"The New Zealand dollar, known as the kiwi, gained 17 percent in the past 12 months, supported by borrowing costs 2.5 percentage points higher than the U.S.' 5.25 percent rate."
"'The U.S. data pushed at the timing of Fed rate cuts,' Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington said. 'The U.S. dollar made a recovery and that kept the kiwi under pressure.'"
"The New Zealand dollar fell 0.6 percent to 73.29 U.S. cents at 9:11 a.m. in Wellington, from 73.73 cents in late Asian trading yesterday."
"New Zealand's record official cash rate is the highest after Iceland's among countries with the top rating at Moody's Investors Service. It is the best performing major currency tracked by Bloomberg in the past 12 months."
"The currency has gained 29 percent against Japan's yen in the past year, buoyed by the so-called carry trade, where investors borrow cheaper currencies to invest in higher yielding assets elsewhere. Japan's 0.5 percent target rate is the lowest among major economies, and is 7.25 percentage points lower than New Zealand's."
"The local dollar's decline was helped by Japan's Trade Minister, Akira Amari, Hampton said. Interest rates will eventually rise to levels where it would diminish the impact of the carry trade, Amari said May 16 in Paris, according to the Reuters newswire."
"'The comments knocked the kiwi lower against the yen,' Hampton said. New Zealand's currency traded at 88.54 yen, from 88.84 yen in late in Asia yesterday."
"Gold for June delivery lost 1.9%, or $13, to close at $661.50 an ounce on the New York Mercantile Exchange, a level not seen since March 19. 'We believe the fall in gold reflected the performance of the dollar,' said Julian Phillips, an analyst at GoldForecaster.com."
"July silver also dropped 2.9%, or 38.5 cents, to close at $12.93 an ounce. That was its lowest closing level since March 5."
"The dollar rallied across the board Wednesday, touching its highest level in almost three months against the yen after reports showed stronger-than-expected U.S. housing starts and industrial production for last month."
"'Funds are obviously increasing their yen carry trade loans given the weakness in the Japanese yen,' said Ned Schmidt, editor of the Value View Gold Report. 'Those monies are flowing into paper assets. All of this is creating an excellent buying opportunity' for gold, he said."
"'While it's the worst seasonally favorable period for gold (May-August), numerous technical indicators are screaming for a major bottom as early as today or on a wash-out to $650,' said Peter Grandich, editor of the Grandich Letter. 'The bullish sentiment among gold timers is almost nil -- another bullish factor that says we're close to a major bottom,' he said."
"'The emergence of support around $665 yesterday is encouraging, with further support expected at $662 to $660 and around the 100-day moving average at $658.75,' said James Moore, metals analyst at TheBullionDesk.com. 'However, further failures to climb towards key resistance pegged at $694 might encourage another round of long liquidation from fund players,' he said."
"Other metals prices were lower Wednesday. June palladium shed 95 cents to close at $357.50 an ounce and July platinum fell $13.80 to end at $1,325.80 an ounce."
From Bloomberg. "The yen traded near a three-month low against the dollar on speculation signs of weakening growth will keep the Bank of Japan from lifting borrowing costs at a faster pace this year."
"'The BOJ is hesitant to hike interest rates aggressively as economic data have been on the soft side,' said Brian Dolan, research director at Forex.com. 'The market doesn't expect the BOJ to do anything in the near term, which encourages yen selling.'"
"The yen traded at 120.79 per dollar and 163.26 per euro at 6 a.m. in Tokyo. The Japanese currency fell 0.5 percent against the dollar yesterday and touched 120.84, the weakest since Feb. 26. The yen also reached an all-time low of 163.90 per euro yesterday."
"The dollar traded at $1.3515 per euro. The U.S. currency strengthened 0.6 percent yesterday against the euro, the most since March 5. The U.S. currency tumbled to a record low of $1.3681 per euro on April 27, and has lost 2.3 percent this year against the euro on bets the U.S. economy will trail Europe's."
"New Zealand's dollar fell on speculation the U.S. economy is performing better than expected, reducing the prospect of a cut in interest rates there and luring investors back to the dollar."
"The U.S. currency rose to its highest in almost three months against the yen after reports showed industrial production increased more than expected and housing starts unexpectedly advanced, diminishing chances the Federal Reserve will cut rates."
"The New Zealand dollar, known as the kiwi, gained 17 percent in the past 12 months, supported by borrowing costs 2.5 percentage points higher than the U.S.' 5.25 percent rate."
"'The U.S. data pushed at the timing of Fed rate cuts,' Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington said. 'The U.S. dollar made a recovery and that kept the kiwi under pressure.'"
"The New Zealand dollar fell 0.6 percent to 73.29 U.S. cents at 9:11 a.m. in Wellington, from 73.73 cents in late Asian trading yesterday."
"New Zealand's record official cash rate is the highest after Iceland's among countries with the top rating at Moody's Investors Service. It is the best performing major currency tracked by Bloomberg in the past 12 months."
"The currency has gained 29 percent against Japan's yen in the past year, buoyed by the so-called carry trade, where investors borrow cheaper currencies to invest in higher yielding assets elsewhere. Japan's 0.5 percent target rate is the lowest among major economies, and is 7.25 percentage points lower than New Zealand's."
"The local dollar's decline was helped by Japan's Trade Minister, Akira Amari, Hampton said. Interest rates will eventually rise to levels where it would diminish the impact of the carry trade, Amari said May 16 in Paris, according to the Reuters newswire."
"'The comments knocked the kiwi lower against the yen,' Hampton said. New Zealand's currency traded at 88.54 yen, from 88.84 yen in late in Asia yesterday."
# posted by Ben Jones @ 3:00 PM 
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IMO, Grandich makes a good point and one I mentioned in recent comments. We were in this exact situation a few months ago; the US$ unexpectedly rallying and gold was down. But the traders were excited about a new leg up. I don't see that this time.
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