Money and Metals

A Pause

2007-07-26T15:23:00.000-07:00

Hello M&M readers. I have decided to suspend posting on this blog while I am busy with a new, yet to be launched blog on northern Arizona real estate. Please check back!

A Story Of General Dollar Weakness

2007-07-20T14:18:00.000-07:00

Reuters reports on currencies. "The dollar fell to a record low against the euro on Friday and was on track for its sixth straight weekly decline, weighed down by fears that losses in risky mortgage debt would hurt consumers and slow U.S. growth. The greenback also tumbled against the yen as investors unwound bets on risky assets such as stocks and emerging market debt."

"Defaults on subprime mortgages, made to borrowers with weak credit, and mounting losses on bonds backed by such debt have rattled financial markets and soured general dollar sentiment."

"St. Louis Federal Reserve Bank President William Poole emboldened dollar bears on Friday when he said losses in the non-prime mortgage market, which includes subprime, were large enough to affect home building and consumer spending."

"'It's just a story of general dollar weakness, and though nothing has really changed on housing, that's being used as a catalyst to sell,' said Dixon Fung, currency strategist at MG Financial in New York."

"Midafternoon, the dollar was trading at $1.3820, down 0.2 percent from late Thursday and near a record peak of $1.3844 hit earlier in the session."

"Sterling hit a 26-year high at $2.0587 before easing to $2.0552. The dollar index, which measures the greenback against a basket of major currencies hit a 12-year low."

"The dollar also fell to a six-week low at 120.87 yen before edging back to 121.05 yen, down 0.8 percent on the day."

"U.S. gold futures rallied to a two-month high in heavy trade Friday, capping a week of solid gains fueled by renewed fund buying and as investors sharply increased holdings of bullion held by gold exchange-traded funds (ETF)."

"Analysts said that gold was poised to retest the psychological $700 level in the near-term because of a combination of bullish factors including a weakening dollar, firm energy prices and improving jewelry demand."

"Most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange was up $6.60, or 1 percent, at $684.70 an ounce, dealing between $675.80 and $687.60, which marked its loftiest level since May 10."

"Gold has attempted several times to break above the $700-level and retest the 26-year peak at $730 set in May 2006, but so far has failed this year."

"Joseph Guzzardi at Sabin Commodities said from the COMEX floor that the falling dollar and stronger energy prices had kept the precious metals market up most of this week. 'Some fund buying is coming back in here,' he said."

"COMEX estimated final volume at a busy 122,692 lots, and gold options at 13,447. Turnover at Chicago Board of Trade's electronic 100-oz gold futures was 27,329 lots at 2:21 p.m. EDT. Changes in gold and silver ETF holdings are closely watched by market participants because sharp inflows in gold ETFs could be a bullish signal as it shows longer-term retail investors are entering the market."

"At 2:37 p.m., spot gold was quoted at $682.90/683.70 an ounce, higher than $673.90/674.50 late Thursday. The London afternoon gold fix was $681.60."

"NYMEX October platinum closed up $8.10 at $1,346.60 an ounce. Spot platinum fetched $1,330/1,334 an ounce. September palladium inched up 80 cents to end at $374.75 an ounce. Spot palladium was quoted at $370/374 an ounce."

"COMEX September silver closed up 2.8 cents at $13.403 an ounce, trading between $13.300 and $13.500. Spot silver was quoted at $13.27/13.32 an ounce, compared with $13.24/28 late Thursday. London silver was fixed at $13.290."

"'I am cautious as recent gains have been made purely on a dollar weakness. The price movement is not artificial, but too much dependence on one factor is not healthy,' said Matthew Turner, precious metals analyst at Virtual Metals. 'Gold will be driven by the dollar, but if the currency doesn't move, then it might come back on profit taking.'"

"U.S. gold futures have rallied more than $35, or nearly 6 percent, since it closed at $650.60 on July 5."

Gold Shows Stamina

2007-07-19T15:17:00.000-07:00

Reuters reports on currencies. "The dollar eased against most major currencies and traded near record lows versus the euro on Thursday as concerns about the health of the U.S. housing market and its impact on consumer spending persisted. The dollar reached its lowest levels in years on Wednesday following congressional testimony by Federal Reserve Chairman Ben Bernanke."

"The Fed cut growth forecasts for the U.S. economy for this year and next and Bernanke said the hard-hit housing market will remain sluggish."

"'The market continues on a bearish mode towards the dollar, favoring higher-yielding currencies and Bernanke's testimony today didn't change that outlook,' said Nick Bennenbroek, head currency strategist at Wells Fargo."

"In early afternoon trading in New York, the euro was up 0.1 percent on the day at $1.3812, having hit $1.3834 on Wednesday according to electronic trading system EBS, its strongest level since its launch in 1999."

"The dollar was up 0.2 percent at 122.08 yen, but it briefly pared its gains versus the Japanese currency after a measure of business activity in the Mid-Atlantic region from the Philadelphia Federal Reserve Bank was surprisingly weak."

"'There's a great deal of volatility in this number. But to the extent that it came in weaker than expected is consistent with the lower dollar trend,' said Bob Lynch, head of G10 FX strategy at HSBC Bank USA."

"Sterling was down 0.2 percent at $2.0485 after softer-than-expected UK retail sales data, coming further off a 26-year peak of $2.0548 hit on Wednesday."

"The market currently reckons U.S. rates will have to stay on hold or be cut at some point but analysts expect the Bank of England and the European Central Bank to raise rates in September, which is supporting the pound and the euro."

"'The FX market has warmed to the idea that the Fed's going to be on hold for the rest of the year so it will have to look elsewhere for direction, probably other asset classes. The dollar's movements are very much dependent on how the U.S. corporate bond market trades, at least for the time being,' said Paul Mackel, senior currency strategist at HSBC in London."

"The dollar also was hurt Wednesday by news two Bear Stearns hedge funds exposed to the risky subprime mortgage sector were now virtually worthless. 'The hedge fund news hit the market and the dollar yesterday, but stocks rebounded and they are up again today, which may be tempering some of the dollar's losses,' said Bennebroek at Wells Fargo."

From MarketWatch. "Gold futures climbed more than $4 an ounce Thursday and copper prices rallied nearly 3%, sending the benchmark contracts for both metals to their highest closing levels in more than two months."

"Concerns over high energy prices and overall weakness in the U.S. dollar continued to support gold prices. Gold for August delivery closed $4.40 higher at $678.10 an ounce on the New York Mercantile Exchange, the contract's strongest closing level since May 15. It traded as high as $678.50, its highest intraday level since June 5."

"As for gold, it stayed mostly firm during the session and prices rose 'nicely' late in the session 'amid continued weakness in the U.S. dollar and near 11-month highs in the crude oil price,' Kitco Bullion Dealers analyst Jon Nadler said in a note to clients."

"'Barring any Friday surprises, bullion might close its third week of gains on a more confident note than it has enjoyed really, since late in May,' he said."

"'Gold remains firm and the dollar remains under pressure staying near record lows versus the euro and sterling with Fed Chairman, Ben Bernanke's Congressional testimony yesterday weighing on the currency,' said Mark O'Byrne, director at Gold & Silver Investments Ltd. Bernanke reiterated that 'upside risks to inflation remain the Fed's main concern, [though] markets were more interested in his references to other problems,' said O'Byrne in a research note."

"Meanwhile, crude futures prices closed near $76 a barrel, feeding worries over high energy prices."

"Also on Nymex, September silver gained 8.5 cents to close at $13.375 an ounce, October platinum added $1.30 to end at $1,338.50 an ounce, and September palladium rose $2 to close at $373.95 an ounce."

Subprime Day For Gold

2007-07-18T14:54:00.000-07:00

Bloomberg reports on the markets. "Gold in New York rose to the highest in six weeks after a decline in the value of the dollar boosted the appeal of the precious metals as alternative investments. Gold generally moves in tandem with the euro, which gained after the Federal Reserve tempered its forecasts for U.S. economic growth. Gold is up 5.6 percent this year while the euro has climbed 4.6 percent against the dollar."

"'The dollar is still weak, and that helps gold,' said Walter Otstott, senior broker at Dallas Commodity Co."

"Gold futures for August delivery rose $7.80, or 1.2 percent, to $673.70 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a most-active contract since June 6."

"Silver futures for September delivery rose 27.2 cents, or 2.1 percent, to $13.29 an ounce, the biggest gain in two weeks. The metal is up 2.7 percent this year."

"Five of the past six bear markets for the dollar have resulted in a higher gold price. The euro has had five straight weekly gains against the dollar and reached $1.3833 today, the highest since debuting in 1999, partly on speculation that interest rates in Europe will rise faster than in the U.S."

"Investor concerns that defaults on U.S. subprime mortgages will widen may spur demand for gold as a haven, analysts said. Bear Stearns Cos. told investors in its two failed hedge funds that they probably won't get any money back after 'unprecedented declines' in the value of AAA rated securities used to bet on subprime mortgages."

"'This is subprime day,' said William O'Neill, partner at research firm Logic Advisors. 'We're seeing some alternative asset buying in gold.'"

From AFX News. "Gold's rise rested on four pillars of support, according to HSBC precious metals analyst Jim Steel: inflation concerns; the dollar's fall against the euro; lower bond yields and higher oil prices."

"'Gold hasn't just risen because of the dollar, it's risen against sterling as well,' said BullionVault.com analyst Adrian Ash. 'A lot of people are concerned about Bear Stearns, and the level of fear you're seeing in the market is bringing people back to gold.'"

"Among other precious metals, platinum is up to 1,318 usd against 1,308 usd after reports that South African mine workers rejected a pay offer from Northam Platinum, increasing the likelihood of strike action. Its sister metal palladium fell to $365 against $366."

Sterling Pushes To 26 Year High

2007-07-17T15:27:00.000-07:00

Reuters reports on currencies. "The dollar edged up against the yen on Tuesday after a government report showed foreign investors bought a record amount of U.S. securities in May. A slightly larger-than-expected advance in producer prices last month also provided mild support for the greenback, which helped to ease some concerns that the Federal Reserve will soon have to cut interest rates."

"However, the dollar failed to get much traction against the euro or sterling. The latter pushed further above $2.04, a 26-year high, after UK inflation data reinforced expectations of another rate hike from the Bank of England."

"Midafternoon, the dollar was up 0.4 percent at 122.33 yen, while the euro was up 0.1 percent at $1.3780, not far from a lifetime high of $1.3813 hit last week."

From MarketWatch. "Gold futures closed slightly lower Tuesday to tally a three-session loss of more than $2 an ounce as the U.S. dollar traded on a mixed note and crude price backed off a high of more than $75 a barrel."

"'Minor price fatigue was visible in the market as bullion prices turned under the critical $665 mark on Tuesday,' said Jon Nadler, analyst at Kitco Bullion Dealers."

"Gold for August delivery fell 40 cents to close at $665.90 an ounce on the New York Mercantile Exchange. The contract fell $1 Monday, pulling back after reaching a high of $669.50 during the regular session. It's lost $2.40 since Thursday's close of $668.30."

