Money and Metals

The Associated Press reports on the markets. "Gold prices tumbled Thursday under pressure from a firming U.S. dollar, an expiring gold options contract and weaker crude oil prices. Meanwhile, June gold options expire Thursday, which means positions will either be abandoned or exercised, said George Gero of RBC Capital Markets Global Futures. 'That's why you have some pressure in today's prices,' he said."

"The June contract for gold shed $9.30 to settle at $653.30 an ounce on the New York Mercantile Exchange."

"A mixed assessment of U.S. economic data offered little support for the industrial metals market, which weakened further. New home sales surged 16.2 percent in April but the median price of a new home plummeted by more than 11 percent at the same time, according to a Commerce Department report. The agency also reported a 0.6 percent rise in U.S. durable good orders, but the increase came in shy of some analysts' expectations."

From MarketWatch. "'The dollar is the heaviest influence on the gold price at the moment, with the oil price not directly pressing down on the price,' said Julian Phillips, an analyst at GoldForecaster.com. 'We believe the gold price is being held back, not only by heavy and continuing sales from the European banks, but from the U.S. gold exchange-traded fund, StreetTracks, where over 30 [metric tons] of gold has been sold since the middle-of-April peak,' he said."

"'With gold sitting on support after the funds tried to take advantage of the technical weakness of the market today, all are watching to see if gold can recover again,' he said."

"'The bullion headed for the $650 mark as soon as the U.S. dollar received a fresh adrenaline shot from the durable goods and new-home sales reports, mid-morning,' said Jon Nadler, metals analyst at Kitco."

"KNadler said that the U.S. Mint has sold only 1/10 of the amount of bullion coins month-to-date, vs. one year ago. See the U.S. Mint data. 'Just try to tell us that such a dismal sales level is not a reflection of souring investor mood, low expectations, and fast-changing purchasing patterns,' he said."

"'Yes, we are oversold; yes, we are due for another corrective pop,' he said. 'But, boy, this market is looking quite a bit different now.'"

"Other metals prices also posted losses Thursday. July silver fell 1.4%, or 18.5 cents, to close at $12.92 an ounce, July platinum declined $16.30, or 1.3%, to end at $1,290.70 an ounce and June palladium fell $8.45 to finish at $369.10 an ounce."

From Bloomberg. "Gold fell to a two-month low in New York as a gain in the value of the dollar reduced demand for the precious metal as an alternative investment."

"Investment in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, has fallen 6.3 percent to 469 metric tons from a record on April 17. Before today, gold had gained 3.9 percent this year as the euro climbed 1.9 percent against the dollar."

"'Gold is precariously hanging on,' said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. 'The dollar is in reasonable condition. The fund managers aren't too eager to jump into this market.'"

"Stronger U.S. home sales may buoy speculation the Federal Reserve will raise interest rates this year. The Fed has kept its benchmark rate unchanged at 5.25 percent since June while the European Central Bank has raised rates three times since August to 3.75 percent."

"'With rates potentially moving higher, that can be a problem for metals across the board,' said Goodis of Equidex."

"Gold reached a 26-year high of $732 on May 12, 2006. The metal's failure to climb above last year's highs as the euro hit a record sparked selling from hedge funds, analysts said. Five of the past six bear markets for the U.S. currency have led to a higher gold price."

"'Gold seems to be struggling and the technical picture has weakened in the past couple of weeks,' said William O'Neill, a partner at Logic Advisors. 'A lack of alternative asset demand for gold has been a negative.'"