Monday, May 14, 2007


Gold "Cracks A Bit"

The Associated Press reports on currencies. "The dollar was mixed against other major currencies Monday. The euro traded at $1.3534 in European trading, down from $1.3535 late Friday in New York. Later, in midday trading in New York, the euro rose to $1.3544."

"In midday New York trading, the dollar bought 120.35 yen and 1.2195 Swiss francs, and the pound was worth $1.9797."

"The euro was helped by data showing that euro-zone manufacturing activity in March beat expectations. Led by Italian and Spanish factories, industrial production rose by 0.4 percent, better than analysts' forecast of 0.3 percent."

"Upbeat economic data underline the likelihood of the European Central Bank increasing interest rates further, while the U.S. Federal Reserve is thought likely to continue leaving its rates unchanged."

From Bloomberg. "Gold and silver prices fell on speculation the euro's rally against the dollar will stall, reducing the appeal of the precious metals as alternative investments."

"Gold has moved in tandem with the euro about 74 percent of the time in the past year. Before today, gold was up 5.4 percent this year while the euro climbed 2.5 percent against the dollar. The metal reached an 11-month high on April 20 as the euro headed for a record against the dollar."

"'A lot of gold's movement for now is going to be tied to the dollar,' said Frank Lesh, a trader at FuturePath Trading LLC. 'The dollar is going to have to look like it's going to make a new low for gold to pull in capital.'"

"Gold futures for June delivery dropped $2.20, or 0.3 percent, to $670.10 an ounce on the Comex division of the New York Mercantile Exchange. The price dropped 2.5 percent last week to the lowest in a month. Silver for July delivery fell 7 cents, or 0.5 percent, to $13.235 an ounce. The metal fell 1.7 percent last week, the fourth-straight weekly loss."

"'What we are seeing in the currencies will be the primary driver for gold prices,' said Matt Zeman, a trader at LaSalle Futures Group. 'Nervous investors are going to be very cautious and may look for any reason to sell.'"

"A break below $665 an ounce may trigger more selling, Zeman said. The metal fell as low as $667.50."

"Investment demand for metals and other commodities may shrink should the U.S. economy slow, said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. 'We are starting to see gold crack a bit,' Goodis said. 'If the economy continues to weaken more than expected, this will hurt all commodity prices.'"

From MarketWatch. "'The gold market has "growing anxieties about where the top end of the current range lies and what selling the attainment thereof might precipitate,' said Jon Nadler, metals analyst at Kitco Bullion Dealers."

"'This week's economic statistics will offer plenty of data worth pondering (CPI, housing starts, capacity utilization, jobless claims and consumer sentiment), and might bring gold's short-term price prospects into sharper focus,' said Nadler. 'Although, much still depends on what level the U.S. dollar will find a comfortable level to trade at.'"

"When asked what would take gold prices to the $700 level, Nadler said 'it would take a set of geopolitical conditions and economic factors out there, which are currently not in the equation, to convince investors to start loading up on this hedge asset a little bit more than they have been.'"

"Also on Nymex, palladium suffered a sizable loss in the wake of a report from metals refiner Johnson Matthey which showed that palladium demand fell in 2006 and the market ended the year with a surplus of supplies."

"June palladium dropped $7.95 to close at $360.70 an ounce in New York. Meanwhile, global platinum supplies outpaced consumption in 2006 for the first time in eight years, as world jewelry demand dropped more than 18%, Johnson Matthey's 'Platinum 2007 Review' report said."

"The high price of platinum and an increase in recycled jewelry cut overall world jewelry demand for the metal by 18.3%, or 360,000 ounces, last year, to 1.61 million ounces, it said."

"Platinum for July delivery fell $12.40 to close at $1,329.30 an ounce Monday.
The platinum group metals market is 'certainly looking heavy following the JM report," said's James Moore."

"Moore said he believes palladium is 'at risk of some sizeable long selling following the recent build in fund longs [and] technical support at $354 needs to hold to avoid a correction back to $330.'"

This looks sorta bearish at this point, IMO. The rally has fizzeled out and nobody seems to be talking $700 anymore.
Considering the huge number of readers and posters at hbb, and how many of them talk "inflation hedge," it's surprising they are not reading and posting here. Despite gold's retreat, AUD looks like it will test last month's highs.
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