"'Despite an onslaught of increased bearishness and some highly suspect capping trading patterns on the Comex, gold has managed to more than hold its own during its weakest seasonally favorable period,' said Peter Grandich, editor of the Grandich Letter. 'The big surprise in coming days could be a major break above key resistance in the $670 to $675 area,' Grandich said.'

"On the currency markets, the British pound rallied to a new 26-year peak against the dollar. The greenback edged higher against the yen, but remained lower against major European currencies."

"'The divergence between gold and the valuation of the dollar is reaching an extreme level that cannot be sustained,' said Ned Schmidt, editor of the Value View Gold Report. 'What that means is that the value of major currencies has appreciated, sending the dollar to a new low.'"

"But 'gold, which is really just a money, has not reflected that valuation,' he said in e-mailed comments. He said a 'major upward revaluation of gold is extremely likely.'"

"Aside from the dollar, 'the near-record oil prices and the increasing inflationary pressures which they are creating internationally,' are just as important Mark O'Byrne, director at Gold & Silver Investments Ltd. said."

"Elsewhere in metals trading Tuesday, metals prices closed broadly lower, with September silver losing 4.7 cents to close at $13.018 an ounce. September palladium fell $2.45 to finish at $367.75 an ounce and October platinum fell $4.50 to close at $1,322.60 an ounce."

It's Been One-Way Traffic For US$

2007-07-16T14:51:00.000-07:00

AFX International reports on currencies. "The euro dropped back slightly against the dollar after France's president Nicolas Sarkozy once again put the level of the single currency on the euro zone's economic policy agenda. Speaking following the Franco-German summit meeting in Toulouse, Sarkozy noted that Article 111 of the EU treaty stipulates that 'the council can define the general direction of currency policy.'"

"Sarkozy went on to suggest the problem is not the level of the euro but the level of the other currencies. 'Sustained strength in the euro exchange rate threatens to bring the crisis in the affairs of the euro zone to a head,' said Stephen Lewis, analyst at Insinger de Beaufort."

"Meanwhile in the UK, the pound shrugged off government figures showing house prices rose at a slower pace in May and marched up to a 26-year high of 2.0402 ussd."

From Reuters. "The Canadian dollar stormed to 96 U.S. cents for the first time in 30 years on Monday as higher oil prices triggered a slew of automatic buy orders. The Canadian dollar closed at C$1.0428 to the U.S. dollar, or 95.89 U.S. cents, up from C$1.0485 to the U.S. dollar, or 95.37 U.S. cents, at Friday's session close."

"'It's been one-way traffic,' said Steve Butler, director of foreign exchange trading at Scotia Capital. 'I think it's going to be a little bit sticky here, but certainly I think (the Canadian dollar's) got some more room to appreciate.'"

From Dow Jones. "Gold and silver futures pulled back slightly Monday in markets that weresubdued ahead of a pair of key inflation reports and congressional testimonyfrom the Federal Reserve chairman this week."

"August gold fell $1 to $666.30 an ounce on the Comex division of the New YorkMercantile Exchange. As pit trade was closing, the August contract at theChicago Board of Trade was down 80 cents to $666.50."

"Comex September silver fell 4.5 cents to $13.065. As it was closing, CBOTSeptember silver was up 5 cents to $13.063."

"'We have severe resistance for gold at the $670 to $675 area,' said Leonard Kaplan, president of Prospector Asset Management. 'The euro did nothing, and gold did nothing.' He put resistance for September silver around $13.25."

"Jon Nadler, analyst with Kitco Bullion Dealers, commented that some profit-taking may have been prompted in the bullion markets since the dollar'srecent decline appears to be decelerating and crude oil's upward momentumappears to be tapering off. Shortly after gold closed, the euro was at $1.3784,little changed from $1.3783 late Friday although also not far from its recordhigh of $1.3812 on Friday."

"Gold has been benefiting from the dollar's weakness lately, but Nadler said this has also been one of his concerns. 'When this fuel of dollar declines runs out, what are we left with?' he asked rhetorically."

"The market is awaiting a heavy slate of economic data the next three days,plus Tuesday and Wednesday will feature congressional testimony from Federal Reserve Chairman Ben Bernanke."

"'I think that is what the market is going to key on,' said said Larry Young, senior trader with Infinity Brokerage Services. 'Nobody wants to do anything until they hear the numbers during the week andespecially Bernanke's speeches on Wednesday and Thursday,' echoed Kaplan."

From Bloomberg. "Platinum rose in London after Lonmin Plc, the world's third-biggest platinum company, said it would delay sales of some of its metal at a time when global supply was barely keeping pace with demand."

"The sales were expected to help platinum supplies exceed demand in the second half of 2007 from a deficit in the first half, London-based platinum marketer Johnson Matthey Plc said in May. 'The Lonmin shortfall will likely make a dent in any expected surplus,' Jeremy Coombes, general manager of marketing at Johnson Matthey in Royston, England, said today. 'It supports the platinum price.'"

"Platinum for immediate delivery rose $3.50, or 0.3 percent, to $1,315 an ounce as of 1:02 p.m. London time, bringing the gain this year to 16 percent. Coombes declined to say what Johnson Matthey's forecast is for supply and demand this year."

"Supply exceeded demand last year by 10,000 ounces, the first surplus since 1998, according to Johnson Matthey. Palladium rose 25 cents to $368.50 an ounce."

Weak US$ Works In Golds' Favor

2007-07-13T14:53:00.000-07:00

MarketWatch reports on currencies. "The dollar touched a fresh record low against the euro and dropped against other major currencies Friday, after a government report showed retail sales fell much more than forecast last month, heightening concerns over the state of the U.S. economy. The dollar finished the week down over 1% against the euro and the yen on rising speculation the Federal Reserve will cut interest rates."

"The U.S. currency has come under heavy selling pressure since Tuesday after Wall Street's two largest rating agencies signaled that problems in the subprime mortgage market aren't going away and will probably get worse."

"'The 0.9% fall in June retail sales is significantly worse than expected and has sparked new U.S. dollar sales,' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman."

"Late in New York, the euro stood at $1.3788, compared with $1.3781 late Thursday, after touching an intra-session high of $1.3813. The dollar was quoted at 122.03 yen, compared with 122.47 yen."

"The British pound was quoted at $2.0332, compared with $2.0295. It had earlier risen to $2.0365, matching a 26-year high it reached in the previous session. The dollar changed hands at 1.2027 Swiss francs, compared with 1.2038 francs."

"The Dollar Index, which tracks the greenback against a basket of the world's major currencies, hit its lowest level in two-and-a-half years at 80.44."

"With weak demand for durable goods and falling gas prices, U.S. retail sales fell 0.9% in June, the largest decline since August 2005, the Commerce Department said Friday. Revisions to May and April data were also negative on balance.

"The dollar pared some of its losses after a monthly survey released Friday by Reuters and the University of Michigan showed consumer sentiment rebounded in July."

"For the week, the dollar weakened 1.2% against the euro and 1.1% against the yen.
Many currency analysts are looking for a near-term test on the $1.40 level for the euro."

"'The US dollar itself is the single biggest exception to the general resiliency that the global economy is demonstrating, which tends to be under-appreciated by most observers,' Chandler said. 'The most compelling diagnosis of the dollar attributes its ailment to the fact that most market participants, including a strong majority of primary dealers, cannot see the Federal Reserve raising interest rates.'"

"'Until the market is convinced that growth will be sustained in [the second half of the year], the dollar may not find a solid floor,' he said."

"But in the very short-term, Brian Dolan, chief currency strategist at Forex.com, a division of Gain Capital, said the dollar's decline has now reached significant technical support levels. 'I'm looking for the down move to transition into a consolidation at the minimum, with decent potential for a corrective rebound in the dollar,' he said."

From Reuters. "U.S. gold futures retreated by midmorning Friday on profit-taking, but a weakening dollar and firmer oil prices limited losses and traders said the yellow metal should rise further in the near term."

"'Gold will continue to firm up as long as the dollar is weakening the
way it has been,' Carlos Perez-Santalla of Hudson River Futures said from
the COMEX floor."

"At 10:57 a.m. EDT, most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange was down $2.40 at $665.90 an ounce, trading between $664.40 and $669.90."

"Investors opted to lock in profits after this week's rally. August gold on Thursday surged to a peak of $671 which marked the loftiest level since June 7. Gold futures have rallied more than $20 or 3 percent from last Thursday's close of $650.60."

"The US dollar is still on pace for its second-biggest weekly drop of the
year against a basket of major currencies, the dollar index, which
is down more than 1 pct on the week."

"'I think we are going to see $678 next week..because of the weak dollar,' Perez-Santalla said."

"'The combination of weak dollar and oil driven inflationary concerns will continue to work in gold's favor,' said James Moore, an analyst at TheBullionDesk.com. Moore said that spot gold's next resistance level was seen at $675 and the precious metal could challenge $690."

"Spot gold was quoted at $664.30/664.90 an ounce, lower than $667.00/667.80 late Thursday. The London afternoon gold fix was $666.50. COMEX September silver was down 6 cents at $13.120 an ounce, trading between $13.075 and $13.235."

"Spot silver was quoted at $13.02/13.06 an ounce, compared with $13.08/13.13 late Thursday. London silver was fixed at $13.125. NYMEX October platinum fell $5.80 to $1,324.90 an ounce. Spot platinum fetched $1,312/1,316 an ounce."

"September palladium was also down $2.25 at $370.50 an ounce. Spot palladium was quoted at $366/370 an ounce."

US$ Hits "Fresh Lows" Versus Euro

2007-07-12T14:50:00.000-07:00

Bloomberg reports on currencies. "The yen may set a record low against the euro for a third day this week as a surge in global stocks signaled that investors are taking on risky bets, including so- called carry trades. Japan's currency may extend its losses as investors resume selling the yen to fund carry-trade purchases of assets in countries with higher yields."

"'With global equity sentiment stabilizing I think the Asian open will be positive and encourage investors back to the carry trades,' said Mike Moran, a senior currency strategist at Standard Chartered Bank in New York. 'The yen will continue to weaken.'"

"The yen traded at 168.82 per euro at 6:13 a.m. in Tokyo, after touching 168.88 yen yesterday, the weakest since the euro's debut in January 1999. The Japanese currency traded at 122.39 per dollar. It may reach 173 per euro by the end of September, Moran said."

The Associated Press. "The dollar briefly stumbled to a fresh low against the euro Thursday on continuing concerns that troubles in the U.S. housing market could drag down the overall economy."

"The 13-nation euro peaked at $1.3797, topping its previous record of $1.3784 set early Wednesday. It retreated to $1.3783 in late New York trading, still up from $1.3761 late Wednesday."

"The euro dipped after several U.S. retail stores announced stronger-than-expected June sales, including Wal-Mart Stores Inc., which posted a 2.4 percent rise in sales at stores open at least a year."

"Rising oil prices and the struggling housing market, however, appear to have dampened consumers' appetites for nonessential purchases. Aside from a few strong performers, Thursday's retail sales came in generally weak."

