Tuesday, June 19, 2007


Gold, Currencies Tracking Interest Rates

Reuters reports on currencies. "The dollar slipped against the major currencies on Tuesday as U.S. bond yields continued to fall from five-year highs hit last week, eroding their appeal to foreign investors. At the same time, the euro retreated from a record peak against the yen and treaded water against the dollar after a surprise decline in German business confidence in June."

"In recent weeks, the dollar has closely tracked Treasury yields, hitching a ride higher as strong U.S. economic data boosted the benchmark 10-year note's yield to 5.33 percent and sent the euro to nearly a three-month low against the greenback."

"But with little major U.S. economic data on tap this week to guide traders, a bond market retracement has curbed the dollar's gains and weakened the case for the Federal Reserve to boost interest rates in 2007. 'We have a light calendar this week and there's no real catalyst providing a fresh reason to buy dollars,' said Bank of New York strategist Michael Woolfolk. That leaves 'significant gyrations in bond prices' to lead some price action, he said."

"But since closing at 5.29 percent a week ago, 10-year yields have slipped nearly 20 basis points over the past five sessions, the bond market's best five-day stretch in more than three months."

From MarketWatch. "Gold futures climbed Tuesday to close at their highest level in almost two weeks, scoring a gain of $12 an ounce in four sessions, as the dollar weakened in the wake of a report showing that the U.S. housing market remained soft, though starts of new homes fell less than expected and building permits climbed."

"'The weakness in housing continues to concern a number of analysts and has worked itself into the Fed's jawboning vocabulary quite firmly since this spring,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'Few are ignoring it anymore, save perhaps for the starry-eyed camp of ever-optimistic Realtors.'"

"The figures were slightly stronger than expected, according to a survey of economists by MarketWatch, but underscored the weakness in housing that's plagued the world's largest economy."

"With that in the backdrop, gold for August delivery closed $4.80 higher at $664.70 an ounce on the New York Mercantile Exchange, recovering from an earlier low of $657.30. It's gained a total of 1.8% in a winning streak that's spanned four, consecutive trading sessions, and the contract marked its highest closing level since June 7. On Monday, the contract added $1.20 an ounce."

"Also on Tuesday, crude-oil futures recovered from earlier declines to touch a fresh nine-month high as traders focused on developments related to Nigerian production."

"Silver prices followed gold futures higher. July silver tacked on 9 cents to close at $13.325 an ounce, recouping its losses after a dip to $13.14. September palladium closed at $376.50 an ounce, up $1.50 for the session, but July platinum slipped $1 to close at $1,298.50 an ounce."

"'Platinum and palladium were down very marginally but continuing unrest in South Africa may lead to higher prices,' said Mark O'Byrne, a director at Gold & Silver Investments Ltd. 'Some 75% to 80% of global platinum supplies comes from South Africa,' he said in a research note. And 'Russia supplies some 10% and thus South Africa and Russia account for nearly 90% of global platinum supply.'"

"'Given the geopolitical situation in Russia and industrial unrest in South Africa, it is likely that platinum will re-challenge its high of $1,390 in November 2006 in the coming months,' O'Byrne said."

"South Africa's Anglo Platinum Ltd. announced Monday that it plans to suspend production at its Rustenburg mine for about seven days following the deaths of five workers in the past two weeks."

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