Wednesday, June 27, 2007


Gold In "Summer Doldrums"

Bloomberg reports on currencies. "The yen may gain for a fourth day against the euro and dollar on speculation investors will pare riskier assets amid concern about a slumping U.S. housing market. Investors this week have reduced the so-called carry trades. 'The unwinding of carry trades looks to still be in the early stage,' said Brian Dolan, research director at 'The mortgage-backed meltdown has finally spilled over into the currency market.'"

"The yen traded at 122.82 per dollar and 165.24 per euro at 6 a.m. in Tokyo. Japan's currency gained 0.4 percent yesterday against the euro and dollar. The yen has rebounded from a record low of 166.94 per euro this month, and 124.13 per dollar, the lowest since December 2002."

"The implied volatility of one-month dollar-yen options, a gauge of carry-trade risk, surged the most since March 5 to 8 percent yesterday. Higher currency volatility clouds the predictability of profits from carry trades in which investors borrow in a low-yielding country like Japan to buy higher-yielding assets overseas."

From MarketWatch. "Gold futures closed modestly lower Wednesday to tally a loss of more than $12 an ounce during a losing streak that has now spanned three sessions. Traders, jittery over conditions in the U.S. and other economies, have been selling commodities in favor of safer assets like Treasurys."

"'The market is capable of extending the pullback to the low $600s, while any rally attempts are going to be difficult to sustain in such an environment,' said Peter Spina, an analyst at 'It will take a new level to form a solid base from where the precious metals complex can stabilize before looking to more forward again.'"

"'These are the so-called 'summer doldrums,' he said. And 'it may be several weeks into this seasonally weak and quieter period when gold starts to make a push back higher.'"

"Gold for August delivery fell by 50 cents to close at $644.80 an ounce on the New York Mercantile Exchange. That's its weakest closing level since mid-January.
The contract briefly traded in positive territory during the session to touch a high of $647.50."

"It had dropped by $9.40 an ounce on Tuesday and fell by $2.30 on Monday. Read more.
'For now, it seems rising Treasury yields and high interest rates, and the guaranteed returns that they offer, are tempting investors away,' said James Moore, analyst at"

"Gold traders...eagerly awaited news from the Federal Reserve's meeting which began Wednesday. The Fed will announce its decision on interest rates on Thursday afternoon. It's widely expected to hold its federal funds target rate at 5.25% for the eighth-straight meeting."

"But despite gold's recent weakness, Moore said he believes the overall 'scenario of high energy costs, high inflation and high volatility is still favorable for gold, longer term.'"

"Meanwhile, July silver continued lower, losing another 7 cents to close at $12.21 an ounce. That marked a fresh eight-month low for the contract, which lost 4.6% on Tuesday."

"'Fund liquidation by the paper players on Comex and option expiry may have exacerbated the sell-off in silver,' said Mark O'Byrne, director at Gold & Silver Investments Ltd. 'It was unusual trading given that the dollar had weakened against the euro, sterling and most currencies.'"

"At this time of year, gold is 'vulnerable because of the seasonal drop-off in demand for physical gold. This is leaving the metals vulnerable, short term,' said Julian Phillips, analyst at"

"'Any drop in the oil price or strength in the dollar incites the funds to sell more gold and silver, so the test for both precious metals is underway,' Phillips said. 'The present technical picture supported the drop down to these levels.'"

"Among the standouts in other metals trading Wednesday, July platinum closed up $7.20 at $1,275.50 an ounce, following on a loss of nearly $20 on Tuesday.
September palladium fell $3.15 to end at $367.85 an ounce while July copper edged up 4.35 cents, or 1.3%, to close at $3.357 a pound."

"'The big precious metals news of the day is the commodities research and consulting firm CPM's release of their annual 'CPM Platinum Group Metals Yearbook 2007',' said Gold & Silver Investment Ltd.'s O'Byrne. CPM forecast that platinum should average $1,235 an ounce in 2007 and that it could trade in a range between $1,175 to $1,425 an ounce, according to O'Byrne."

From Reuters. "James Steel, analyst at HSBC, said that concerns over the credit markets and investors' flight from risk pummeled gold and silver and accounted for a general pullback in commodities."

"'Now we are also seeing some liquidation in the ETFs,' which had generally done well and remained fairly firm until recently, Steel said."

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