From Reuters. "Gold jumped 1 percent to a one-month high on Thursday, powered by the dollar that slumped to a record low against the euro and as the precious metal's recent rally led to a sharp inflow into the largest bullion exchange-traded fund."

"But the metal was likely to attract heavy selling at key technical points on its upward move as investors were not yet convinced it was on a recovery path, analysts said. Seasonally less-active months for physical buying and the approaching holiday period could also cap sharp price gains, but the near-term outlook was positive, they said."

"'Gold is supported by the weakening in euro/dollar, driven by the continued concerns over the U.S. subprime mortgage market in the past few days. It is likely that the stream of bad news in the mortgage market will not abate,' said Michael Widmer, analyst at Calyon Corporate and Investment Bank. 'Investors are also set to look at signs that may indicate any contagion from the housing market in the U.S. economy. Against this backdrop, it is likely that gold prices will be strong in the coming days.'"

"Spot gold rose as high as $669.05 an ounce and was quoted at $667.20/668.00 by 2:30 p.m. EDT (1830 GMT), up from $660.30/660.90 late in New York on Wednesday."

"Most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange settled up $6.20 at $668.30 an ounce. Earlier, it surged to a session-peak of $671, the loftiest level since June 7. It hit a low of $661.80."

"The dollar's selloff this week was triggered by reports from credit rating agencies Standard & Poor's and Moody's Investors Service on Tuesday that warned of downgrades to more than $17 billion of debt related to risky mortgages, much of it subprime."

"A Reuters poll suggested on Wednesday that average gold prices would jump nearly 10 percent this year and gain further in 2008 on a weaker outlook for the dollar, less aggressive sales by central banks and physical demand."

"A recovery in gold prices after a three-month low at $638.90 on June 26 helped exchange-traded funds (ETFs) attract fresh inflows after witnessing a sharp decline."

"Data showed that holdings in New York's StreetTRACKS ETF rose to 481.15 tonnes on Wednesday, against 463.45 tonnes two weeks ago and a record high of more than 500 tonnes in April."

"Platinum rose to a six-week high of $1,315.90 an ounce and was last at $1,314.80/1,321.80, against $1,298/1,305 late in New York on Wednesday, supported by news of a labour dispute in South Africa."

"'Prices might shift higher in the next month or so, depending on the outcome of difficult wage talks in South Africa ... An outright strike is at this stage remote, but if it happened it could be bitter,' Fortis Bank said in a report."

"Palladium edged up to $367.75/371.75 an ounce from its previous close of $365.55/369.55 in New York, while silver rose as high as $13.11, the highest in nearly three weeks. It was last traded at $13.07/13.12 an ounce, versus $12.87/12.90 in the U.S market on Wednesday."

Little Solace For Dollar Bulls

2007-07-11T14:32:00.000-07:00

The Wall Street Journal reports on currencies. "The dollar hit an all-time low against the euro Wednesday for the second consecutive day amid ongoing concerns about how the subprime mortgage mess could hurt the overall U.S. economy. But a rise in U.S. equity prices Wednesday reduced risk aversion-dollar selling, which pushed the greenback higher against the yen from day-earlier numbers."

"Wednesday's action 'should be looked at in conjunction with the last couple days,' said John McCarthy, director of foreign exchange at ING Capital Markets in New York. 'There's intense pressure on the dollar over the subprime business and as more information comes to light and there are more downgrades, this will weigh on the ability of the (Federal Reserve) to raise rates.'"

"Wednesday afternoon, the euro was at $1.3753 from $1.3728 late Tuesday, while the dollar was at 122.23 yen compared with 122.01 yen, according to EBS. The euro was at 168.10 yen compared with 167.54 yen late Tuesday, while sterling was at $2.0333 from $2.0269. The dollar was at 1.2045 Swiss francs from 1.2050 francs late Tuesday."

"The euro reached its all-time high of $1.3787 during the overnight session after European Central Bank Executive Board Member Juergen Stark downplayed concerns about a strengthening euro, noting an improving euro-zone economy."

"The dollar remained under pressure during the New York session and found little support from comments by Philadelphia Federal Reserve Bank President Charles Plosser, who said the financial system is well-equipped to handle events such as the current subprime mortgage turmoil."

"But Mr. Plosser's comments provided at least a stabilizing effect to the dollar Wednesday that kept the euro from flirting too close to the $1.38 level."

"Elsewhere, Australia's dollar touched a fresh 18-year high of $0.8640 on Wednesday, showing that high-yielding currencies continue to outperform the low-yielders, such as the yen."

"Among the only bright spots for the dollar was its position against Canada's dollar, with the U.S. currency pushing above C$1.06 in overnight trading after falling to a 30-year low of C$1.0444 earlier in the week. But Canadian currency weakness is partly based on fears that what is bad for the U.S. economy may prove even worse for Canada, so the move provides little solace for dollar bulls."

From MarketWatch. "Gold futures closed lower Wednesday, giving back some of the nearly $14 an ounce they gained during a three-session winning streak as the U.S. dollar regained lost ground against some major currencies and oil prices retreated."

"'There is substantial resistance in the mid-$660's and the present demand is eating away at it,' said Julian Phillips, an analyst at GoldForecaster.com. 'We should continue to see a certain amount of ebb and flow until this resistance is absorbed,' he said. 'Once this is complete, expect to see a more vigorous market.'"

"Gold for August delivery closed down $2.30 at $662.10 an ounce on the New York Mercantile Exchange. The contract had climbed $1.90 on Tuesday to tally a three-session win of $13.80."

"'Bullion's recent ascent took a seat on the side bench for the day, as the U.S. dollar managed to cut some of its losses during Wednesday's session,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Overall, the dollar has 'a downside bias against most of the major currencies, as the capital markets reel from heightened subprime woes,' said Marc Chandler, currency strategist at Brown Brothers Harriman."

"And 'concern that difficulties in the U.S. subprime mortgage sector could spread to the wider economy is undermining the dollar and makes gold more attractive as an alternative investment,' said analysts at Action Economics. 'High oil prices and geopolitical tensions in the Middle East are also supporting factors.'"

"The dollar is falling into 'new lower territory,' said Phillips. 'Combine this with the oil price holding and the pressure on the gold price is upwards.'"

"Most other metals prices gained ground Wednesday, though September silver finished unchanged at $12.975 an ounce. September palladium closed at $371.45 an ounce, up $1.20, and October platinum added $2.60 to end at $1,316.10 an ounce."

US$ Hits Record Low Versus Euro

2007-07-10T14:58:00.000-07:00

Reuters reports on currencies. "The dollar hit a record low against the euro and 26-year troughs against sterling on Tuesday, as investors fretted about a possible fallout from weakness in the U.S. subprime mortgage market. The dollar also slumped nearly 1 percent against the yen, as risk-averse investors cut back on 'carry trade' transactions funded by borrowing in the Japanese currency."

"'This is a combination of unwinding of carry trades and broad dollar weakness, mainly because of what S&P did,' said Ashraf Laidi, chief currency analyst, at CMC Markets in New York."

"On Tuesday, Standard & Poor's said it may cut 612 residential mortgage-backed securities backed by U.S. subprime loans, affecting $12 billion in debt. Subprime loans are extended to borrowers with poor credit. The subprime news pushed down U.S. stocks, bond yields and the dollar across the board."

"The euro rose to $1.3741against the dollar, a record high, according to electronic trading platform EBS, before falling back to $1.3713, still up 0.6 percent on the day."

"Sterling climbed to around $2.0274 against the dollar, its highest in 26 years according to Reuters data. The British pound last traded at $2.0243, up 0.5 percent from late on Monday."

"Against the yen, the dollar fell 0.9 percent to 122.24, on track for its steepest fall since mid-March. The high-yielding Australian and New Zealand dollars dropped 0.7 percent against the yen to 105.29 and 94.91 respectively."

"Against a basket of major currencies, the dollar fell to a 2-1/2 year low around 80.822."

"Analysts also said the dollar's dwindling interest rate advantage over other currencies has hurt the greenback. Benchmark U.S. rates have held at 5.25 percent for more than a year, reducing the dollar's appeal to global investors when other major central banks such as the European Central Bank are raising rates."

"The ECB is expected to hike rates again in September to 4.25 percent. The Bank of Canada, meanwhile, raised interest rates to 4.50 percent earlier on Tuesday. The U.S. dollar rose 0.2 percent against the Canadian dollar to C$1.0514, benefiting from the Canadian central bank's less hawkish monetary policy statement."

"'It's still an interest rate differential game,' said Gregory Salvaggio, a vice president for trading at Tempus Consulting in Washington. 'The ECB is going to hike rates at least two times more this year and U.S. bond yields are falling, giving no incentive for large global investors to hold dollars,' he added."

"Lower U.S. bond yields arising from problems in the subprime sector have diminished the allure of U.S. Treasury debt."

From Bloomberg. "'There's a growing consensus in Japan that the yen has gotten too weak,' said Boris Schlossberg, senior currency strategist in New York at DailyFX.com. In August the BOJ will probably raise interest rates, 'and the wholesale prices will be a key determinant. We have reached a point where the BOJ doesn't need to see rising consumer prices before it makes its move.'"

"The yield advantage of the benchmark 10-year U.S. Treasury note versus the comparable-maturity Japanese security plummeted 12 basis points to 306 basis points yesterday, the lowest in two months."

"Gold rose to a new one-month high on Tuesday as the weaker dollar stimulated buying and investor sentiment towards the precious metal strengthened."

"Gold's comeback began the previous day when most commodity markets rallied to take leading indexes back up to 2006 highs after crude oil hit an 11-month peak and copper a two-month high. By 1358 GMT spot gold was at $662.10/662.70 an ounce, up from $660.80/661.60 late in New York on Monday and near its peak of $663.30, its firmest since June 7."

"Analysts said currency moves, notably dollar/euro, would be key to further gains, noting that gold had underperformed relative to the U.S. currency's most recent bout of weakness."

"'Gold is on the cusp of where it might possibly break up rather than down,' said Stephen Briggs, metals economist at Societe Generale investment bank."

"UBS Investment Bank noted that the last time gross long positions held by Comex and CBOT speculators were as small as they were last week was in October 2006, when gold rallied by more than $50 in the following six weeks."

"'Since last Tuesday, gold is up about $10/oz and about $25/oz from the recent low. We believe that the recent long liquidation and limited new short selling offers an opportunity to build long positions and see the metal higher on the one and three month view,' the bank said in a daily note."

"Gold has generally been stuck in a broad trading range since February, touching an 11-month high at $693.60 in April and a low of $632.30 in March."

"Three attempts to get back to the psychological $700 level have so far ended in failure, although many analysts believe this may still happen later in 2007."

"'The performance of gold was not too impressive during the first half of the year,' a trader at a Japanese trading house said. 'Portfolio managers are still watching trends of interest rates before deciding what to do with precious metals for the rest of the year.'"

"Platinum fell to $1,295/1,299 an ounce from $1,303/1,307 late in New York on Monday. Traders are waiting for further developments in wage negotiations in top producer South Africa."

