Thursday, May 17, 2007


Shorts In Control Of PM Market

Bloomberg reports on currencies. "The dollar advanced to the highest in almost three months against the yen and rose a second day versus the euro after a government report pointed to resilience in the labor market. Investors bought the U.S. currency as first-time claims for jobless benefits unexpectedly dropped to a four-month low."

"The yen's decline started after a report showed Japan's economy slowed in the first quarter and the central bank kept interest rates unchanged at 0.5 percent, the lowest among major economies."

"The dollar rose 0.4 percent to 121.25 yen at 10:16 a.m. in New York and earlier touched 121.29, the highest since Feb. 23. The U.S. currency also gained 0.2 percent to $1.3489 per euro. It has rebounded from a record low of $1.3681 set April 27."

"The U.S. currency also increased 0.6 percent against the New Zealand dollar, 0.5 percent versus the Australian currency, 0.1 percent against the British pound and 0.3 percent versus the Swiss franc."

"The Canadian dollar advanced against all 16 major currencies tracked by Bloomberg after a government report showed annual core inflation, which excludes food and energy, accelerated to its highest in more than four years last month, bolstering speculation of higher interest rates."

"'The market has been so short the dollar, and every time you have some good data coming out of the U.S., it will push people to cut their dollar shorts,' said Tim O'Sullivan, chief foreign exchange trader at"

"The report followed data yesterday that showed industrial production advanced more than economists forecast and housing starts unexpectedly gained last month."

"Volatility on one-month dollar-yen options fell to 6.25 percent, from 6.4 percent yesterday, and 7.45 percent a month earlier, encouraging investors to borrow yen and buy higher- yielding assets abroad as lower volatility implies smaller exchange-rate fluctuation risk."

"The Japanese currency has fallen against 15 of 16 major currencies tracked by Bloomberg this year as low interest rates in Japan spurred the so-called carry trades. The yen has lost 1.8 percent against the dollar and 3.9 percent versus the euro over the same period."

From MarketWatch. "Gold futures closed lower Thursday to tally a two-day drop of nearly $16 an ounce and copper futures tumbled more than 3% to mark their fourth losing session in a row as traders eyed economic data in the U.S. and moves in the dollar for hints on demand for the metals."

"Gold for June delivery fell $4.30 to close at $657.20 an ounce on the New York Mercantile Exchange, following a low of $654.30, levels not seen since March 15. The contract lost 1.9%, or $13, on Wednesday."

"'The economic data flows are indeed only adding to short-term indecision, but perhaps also to the downside bias in gold,' said Jon Nadler, metals analyst at Kitco Bullion Dealers. 'And the odds...are apparently still on the side of the shorts.'"

"Overall, the gold market appears to be 'trading on technicals rather than any fundamental news, with the sell-side pressure and shorts currently in control of the market,' said Neal Ryan, director of economic research at Blanchard."

"Ryan admits that Blanchard's prediction for $700 gold in a matter of weeks was wrong. Even so, 'the fundamental picture for the market is more bullish today for increasing prices than it was just two years ago at $400 per ounce,' he told clients."

"Also on Nymex, July silver fell 4.7 cents to finish at $12.883 an ounce, ending a bit above the more than two-month, intraday low of $12.765. July platinum shed $7.90, or 0.6%, to close at $1,317.90 an ounce, but June palladium tacked on $2.90 to end at $360.40 an ounce."

From Reuters. "Selling from liquidation in bullion exchange-traded funds and chart-based sales sent U.S. gold futures to a lower finish for a second straight day on Thursday, as slumping copper prices helped keep the precious metal below $660 an ounce."

"'We broke through major support levels in the gold, and there was also follow-through liquidation from the ETFs. So there's a lot of pressure on the metals this morning,' said one New York dealer."

"StreeTRACKS gold shares, the world's largest gold ETFs, accounting for more than 80 percent of the metal held by all such funds, dropped 8 tonnes of its bullion in one day on Wednesday."

"The dealer said a slide in U.S. copper futures on Thursday hurt the entire precious metals complex. Copper's decline followed a 3 percent drop Wednesday. U.S. copper futures ended down another 3.4 percent on Thursday."

"On Wednesday, a combination of heavy liquidation by funds, a stronger dollar and lower crude oil drove U.S. gold and silver futures to their lowest finishes in two months."

"Gold prices have been rising in recent weeks toward their 27-year peak of $730, set last May, but have failed to break the psychological $700 mark this year."

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