Money and Metals

MarketWatch reports on the markets. "Gold futures dropped more than $15 an ounce Thursday to close at their lowest level in seven weeks, as mixed U.S. economic data and comments from the European Central Bank chief helped push the U.S. dollar to a one-month high against the euro. Gold for June delivery closed down $15.50, or 2.3%, at $667 an ounce on the New York Mercantile Exchange. That was the contract's lowest closing level since March 23 though during the session, it fell to $666, an intraday level not seen since April 2."

"The June gold contract has now lost $23.40 in a three-session losing streak."

"The 'dollar looks stronger today, [so] the funds are pressing gold down to support levels,' said Julian Phillips, an analyst at GoldForecaster.com. 'The dollar is fighting hard not to fall, despite a fundamental picture that says it should. Once it gives us clear direction, gold will react too,' he said."

"Overall, 'it does seem the market is lacking some clarity in short-term direction, and may suggest further consolidation could be on the cards,' said James Moore, an analyst at TheBullionDesk.com."

"On Thursday, the European Central Bank left its interest rates at 3.75% and signaled a rate increase in June. Comments from ECB President Jean-Claude Trichet indicated 'that maybe the ECB's tightening campaign is a little bit closer to the completion than people had thought, and that has caused some of the change-over in sentiment,' said David Watt, senior currency strategist at RBC Capital Markets. So some investors 'are taking some long euro and short dollar positions of the table.'"

"Against this backdrop, the dollar touched two-month peak against the yen and a one-month high vs. the euro Thursday."

"Meanwhile, the Bank of England implemented its fourth rate rise since August, raising base rates by a quarter-point to 5.5%. And the Federal Reserve decided Wednesday to hold short-term interest rates steady and said nothing that indicates it is prepared to move interest rates anytime soon."

"'What rattled the markets was their statement that inflation risks are `somewhat elevated',' according to Mike Rapson, an analyst at Man Financial. Rapson wrote in his daily metals report that 'those looking for a rate cut this year now need to reevaluate their positions.'"

"But Phillips pointed out that the 'impression given is that it will react to higher inflation but will not preempt it. [So] the dangers of inflation with falling growth [stagflation] are now apparent,' he said. 'This is gold-positive and dollar-negative as the trade deficit will continue at excessive levels in a climate that could discourage the investment of surplus dollars [Asian nations in particular] back into the States,' he said."

"Other metals prices also posted losses. July silver fell 33 cents to close at $13.14 an ounce, marking the contract's lowest closing level since March 14."

"July platinum fell $15.30, or 1.1%, to close at $1,324.20 an ounce and June palladium declined $6.65 to end at $363.75 an ounce."