"Palladium edged down to $365.50/370.50 an ounce from $367/370 in New York, while silver gained to $12.82/12.86 from $12.71/12.76 an ounce, having risen to its highest in nearly two weeks at $12.85 an ounce on Monday."

Precious Metals Start Week On Positive Note

2007-07-09T15:05:00.000-07:00

Bloomberg reports on currencies. "Canada's dollar touched a 30-year high as investors anticipated the Bank of Canada will raise the borrowing cost tomorrow to cool the economy. Policy makers on May 29 said rate increases may be needed 'in the near term,' citing 'excess demand' in the world's eighth-biggest economy."

"'The Canadian currency will do better against the low- yielding currencies,' said Phyllis Papadavid, a currency strategist at Lehman Brothers Holdings Inc. in London. 'Any indication that bank would keep on with its monetary tightening drive would expedite that move.'"

"Canada's dollar was little changed at 95.28 U.S. cents at 4:08 p.m. in Toronto. Earlier, it reached 95.74 cents, the highest since March 3, 1977. One U.S. dollar buys C$1.0495. The currency last traded at par with the U.S. dollar in 1976."

From MarketWatch. "Gold futures closed sharply higher Monday, extending their prior-session gains, boosted by softness in the dollar and general strength in the metals market. Gold for August delivery closed up $7.70 at $662.50 an ounce on the New York Mercantile Exchange. Other metals prices also gained ground."

"'Today's movements seem to be a buy into the metals and commodities in general,' said Zachary Oxman, senior trader at Wisdom Financial. A supply shortage and strike issues in base metals, such as London copper, are pushing the complex higher, he said."

"'Gold is coming off of an oversold situation where most of the longs from early 2007 were liquidated, which is leading to a market that can be driven quickly either way as the trade re-approaches the market,' Oxman said."

"Crude-oil futures declined Monday, but traded above $72 a barrel, as traders locked in profits from recent gains. On the currency markets, the dollar 'generally has a softer bias after being unable to sustain upticks ahead of the weekend despite firm jobs data and a backing-up in U.S. yields,' said Marc Chandler, foreign-exchange strategist at Brown Brothers Harriman."

"The dollar traded at 123.42 yen, while the euro held at $1.3628. The British pound traded at $2.0147."

"'Gold prices started the new week off on the same positive note it finished the last one, as returning market participants found a softer dollar once again conducive to being on the long side of the bullion position fence,' said Jon Nadler, analyst at Kitco Bullion Dealers."

"Also on Nymex, September silver closed up 6.30 cents at $12.820 an ounce, October platinum gained $6.90 at $1,318.0 an ounce and September palladium gained $2.15 at $371.10 an ounce."

Gold Is Tracking The Dollar

2007-07-06T14:37:00.000-07:00

Reuters reports on the markets "Gold erased early losses to trade higher on Friday as the dollar's rise following a U.S. strong jobs report stalled, and robust buying by physical buyers could support the precious metal in the near term, dealers said. Spot gold fell as low as $645 an ounce, the lowest since June 28, before rising to $654.30/655.10 by 3:31 p.m. EDT (1931 GMT), against $649.30/$650.10 in New York late on Thursday."

"Most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange settled up $4.20 at $654.80 an ounce, dealing between $646.70 and $668.50. 'Gold is tracking the dollar. It moved a bit lower after the payrolls data, but it looks that there is still support at $646,' a European precious metals trader said."

"Spot platinum rose as high as $1,291 an ounce and was last quoted at $1,290/1,297 an ounce, against $1,288/$1,292 in late New York trade on Thursday."

"The silver market was supported by the news about Mexican miners' labor actions in a protest over safety conditions and a long-running power struggle in the union. Silver was at $12.68/12.73 an ounce, up from the late Thursday quote of $12.48/12.53 in the U.S. market, while palladium fell to $359.50/363.50 an ounce from $364/368, its previous finish in the U.S. market."

From MarketWatch. "'The combination of a weak U.S. currency and oil near $73 is a powerful combination to drive gold higher, among other factors at work,' said Peter Spina, an analyst at GoldSeek.com."

"Gold for August delivery closed up $4.20 at $654.80 an ounce on the New York Mercantile Exchange. The contract lost a total of $8.60 an ounce in the past two trading sessions, but it finished the week $3.90 above the $650.90 level at which it closed a week ago."

"'The strength below $650 is enormous,' said Julian Phillips, an analyst at GoldForecaster.com. 'The market mood has been turning for the last two weeks, so I expect rising bottoms from now on,' he said."

"And if gold 'breaks $660 it may well run quite a way,' he wrote."

" On the equities side, metals and mining stocks closed higher, extending strength from the previous session. Late Thursday, Newmont said it's eliminating its entire gold hedge position, 1.85 million ounces, and plans to discontinue its merchant banking segment."

"The Denver-based gold producer also said, among other things, that during June it spent $578 million to eliminate its entire price-capped forward sales contracts."

US$ Up Despite UK Rate Hike

2007-07-05T15:14:00.000-07:00

The Associated Press reports on currencies. "The dollar rose against the euro and the pound Thursday after an unexpectedly strong report on the U.S. service economy overshadowed widely anticipated interest rate decisions in Europe and Britain. The European Central Bank held its key rate steady at 4 percent in the 13-nation region that shares the euro, while the Bank of England boosted its benchmark rate a quarter of a percentage point to 5.75 percent."

"The euro rose as high as $1.3658 after the ECB decision, but later fell to $1.3598 in late New York trading. The dollar bought $1.3603 euro on Tuesday. U.S. financial markets were closed Wednesday for the July 4th holiday."

"The pound, which has been trading at 26-year highs against the dollar, rose to $2.0200 after the Bank of England lifted its key rate to a six-year high. It was the BOE's fifth such move in a year to contain rising prices and a booming housing market."

"After the strong U.S. service sector report, however, the pound fell to $2.0123. The dollar bought $2.0166 pound on Tuesday."

From AFX News. "Gold fell midafternoon, retracing this morning's gains, as the dollar firmed against the major currencies and as oil prices eased. At 4.09 pm in London, spot gold was trading at 649.20 usd per ounce against 653.30 usd in late New York trade yesterday, having dipped as low as 645.53 in intraday trade."

"'The dollar came back against the yen and the euro as the ECB kept interest rates unchanged. Oil coming down to 71 usd didn't help matters either,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Among other precious metals, platinum rose to 1,285 usd from 1,280 usd, while its sister metal palladium dipped to 359 usd per ounce against 363 usd. Silver slipped to 12.44 usd from 12.58 usd in New York trade."

From Reuters. "'Now the euro/dollar is below $1.36 again, so we see some liquidation of long positions which had been taken on Monday and Tuesday. Also, physical demand has been slow but we are expecting the demand back around the $645-$646 level,' said Michael Kempinski, senior trader at Commerzbank International."

"'We are still in a downtrend channel and the first support line is at $635 at the moment. If the euro/dollar doesn't recover above $1.36 again, we will definitely see some more selling,' he added."

"UBS Investment Bank noted that gold held by major exchange traded funds (ETFs) remained at more than 20 million ounces, but some investors moved out of the market in the second quarter. Since a peak in gold holdings on April 19, the ETFs have lost 938,000 ounces, or about 29 tonnes."

"'Gold's recent sell-off has probably triggered some institutional selling, and after gold has apparently based at about $640 this will probably stop,' John Reade, head of metals strategy at UBS, said in a daily note."

"In market news, the Bank of Spain said it sold no gold in June after running down its reserves in each of the previous three months."

"'Palladium prices are potentially exposed to downside risk in the forthcoming weeks as speculative long positions in the metal remain at elevated levels,' Barclays Capital said."

US$ Range-Bound Ahead Of Data, Holidays

2007-07-03T14:44:00.000-07:00

Reuters reports on currencies. "The Canadian dollar ended higher against the greenback in holiday-quietened trading on Tuesday, sandwiched between Monday's day off for Canada Day and Wednesday's U.S. Independence Day. The Canadian dollar ended at C$1.0605 to the U.S. dollar, or 94.30 U.S. cents, up from C$1.0654, or 93.86 U.S. cents, at Friday's close."

"The U.S. dollar steadied on Tuesday, after sustaining steep losses in recent sessions with investors holding off on any major moves ahead of the Wednesday holiday. 'Overall, a very stable day and I think we'll likely see that continuing through tomorrow and probably remaining pretty much range-bound ahead of the employment data on Friday,' said Matthew Strauss, senior currency strategist at RBC Capital Markets."

"'It was very much a technical flows-driven move that took (the Canadian dollar) to C$1.06,' he said."

"Investors will also be looking to Europe this week, where the Bank of England is widely expected to hike interest rates, while the European Central Bank is seen keeping rates on hold but laying the ground work for a September increase.

"Meantime, firm commodity prices are seen lending support to the Canadian currency. Further strength could come from U.S. crude oil, which is hovering near 10-month highs. 'I think, at the moment, supporting the Canadian dollar is oil above $70,' said Strauss."

"South Korea's won extended its rally against the US dollar for a fourth day, rising past the 920 to the dollar level to hit a seven-month high, as investors bet on a rate hike by the Bank of Korea (BoK) next week, while the US Federal Reserve is seen keeping its rates on hold."

"At 9:40 am here, the won was quoted at 918 to the dollar, up 0.39 pct from yesterday's close and the best level so far this year. The previous high was 913.80 to the dollar seen on December 7."

"'Investors both at home and abroad are continuing their dollar selling, with a Bank of Korea (possible) rate hike serving as a catalyst,' a Kookmin Bank forex dealer said."

The Daily FX. "The US dollar has recovered from Monday’s sharp losses thanks to profit taking and position squaring ahead of the Independence Day holiday. Even though trading tomorrow should be quiet, traders should not become complacent, because we still have very important and market moving data scheduled for Thursday and Friday."

From MarketWatch. "Gold futures closed with a nearly $4-an-ounce loss Tuesday, as traders took in profits from a rally in the previous session, which lifted prices near their highest level in two weeks. The U.S. dollar put some modest pressure on gold Tuesday, with the greenback trading in a tight range, though slightly higher against major currency rivals, ahead of Wednesday's Independence Day holiday."

"But gold investors mostly ignored data that showed further weakening in the U.S. housing market."

"Gold for August delivery fell $3.80 to close at $655.40 an ounce on the New York Mercantile Exchange. On Monday, the benchmark contract rallied $8.30 an ounce, up 1.3%, to reclaim its strongest closing level since June 20."

"Regular metals-futures trading on Nymex will be closed Wednesday and resume Thursday."

"Gold's price action 'was subject to cross-currents coming from a stronger dollar and a still resilient oil price,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'Continuing elevated apprehension levels surrounding the ramifications of the recent [attempted] attacks in London and Glasgow remain supportive for the save-haven oriented purchases of gold, but market participants remained on alert for any signs of fatigue in the recent rise in prices,' he said."

"Much of the metal's recent gains have been 'due to dealer/investor diversification due to ongoing weakness in the dollar,' said James Moore, analyst at TheBullionDesk.com, in a research report."

"The greenback traded in a tight range, after falling on Monday to a 26-year low against the British pound."

"Oil prices climbed for a fifth-straight session Tuesday, with weekly data on U.S. petroleum supplies delayed to Thursday because of Wednesday's holiday. See Futures Movers."

"September silver fell 5.5 cents to close at $12.685 an ounce and September palladium lost $2.40 to end at $369 an ounce, while October platinum fell by 90 cents to end at $1,294.20 an ounce."

The US$ Bear Re-emerges

2007-07-02T13:48:00.000-07:00

Bloomberg reports on currencies. "The dollar dropped to a 26-year low versus the British pound and approached the weakest level against the euro on speculation the Federal Reserve will keep borrowing costs unchanged while other central banks extend their increases. Investors sold the U.S. currency amid concern losses in the subprime mortgage sector may weaken the housing market and spill over into the broader economy, dimming the allure of U.S. assets."

"'The dollar bearish mode in the market is back,' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. 'It's the story about better growth and rising interest rates elsewhere. We saw the dollar bear re-emerge.'"

"The dollar fell 0.41 percent to $2.0171 per British pound at 4:24 p.m. in New York and reached $2.0184, the weakest since June 1981. The U.S. currency also dropped 0.6 percent to $1.3622 per euro, after earlier touching $1.3638, the lowest since May 1. The U.S. currency touched an all-time low of $1.3681 on April 27."

"The dollar also dropped 0.6 percent, the most since April 17, to 122.42 yen. It touched 122.10 yen, the weakest since June 13."

"The U.S. dollar touched as low as 78.37 U.S. cents against the New Zealand dollar, the weakest since the nation's currency was allowed by the central bank to trade freely in March 1985. The U.S. currency also dropped to as low as 85.99 U.S. cents, the weakest since February 1989, versus the Australian dollar."

"The decline in the dollar 'reflects the market's uncertainty about where the U.S. economy goes in the second half of the year and where Fed policy goes,' said Robert Sinche, head of currency strategy at Bank of America Corp. in New York. It is 'probably related to the renewed uncertainty about the housing market, particularly the impact of subprime activities as we go to the second half of the year.'"

"'Geopolitical risk causes some jitters and people are cutting back risks,' said Naomi Fink, chief North American currency strategist at BNP Paribas Securities SA in New York. 'But carry trade is not dead yet. There is still a lack of conviction for an unwinding of the carry trade as shown' in the yen's decline versus the Australian and New Zealand currencies."

From MarketWatch. "Gold futures rose more than $8 an ounce Monday to close near their highest level in almost two weeks as terrorism concerns and a weaker U.S. dollar helped boost the metal's appeal as an investment hedge."

"'All the ingredients for a rally were there but nothing happened until today,' said Julian Phillips, an analyst at GoldForecaster.com."

"'The dollar is falling fast now, the oil price is sitting on $70 and looks like staying there or rising. Gold had to run up, despite any efforts to hold it down,' he said. 'What is clear now is that there is force to this rise,' he said. 'If more consolidation occurs, it will simply power up this rise.'"

"Gold's benchmark August contract gained 1.3%, or $8.30, to finish at $659.20 an ounce on the New York Mercantile Exchange, its strongest closing level since June 20. Gold futures gained 50 cents an ounce on Friday but finished last month with a loss of 2.4%."

"Other metals prices finished higher along with gold Monday. Silver for September delivery rose 26.7 cents to close at $12.74 an ounce. October platinum also edged up by $8.60 to end at $1,295.10 an ounce, while September palladium closed at $371.40 an ounce, up $2.90."

"'Although we have the euro moving back towards record levels against the greenback, the U.S. dollar itself is nearing some terrific technical support so it is hard to say the move will continue from here,' Spina said. 'Gold and silver are also nearing technical resistances so one must watch those levels quite carefully, too,' so 'until the markets show me they are ready to move through these key levels, I remain vigilant, and most importantly, patient with gold and silver,' he said."

From Reuters. "Asian countries were warned on Monday against complacency that another Asian financial crisis could not hit the region. 'It is important that we make sure that we do not become overconfident that a crisis can never happen,' said Thailand's finance minister, Chalongphob Sussangkarn."

"He was speaking at a forum in Manila to mark the 10th anniversary of the Asian financial crisis, which was triggered by a large outflow of capital toppling an overvalued Thai baht."

"The president of the Asian Development Bank said there was potential market volatility from large inflows of capital. 'We have the potential for more bouts of financial market volatility,' Haruhiko Kuroda said."

"'Capital flows have rammed up significantly over the past several years as increased global liquidity, Asia's economic resurgence and dynamism, along with the search for yields has drawn in and out large amounts of investment capital.' Asian economies have accumulated huge foreign reserves to cushion the impact of sudden withdrawal of massive capital."

"The devaluation of the Thai baht on July 2, 1997 triggered a sharp fall in asset prices and currencies across the region. Millions of people fell below the poverty line and the crisis also led to upheaval in some countries, such as Indonesia and Thailand."

Gold Will Remain Vulnerable

2007-06-29T13:49:00.000-07:00

MarketWatch reports on the markets. "Gold futures closed higher Friday, underpinned by a rally in crude-oil prices and concerns about inflation, but prices finished lower for the week, month and quarter as traders continued to gauge investment demand for the metal. 'The metal really needs to regain all the investor confidence it can as the second half of the year gets under way,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Gold for August delivery gained 50 cents to close at $650.90 an ounce on the New York Mercantile Exchange. The contract gained $5.60 on Thursday. But it's down 0.9% from a week ago, when closed at $657. It's down 2.4% from last month's close of $666.70, and it lost 3.6% from the $675.20 level at the end of March."

"But 'the new language' in (the FOMC) statement 'suggests the central bank, which has kept rates unchanged for a year, is nowhere near contemplating a reduction,' said Mark O'Byrne, director at Gold & Silver Investments Ltd., adding that the Committee said inflation remains their 'predominant' concern, which disappointed some traders who anticipated softer FOMC wording."

"'The increase in inflation is obviously bullish for gold,' said O'Byrne.
Also, gold bullion has largely been underpinned by its 200-day moving average of $641.90 since mid-January, he said."

"Gold likely saw support coming from 'month-end, quarter-end and half-yearly dynamics, strikes at copper mines around the world and potential gold and silver mine strikes in [South Africa], a likely pause in the unwind of the CDO [collateralized debt obligation] trade and the fizzling of non-commercial selling,' according to Zachary Oxman, a senior trader at Wisdom Financial."

"'For the moment, sub-$650 should be viewed as a good buying opportunity by physical players as well as investors,' said James Moore, analyst at TheBullionDesk.com, in a research report. 'However, as we move into the summer, a time when physical buying traditionally slows, gold will remain vulnerable to further bouts of weakness.'"

"Offering support to the precious metals Friday, crude-oil futures rose sharply, trading above $70 a barrel, supported by supply concerns. Trading in currencies likely added to gold's gains. The dollar fell against both the euro and yen."

"Other metals prices traded on a mixed note. September palladium closed down 20 cents at $368.50 an ounce. It ended the month 1.3% lower, but it was 1.6% above last quarter's close of $362.75. October platinum rose 50 cents to close at $1,286.50 an ounce, finished below last month's close of $1,295.50, but 2.1% higher for the quarter."

"September silver fell by 3.2 cents to end at $12.473 an ounce. It was more than $1 lower for the month and quarter."

"Meanwhile, it appears the Fed is 'more ready to lean on the 'hike' button if it perceives continued core inflation levels that remain above its 'comfort zone' targets,' said Nadler. 'While August is too early to call, the balance appears to be tipping ever so slightly to the rate increase side,' he said. 'It would take a second-quarter GDP as bad or worse than [the first quarter] to push the Fed into the opposite direction on rates, and no one we spoke to expects that [first-quarter] number to be seen once again.'"

"Gold 'has to prove itself on its own merits and react in a classic manner to declining stocks, rising oil, negative geopolitics, factors to which it frequently seemed to pay little attention thus far this year during its decline from $694,' said Nadler."

"Oxman pointed out that another round of liquidation from the gold exchange-traded fund 'seems to suggest that investors are shifting assets away from gold and other metals as the picture seems to be short-term supported, but longer-term bearish,' he said."

"Oxman expects the gold market to see a technical fall to the mid- to high $500s within the next three to six months. 'The fundamental picture is also starting to falter a bit, which gives me some near-term trepidation in terms of holding long gold,' he said."

US$ Stronger On FOMC Meeting

2007-06-28T14:45:00.000-07:00

Bloomberg reports on currencies. "The dollar rose against the yen and euro as the Federal Reserve kept its benchmark interest rate at 5.25 percent and said inflation is a risk to the economy. The Fed's statement that inflation is the 'predominant' concern reduced speculation the central bank will cut borrowing costs later this year. The Fed has held rates unchanged for eight straight meetings, after raising its target to the current level a year ago."

"'The statement completely shut the door for a rate cut this year,' said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments in Boston. 'The statement provides some support for a resilient dollar.'"

"The dollar rose to 123.20 yen at 4 p.m. in New York, from 122.83 yesterday. The U.S. currency reached 124.13 yen on June 22, the strongest since December 2002. The dollar advanced to $1.3436 per euro from $1.3453 yesterday, and has rebounded from an all-time low of $1.3681 per euro touched on April 27."

"'Readings on core inflation have improved modestly in recent months,' the Federal Open Market Committee said in a statement. 'However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated.'"

"'There is a tad of dollar optimism,' said Kathy Lien, chief currency strategist at DailyFX.com in New York. 'There is little sign that they will relax their guard on inflation. There is no chance the Fed will cut rates this year.'"

"Yields on benchmark 10-year Treasury notes climbed to the highest in five years this month, pushing the dollar to the strongest since March versus the euro, as traders added to bets policy makers would raise borrowing costs."

"Signs the U.S. housing market is still slumping then undermined the dollar's rally and fed demand for Treasuries."

"The yen's drop began earlier today as investors resumed their search for higher yields outside Japan through so-called carry trades. Japan's yen fell against all Group of 10 currencies as Bank of Japan Governor Toshihiko Fukui said the central bank aims to adjust interest rates gradually."

"The yen weakened after a report from the Ministry of Economy, Trade and Industry in Tokyo showed Japanese industrial production fell 0.4 percent in May. The median estimate of economists surveyed by Bloomberg News was for a 0.9 percent increase."

"Japan's consumer prices may have fallen 0.1 percent last month from a year earlier, after being unchanged in April, according to the median forecast of economists surveyed by Bloomberg News. The government releases the data tomorrow in Tokyo."

"'We have passed the worst of the market jitters and are starting to return to the normal pattern of people seeking higher returns in risky assets, and that will weaken the yen,' said Nicholas Bennenbroek, head of currency research in New York at Wells Fargo & Co."

From MarketWatch. "Gold futures closed with a nearly $6-an-ounce gain Thursday, with a weaker dollar and strong oil prices helping the market break a three-session losing streak that's driven prices lower by nearly 2%. Prices extended their gains into the electronic trading session late Thursday following a decision by the Federal Reserve to keep interest rates unchanged at 5.25%."

"Gold for August delivery gained $5.60 to close at $650.40 an ounce on the New York Mercantile Exchange. In electronic trading shortly after the Fed announcement, the contract moved a bit higher to stand at $651.20 an ounce. The contract closed at $644.80 on Wednesday, its lowest level since mid-January, after tallying a loss of $12.20 in three sessions."

"'Supported by a hefty surge in crude-oil prices...a stabilizing equity market, and a mild retrenchment in the U.S. dollar...gold was seen as a reasonable short-term play by a number bargain hunters brave enough to enter the market on the day of Fed speak and after several declining sessions of quite some significance,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Earlier Thursday, gold prices had climbed on 'bargain hunting and physical buying after the sell-off earlier in the week,' said analysts at Action Economics.
'Gold has traditionally been seen as a safe haven for investors, but more recently seems to have been put in the same category as other commodities and risky investments,' they said in a research note."

"Lately, traders, jittery over conditions in the U.S. and other economies, have been selling commodities in favor of safer assets such as Treasurys."

""Zachary Oxman, a senior trader at Wisdom Financial, said he believes that gold has, overall, been following the commodities markets as a whole, which has been seeing downside moves off the collateralized debt obligations securities, or CDOs, and overall market weakness."

"The largest liquidation for commodities 'has come off the back of a descent size unwinding of the carry trade as the [yen] and [Australian dollar] moved significantly higher yesterday off the [Bank of Japan] jawboning their currency higher,' he said."

"Other metals prices posted gains along with gold Thursday. September silver rose 16.9 cents, or 1.4%, to close at $12.379 an ounce, July platinum gained 50 cents to end at $1,276 an ounce and September palladium rose 85 cents to close at $368.70 an ounce."

Gold In "Summer Doldrums"

2007-06-27T14:42:00.000-07:00

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 Forex.com. '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 GoldSeek.com. '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 TheBullionDesk.com."

"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 GoldForecaster.com."

"'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."

Gold Falls On Hawkish Rate Talk

2007-06-26T14:42:00.000-07:00

Reuters reports on currencies. "The yen rose against the dollar and euro for a second straight day on Tuesday, as worries about fallout in the U.S. subprime mortgage sector prompted investors to unwind some trades funded by low rates in the Japanese currency. Volatile stock markets, in part stemming from concerns about the exposure of U.S. lenders to subprime mortgages in a declining housing market, have prompted some reduction in risk appetite around the world."

"Further helping the yen's cause was a warning from Japanese Finance Minister Koji Omi about the weakness of the country's currency."

"'The risk appetite in the market is starting to wane a little bit given anecdotal evidence of what is going on in hedge funds and equities,' said Joe Francomano, vice president for foreign exchange at Erste Bank in New York."

"'We're into the summer months, we have a U.S. holiday next week and we've got the quarter-end. This a pretty good opportunity right now to take some profits off the table especially in carry trades,' he added."

"In early afternoon New York trade, the dollar was down 0.2 percent against the yen at 123.37. It fell as low as 122.81, its lowest in about two weeks. The euro slipped 0.2 percent against the yen to 166.15, well off a record high hit last week."

"Foreign exchange officials from South Korea and New Zealand also said they were worried about the harm caused by the yen's weakness, compounding concerns about carry trades."

"Against the dollar, the euro was little changed on the day at $1.3468. The dollar was also little changed at 1.2282 Swiss francs. Sterling edged up against the dollar at 1.9989."

"Finance Minister Omi's comments follow similar warnings from the Bank for International Settlements in its annual report on Sunday that there was 'clearly something anomalous' about the yen's recent weakness."

"Adding to market talk around the yen, the International Monetary Fund's chief economist, Simon Johnson, said building global inflation pressures should provide room for the Bank of Japan to raise interest rates, which in turn would gradually reduce the yen carry trade."

"In other markets, key precious metals such as gold and silver -- the recipient of some carry trades, were weaker on Tuesday amid declining risk appetite and expectations of higher global interest rates. Oil prices were also down, tracking weakness in other commodities."

From MarketWatch. "Gold futures dropped more than $9 an ounce Tuesday to close at their lowest level since mid-January, and silver futures sank to their weakest level in eight months, pressured by the options expiration on the July contracts and weaker oil prices as traders awaited a Federal Reserve decision on interest rates due later this week."

"'This erosion was in the making for some time now [certainly since the scary June 8 drop],' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'People ignored the subtext of risk aversion becoming trendy, and now they are suffering the consequences. Technicals have converged with short-term fundamentals to yield a pivotal tone change in the market.'"

"Gold for August delivery closed 1.4%, or $9.40, lower at $645.30 an ounce on the New York Mercantile Exchange after tapping a low of $642.80. It is trading at the contract's weakest intraday level since Jan. 16."

"Silver futures followed suit, with its July contract dropping to a low of $12.15 an ounce, its weakest intraday level since Oct. 25, 2006. It closed down 4.6%, or 59.7 cents, at $12.28."

"'Expectations of a more hawkish stance on interest rates by the world's central banks looks set to keep gold on a back footing in the coming sessions,' said James Moore, analyst at TheBullionDesk.com.

"The expiration of options on the July gold and silver contracts in New York Tuesday was also likely contributing to the liquidation in the metals, according to Mark O'Byrne, director at Gold & Silver Investments Ltd."

"The Federal Reserve will hold a meeting on Wednesday and Thursday, with its decision on interest rates expected on Thursday. The Fed is widely expected to leave rates on hold, but investors will be eager to see if the committee's accompanying statement hints at whether rate increases or reductions could be in store in coming months."

"There is lots of talk of a hawkish stance from the Fed [and] higher rates are negative for gold, said Charles Nedoss, an analyst at Peak Trading Group. And 'we are through many technical levels, it's going to take a while for the dust to settle.'"

"Other metals prices declined. July platinum fell $23.40, or 1.8%, to close at $1,268.30 an ounce and September palladium closed down $4.35 to end at $371 an ounce."

"For now, 'gold remains in a tight range between $640 and $670 and support is at $640,' said Gold & Silver Investments Ltd.'s O'Byrne. 'Any liquidation below $640 is likely to be brief and shallow as the fundamentals will reassert themselves and there is strong physical demand internationally at these levels,' he said."

"Steven Jon Kaplan, a senior editor at TrueContrarian.com, points out that the strongest physical buying of gold comes from countries such as India, where most of the buying is done for festivals, holidays, and other special religious and family events."

"But 'there are very few such holidays scheduled between now and September, so I think it is likely that gold will continue to decline for at least the next two months,' he said. Kaplan expects gold prices to fall below $600 an ounce within a few months."

"Overall, the gold market has been seeing a couple of 'changing investment psychology factors' since at least this past February, according Kitco's Nadler. 'Gold pundits have not considered large-scale situations, such as severe stock market setbacks, in any other context than an immediate ostensible run-up in gold prices,' he said."

"But 'in the aftermath of such events, for investors who are trying to meet margin calls [which have no patience for tardiness], the precious metals portion of a portfolio is among the first to be liquidated,' he explained. 'Such a phenomenon should not come as a surprise to those who signed on to the concept of gold as an insurance hedge to be placed in one's portfolio precisely in order to mitigate losses incurred in other sectors,' he said. 'Gold is bought for the 'rainy day.' Well, those rainy days are now here.'"

US$ May Need Adjustment Process

2007-06-25T14:10:00.000-07:00

AFX News reports on the BIS. "The Bank for International Settlements said the yen's decline is 'anomalous' and warned investors that the currency could rise sharply once market sentiment shifts. 'There is clearly something anomalous in the ongoing decline in the external value of the yen,' the BIS said in its annual report."

"'Tighter monetary policies would help to redress this situation, but the underlying problem seems to be a too firm conviction on the part of investors that the yen will not be allowed to strengthen in any significant way,' it said."

"The BIS said investors should remember that the yen rose 10 pct against the dollar in the space of 10 days in 1998, inflicting sizeable losses on those involved in the carry trade business."

"It said there should also be a greater willingness to let the yuan rise, although it recognised that this will pose considerable internal challenges to the Chinese authorities."

"The dollar may also need to decline further, it said. 'If global trade imbalances need to be resolved, a further and perhaps substantial decline in the dollar might be part of the adjustment process,' it said."

"The BIS said the structure of the economy in Japan, China and the US is fuelling global current account imbalances. 'The problem at the moment is that the allocation of resources in all three countries has been moving resolutely in the wrong direction,' it said."

"It said mounting global inflation pressures and persistent current account imbalances would seem to call for further interest rate increases. In particular, the Bank of Japan should continue raising rates now that the potential for a dangerous deflationary spiral has been much reduced."

"'The fact that the economy seems to be growing robustly, and that capital outflows from Japan might be having unwelcome effects elsewhere in the world, provides further arguments for supporting the suggestion that the Bank of Japan should continue to normalise interest rates gradually,' it said."

"Prices of virtually all assets have been on an upward trend since the middle of 2003 and the market reaction to good news may now have become 'irrationally exuberant,' it said."

"'Apparently, the observed resilience of markets to successive shocks has increasingly encouraged the view that lower prices constitute a buying opportunity. The danger with such endogenous market processes is that they can, indeed must, eventually go into reverse if the fundamentals have been overpriced,' it said."

"The market volatility of May-June 2006 and Feb 2007 is a reminder that markets can be unsettled by negative surprises on inflation and growth, it said. 'While on these occasions there was no pass-through to the real economy, such an impact cannot be ruled out in the future,' it said."

From Reuters. "Gold prices slipped on Monday on bearish sentiment, but closed off session lows as crude oil prices recovered, and trade was quiet ahead of a slew of economic indicators scheduled this week, dealers said. 'As far as the metals are concerned, it's really lackluster,' Jonathan Jossen, an independent trader, said from the COMEX floor in New York."

"Spot gold fell as low as $648.70 an ounce and was quoted at $650.60/651.20 by 3:21 p.m. EDT, against $653.60/655.10 late in New York on Friday. Gold for August delivery on the New York Mercantile Exchange's COMEX division settled down $2.30 at $654.70 an ounce, dealing from $651.60 to $657.70."

"Jossen said investor sentiment was largely bearish because of a host of factors including a higher interest-rate environment, weaker oil prices and sagging stock markets."

"Dealers said the market would watch the heavy U.S. economic calendar this week, which includes key housing, consumer and gross domestic product data and the Federal Reserve's meeting."

"Jossen said volume was light ahead of the busy economic calendar this week. New home sales and consumer confidence reports are due on Tuesday, with durable goods orders data on Wednesday, a gross domestic product report and the Federal Reserve's rate-setting decision on Thursday. Personal income data is to be released on Friday."

"Goldman Sachs said in a research note it had reduced its forecast for gold prices over the next year by $25 to $725 following a more neutral stance on the dollar. 'However, GS Research remains bullish on gold prices despite a relatively modest dollar depreciation forecast. They believe gold is currently undervalued and physical demand is likely to remain supportive,' the investment bank said."

"In other metals, platinum fell to a one-week low of $1,277 an ounce after rising as high as $1,297. It was last quoted at $1,280/1,284, versus $1,296/1,301 late in New York on Friday, when it rallied to a two-week high of $1,301 on the risk of supply disruptions in South Africa."

"Silver was at $12.855/$12.885, versus $13.04/$13.08 its previous finish late in the U.S. market, while palladium was down $5.50 an ounce at $367.50/$371.50."

A Dollar And Bond Yield Vigil

2007-06-22T14:18:00.000-07:00

The Associated Press reports on currencies. "The dollar fell against the euro and British pound Friday ahead of a week loaded with economic data, while the U.S. currency hit a 4 1/2-year high against the yen. The 13-nation euro bought $1.3466 in afternoon New York trading, up from $1.3387 late Thursday."

"Meanwhile, the British pound moved closer to the $2 mark, rising to $1.9994 from $1.9922. The pound broke through $2 in April for the first time since the early 1980s."

"The dollar climbed as high as 124.12 yen before backing down to 123.87 yen in afternoon trading. The yen also plunged to a record low against the euro, with traders borrowing the Japanese currency at its lower interest rate to invest in better yielding assets overseas. Returning those funds to Japan would lift the yen."

"'It was a light week on economic data in the States. So, there was some trepidation in buying the dollar going into next week, which is heavy on data,' said Michael Woolfolk, a senior currency analyst at the Bank of New York."

"The Federal Reserve meets Wednesday and Thursday to discuss interest rates. Most analysts expect the central bank to keep rates unchanged at 5.25 percent as it has for the past year. At the same time, analysts expect the European Central Bank and other foreign central banks to hike their interest rates during the third quarter, which would weigh heavily on the dollar."

"In other trading, the dollar bought 1.2287 Swiss francs, down from 1.2418 late Thursday, and 1.0690 Canadian dollars, down from 1.0759."

MarketWatch reports on the metals. "Gold futures closed higher Friday, but after losing more than $10 an ounce during a two-session losing streak, they finished the week with a modest loss. 'Traders remained on a dollar and bond yield vigil, as bullion market conditions remain on the fragile side,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Gold for August delivery closed up $2.80 at $657 an ounce on the New York Mercantile Exchange. The contract lost $10.50 between Tuesday and Thursday, so it fell $1.70, or 0.3%, from last Friday's closing price of $658.70."

"Gold feels 'very listless,' said Zachary Oxman, a senior trader at Wisdom Financial. 'The trade seems to be bouncing a bit off of yesterday's strong sell off [on] the back of a stronger dollar, rising yields and a stronger-than-expected Philly Fed number,' he said." The metals market saw 'a good amount of buyers looking to pick up gold around $654.50 or so,' he said."

"'Market attention is now also shifting towards next week's FOMC meeting and the expectation that participants will be able to read the tea leaves within the Fed' statements,'" said Nadler. The Federal Open Market Committee, which sets interest rates, with meet on June 27 and 28."

"On the currency markets Friday, the dollar gave ground against the euro, which failed to benefit from weaker-than-forecast data on German business sentiment.
The Japanese yen fell to its weakest level against the greenback in more than 4 1/2 years, as reflected in so-called carry trades. Meanwhile, the euro touched another record high against the yen."

"Also on Nymex, July silver extended its losing streak to three sessions, losing 7 cents Friday to close at $13.02 an ounce. It lost 1.8% for the week.
July copper edged 2.1 cent lower to finish at $3.382 a pound. That was 1.1% below last Friday's closing level."

"July platinum rose $9 to close at $1,308 an ounce, finishing $22 higher for the week, while September palladium reached $381.85 an ounce, closing $2.60 higher for the session, 2.3% above last week's close of $373.50."

"'What hasn't restarted are the negotiations between the platinum producers and mining unions in South Africa,' Neal Ryan, director of economic research at Blanchard, said. 'Complaints have been lodged in that industry and the unions are moving closer to strikes versus individual companies in the coming week.'"

"So, 'while the gold sector has gotten a brief reprieve in the next week, the platinum industry in South Africa has not,' he said. 'A strike in the [platinum group metals] market could have major implications on supply within the market as 75%-80% of platinum supply is mined in South Africa.'"

Gold "Hanging In Limbo"

2007-06-21T14:58:00.000-07:00

The Associated Press reports on currencies. "The dollar hit a fresh high against the yen Thursday as investors sold the low-yielding Japanese currency for better returns off the greenback. The yen fell to 123.75 before recovering to 123.67, remaining above its December 2002 high of 123.13 yen against the dollar."

"The yen has come under new pressure after Bank of Japan Governor Toshihiko Fukui indicated that interest rates, currently at 0.25 percent, are not likely to rise at next month's meeting of the central bank."

"The 13-nation euro fell to $1.3387 in late New York trading from $1.3418 late Wednesday. The British pound dipped to $1.9922 from $1.9947."

"Also Thursday, encouraging U.S. economic data offset an unexpected rise in jobless claims to further boost the dollar. The Philadelphia Federal Reserve reported that regional manufacturing grew in June at the strongest rate since April 2005. The bank's index of regional manufacturing activity jumped to 18 from 4.2 in May."

"The Conference Board's May index of leading economic indicators predicted the U.S. economy will expand modestly in the coming months, and economists said jobs should continue to be plentiful, despite an unexpected surge in jobless claims last week."

"The dollar held onto gains made off Wednesday's soaring bond yields, which traded more narrowly Thursday. The yield on the benchmark 10-year Treasury rose to 5.17 percent from 5.15 late Wednesday.

The rising yields have fueled concerns about a U.S. interest-rate hike since passing 5 percent last week for the first time since last summer. Economists still predict that the Federal Reserve will leave rates unchanged when it meets next week."

"In other New York trading, the dollar bought 1.0759 Canadian dollars, up from 1.0662, and 1.2418 Swiss francs, rising from 1.2367."

From Bloomberg. "The New Zealand dollar may rise to a 22-year high as investors test the central bank's currency intervention policy and are attracted to the nation's higher- yielding assets. The currency yesterday rose to its highest since being allowed to trade freely in 1985, and above the level it reached before the central bank sold New Zealand dollars June 11, calling the gains 'unjustified.'"

"The currency has gained 23 percent against the U.S. dollar the past 12 months, as a record 8 percent benchmark rate lures investors to the country's debt."

"'It could test higher as the market tests the central bank out and sees if it will respond,' said Alan Ruskin, chief international strategist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. 'And the whole issue of yield is at the core of these gains.'"

"The currency bought 76.31 U.S. cents at 9:30 a.m. in Wellington from 76.18 cents in late Asian trading yesterday when it rose as high as 76.57 cents. The local dollar may exceed that level 'in the next couple of days,' Ruskin said. 'There's no clear top now.'"

"New Zealand rates are 2.75 percentage points more than the key U.S. borrowing cost and 7.5 percentage points higher than Japan's benchmark rate, the lowest of the major economies."

"The New Zealand dollar fell as much as 1.8 percent after the bank's June 11 sales, the first intervention announced by the central bank since it set up a fund for stabilizing the currency in 1988."

"New Zealand's dollar also gained against Japan's currency, trading at 94.42 yen, from 94.19 late in Asia yesterday. It reached 94.69 yen yesterday, the highest since October 1987. So-called carry trades, where investors borrow cheaply in yen to invest in higher-yielding assets elsewhere, have buoyed the New Zealand dollar 33 percent against the yen since the beginning of the year."

"Individual Japanese investors, who have set up 600,000 accounts to trade currency with borrowed yen, stepped up purchases of the New Zealand dollar after the Reserve Bank said it sold the currency. New Zealand government bonds were unchanged. The yield on the benchmark 10-year note remained steady at 6.78 percent, according to data compiled by Bloomberg."

From Reuters. "U.S. gold futures finished with moderate losses on Thursday after probing one-week lows, with speculative sellers able to push through technical support levels amid dollar strength and longer-dated U.S. interest rate increases, analysts said."

"'It is really all interest rate driven right now, which obviously means dollar driven. The euro looks like it might roll over and have the dollar strengthen again," said Frank McGhee, head precious metals trader at Integrated Brokerage Services."

"Most-active gold futures for August on the COMEX division of the New York Mercantile Exchange settled $5.80 lower at $654.20 an ounce, up from the session low of $650.50, a level dating back to June 14, though down from the $659.50 top. On Tuesday, it set a $665.80 high, last seen on June 8."

"'The fundamental point is that we've had a true realignment of interest rates with the (U.S. Treasury) 10-year note (yield) between 5.10 and 5.25 percent. That puts a very significant downward pressure on the euro, upward pressure on the dollar, which is very negative for gold,' said McGhee."

"Patrick Fearon, precious metals analyst at A.G. Edwards & Sons said a dramatic rise in longer yields at some point could prolong the housing slump, complicate things in the auto sector, weigh on investment and consumer spending, which, added together, would eventually bring down inflation."

"At the same time, analysts said a clear technical pattern set up a more vulnerable outlook for gold, though it currently remained in its $650 to $665 per ounce consolidation range. McGhee explained that gold's breakdown on Thursday, before extending this week's rally up to the $670 upside channel target, made it vulnerable to more selling."

'"Right now we're hanging in limbo. If we hold the $648 to $650 range we've got a little bit of technical support that can take us back to test the $665 to $668 area,' he said."

"If the dollar continues to rally against the euro, however, he said he sees a significant selling wave taking August gold futures down to the $635 to $640 area."

"Spot gold steadied around $651.30/652.80 an ounce late Thursday, off $654.50/656.0 an ounce on Wednesday, but well above the $647.50 session low dating back to June 14. On Tuesday, it set a 10-day high $661.40 an ounce. London banks set the afternoon gold fix at $650.50."

"COMEX July silver lost 16.0 cents to end at $13.09 an ounce, but slid to a low at $12.97 from the $13.2650 high. Spot silver fell to $13.08/13.12 an ounce at Thursday's end, down from $13.21/3.25 an ounce in late Wednesday trade. London silver was fixed at $13.17 an ounce."

"NYMEX July platinum lost $1.80 to $1,299.0 an ounce. Spot platinum ease to $1,288/1,292 an ounce. September palladium turned down $0.55 to $379.35 an ounce. Spot palladium edged up to $374.0/377.0."

"A New Correlation" For Gold, Yields

2007-06-20T15:04:00.000-07:00

The Associated Press reports on currencies. "Soaring U.S. bond yields boosted the dollar against the yen and euro Wednesday as worries resurfaced about a Federal Reserve interest rate hike. The dollar approached a 4 1/2 year high against the Japanese yen, climbing to 123.67 Wednesday before easing back to 123.61 yen, according to Thomson Financial."

"The euro fell to $1.3400 in late New York trading from a high of $1.3436, reached earlier in the day after a new report showed an unexpected increase in producer prices in Germany."

"The dollar weakened against the British pound, which rose to $1.9929 from $1.9869 after minutes from the latest Bank of England meeting showed that its Monetary Policy Committee voted 5-4 to keep interest rates unchanged at 5.5 percent earlier this month."

"Concerns about a U.S. interest-rate hike were renewed Wednesday on surging U.S. bond yields. The 10-year Treasury note's yield climbed to 5.15 percent by late afternoon from 5.09 percent late Tuesday.

"In other trading, the dollar bought 1.0663 Canadian dollars, up from 1.0616, and 1.2375 Swiss francs, down slightly from 1.2404."

From MarketWatch. "Gold futures fell almost $5 an ounce Wednesday, closing lower for the first time in five sessions as rising bond yields, the stronger dollar and declining crude-oil prices combined to squeeze demand for the precious metal. Gold for August delivery shed $4.70, or 0.7%, to close at $660 an ounce on the New York Mercantile Exchange."

"The contract broke a winning streak that had spanned four sessions and added $12 to the benchmark price."

"'After four sustained days of winning sessions, gold prices were spooked once again by rising bond yields, and retreated to 'safer' ground near the $655.00 area,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'A new correlation is emerging between gold and bond yields, although the dollar and its relative strength are still at the root of the equation,' Nadler said."

"'While yesterday's gains [in gold] were encouraging, further rallies are likely to rely on ongoing pressure on the dollar and strong energy prices,' said James Moore, analyst at TheBullionDesk.com. 'For the moment resistance is expected toward the 100-day moving average at $665.45, although clearance should generate some additional momentum for gold to target $675,' he said."

"Crude-oil futures fell Wednesday, after the Energy Department reported big increases in crude-oil and gasoline stocks. Crude supplies jumped 6.9 million barrels for the week ended June 15, while motor gasoline supplies also rose 1.8 million barrels to 203.3 million."

"Among the metals, silver prices followed gold lower, with the July contract losing 7.5 cents to close at $13.25 an ounce. September palladium added $3.40 to close at $379.90 an ounce and July platinum gained $2.30 to end at $1,300.80 an ounce."

"'Supply concerns continued to underpin platinum as the outcome of wage negotiations between the South African unions and mine companies remain uncertain,' said Mark O'Byrne, a director at Gold & Silver Investments Ltd. 'Should negotiations fail and strike action commence there could be a sharp upward adjustment in platinum prices,' O'Byrne said."

Gold, Currencies Tracking Interest Rates

2007-06-19T15:00:00.000-07:00

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."

Dollar/Yen Remains A One-Way Ticket

2007-06-18T14:12:00.000-07:00

Reuters reports on currencies. "The yen fell to a lifetime low against the euro on Monday and hit a four-and-a-half-year trough against the dollar on a growing view that Japanese interest-rate rises will be outpaced by other central banks. But the dollar edged lower against the euro and sterling, tracking a slide in U.S. government bond yields, which retreated after a rise to five-year highs last week."

"The yen has declined across the board since Bank of Japan governor Toshihiko Fukui last week all but doused expectations that the bank would raise interest rates in July. 'Dollar/yen remains a one-way ticket, euro/yen is setting new highs, and the wide interest rate gap means this will remain a theme throughout the summer,' said Greg Salvaggio, senior currency strategist at Tempus Consulting."

"The dollar hit a fresh four-and-a-half-year high above 123.70 yen for the fourth straight session. Meanwhile, the euro surged to a record high of 165.82 yen and a nine-year high of 1.6664 Swiss francs on electronic trading platform EBS."

"The dollar, however, lost ground against the euro, which rose as high as $1.3419 in tandem with falling U.S. bond yields. Bond prices have edged higher since an unexpectedly tame reading in U.S. core consumer prices on Friday."

"The dollar has rallied since early May, tracking a rise in Treasury bond yields to 5-year highs. Over the past three months a series of solid U.S. economic data has led investors to completely wipe out expectations that the Federal Reserve would deliver at least two quarter-point rate cuts this year."

From MarketWatch. "Gold futures closed higher Monday, building off last week's gains to close near the $660 level as traders eyed movements in the U.S. dollar and continued to gauge inflation concerns and the likelihood of an interest-rate hike by the Federal Reserve."

"Gold for August delivery climbed $1.20 to close at $659.90 an ounce on the New York Mercantile Exchange, marking its strongest closing level since June 7. The benchmark contract, which climbed as high as $662.50 during Monday's trading session, rose $2.80 an ounce last Friday to score a total gain of $8.40 for the week."

"'The precious complex staged a modest rebound Friday as tame CPI data curbed expectation for the Fed to hike interest rates, leading the dollar to give back some of its recent gains,' said James Moore, an analyst at TheBullionDesk.com."

"'Range trading appears to be taking over and with no impact news coming our way for some time, gold may meander from $650 to $660 on a short-term basis,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'Retail investor apathy continues to be a feature, as many are uncertain the worst is over, and the upside targets are not only fairly firm but quite visible above current levels.'"

"'The $665 point may emerge as a decision-making trigger for either side of the participating trading crowd,' he said."

"For now, it's a 'relatively quiet week in terms of U.S. economic data, leaving key housing statistics as the main focus of attention,' said Mark O'Byrne, director at Gold & Silver Investments Ltd. 'The continuing irrational exuberance and huge complacency in financial markets will be challenged by the data, which is expected to be poor,' he said."

"The outlook for U.S. home building is the worst in 16 years, the National Association of Home Builders reported Monday. The builders' housing index fell by 2 points to 28 points in June. The Commerce Department will release its latest report on May housing starts and building permits on Tuesday."

"Meanwhile, a rally in crude prices, and therefore concerns about high energy prices, likely contributed to gold's strength Monday. The benchmark crude contract climbed past $69 a barrel to a level it hasn't seen since September."

"Rounding out the metals action, July silver fell by 2.5 cents to close at $13.235 an ounce, falling from a high of $13.39. But September palladium rose $1.50 to end at $375 an ounce and July platinum added $13.50, or 1.1%, to close at $1,299.50 an ounce."

"'One of the largest platinum mines based in South Africa has gone offline for a week due to some safety concerns and mining union, NUM, and Implats continue to head toward a stalemate in negotiations as Implats has not offered a new wage increase,' according to Neal Ryan, director of economic research at Blanchard & Co. 'NUM filed for a grievance with the government, the next move in beginning an official strike.'"

The Attack On $700

2007-06-15T14:38:00.000-07:00

The Associated Press reports on currencies. "The dollar slid against the euro Friday after U.S. data showed easing inflation, but it reached a fresh high against the yen as chances diminished for an interest rate hike in Japan. The euro rose to $1.3378 in late New York trading from $1.3307 the day before."

"The dollar climbed to 123.46 yen from 122.97 yen after the Bank of Japan left its benchmark lending rate unchanged at 0.5 percent and suggested a July rate hike was unlikely. On Thursday, the dollar broke through its December 2002 high of 123.13 yen ahead of the expected rate decision."

"The dollar weakened after the U.S. Labor Department reported that its Consumer Price Index shot up in May at the fastest pace in 20 months, while gas prices jumped. The reading eased concerns about an interest rate hike, fueled last week when the benchmark 10-year Treasury note passed 5 percent for the first time since last summer."

"In other economic news, the U.S. Commerce Department said that the current account deficit, the broadest measure of foreign trade, increased to $192.6 billion (€144.66 billion) in the January-to-March period from $187.9 billion (€141.13 billion) in the fourth quarter — slightly below what analysts expected."

Also Friday, the dollar bought 1.0685 Canadian dollars, barely changed from 1.0684, and 1.2428 Swiss francs, down from 1.2468. The British pound rose to $1.9751 from $1.9694 late Thursday."

From MarketWatch. "Gold's moves have been tormenting traders even more than usual lately. For the optimists, $700 is just a stone's throw away. To the pessimists, however, it would require quite a powerful throwing arm."

"The August contract for gold futures climbed past $700 nearly nine weeks ago, and, while that prompted renewed calls among some observers for $800 and beyond, gold has failed at every attempt since to return to that level."

"And a week ago the price touched a three-month low under $649 an ounce. 'Right now, the time window has shifted for the price to move past the $700 barrier,' said Peter Spina, an analyst at GoldSeek.com. 'I would not feel comfortable betting against gold at these levels, although it does appear the rally will take a summer vacation.'"

"Gold sales from central banks, a seasonal decline in demand, strengthening in the U.S. dollar and a rise in Treasury yields are some of the factors that have come into play, putting pressure on gold prices, analysts said."

"'The seasonal influences alongside a bout of heavy gold selling from the Spanish central bank capped gold at a high point in the annual pattern of demand for physical gold,' said Julian Phillips, an analyst at GoldForecaster.com, a sister site to GoldSeek.com. 'Investment demand retreated in the face of this situation, so stunting the attack on $700,' Phillips said."

"And the metal's market has suffered amid 'dramatic upside moves in U.S. Treasury yields,' said Zachary Oxman, a senior trader at Wisdom Financial. 'With bond rates pushing through resistance on the long end of the yield curve, gold has seen strong liquidation across the board from futures traders, funds and investors in GLD shares,' he said, referring to the StreetTracks Gold Trust exchange-traded fund."

"Add that to the fact that Fed officials have been suggesting of late that there will not be a rate cut later in the summer, 'and you have a fairly negative tone to gold and the metals overall,' Oxman said."

"There has been a liquidation recently of more than 180 metric tons of gold sales by central banks -- likely in the past three months, said Oxman."

"Gold's momentum about eight weeks ago was 'crushed by a huge wave of central bank gold sales,' said Spina. 'Had this event not occurred, we may well be trading over $700, but the event has caused a delay in the next run higher.'"

"Besides, 'the volume of central-bank selling cannot be maintained and will soon subside, leading to the next stage of this secular gold bull market,' said Mark O'Byrne, a director at Gold & Silver Investment Ltd. in Dublin."

"Meanwhile, slower growth of ETFs in the first quarter of 2007 as compared with a year ago resulted in a decline of 26% in gold-investment demand, in tonnage terms, though jewelry demand was up 17%, according to a World Gold Council report released last month."

"The StreetTracks Gold Trust ETF 'dumped' 31 metric tons of privately owned gold into the market in May, according Jon Nadler, an analyst at Kitco Bullion Dealers. 'May was a critical month. It showed that the ETF is not a one-way street,' he said. Before that, it had been a 'one-way accumulation load.'"

"'Investment demand has to be up. It's been the single most important driver [for gold] since 2001,' he said. But, overall, 'demand has been lackluster thus far this year.'"

"And, he said, supply is growing, with the $22 billion that has been 'plowed into exploration' over the past five years now starting to pay off. More than 50 operations will come into being between 2007 and 2012, with a combined annual output of about 450 metric tons, he said. 'That, in a 3,300 metric-ton total market supply, is 13% incremental supply.'"

Inflation Picture Murky

2007-06-14T14:00:00.000-07:00

MarketWatch reports on the markets. "Gold futures closed more than $3 higher Thursday as a larger-than-expected rise in U.S. wholesale prices renewed concerns about inflation, boosting gold's appeal as an investment hedge."

"Wholesale food prices fell 0.2%, the first decline in seven months. Energy prices jumped 4.1%, the biggest increase in six months."

"The 'PPI report shows [that] while the headline number was 'hot,' the core number was only [up] 0.2% -- so gold had a mild but positive reaction,' said John Person, president of NationalFutures.com. 'But most traders and investors know that inflation is driven by accelerating costs such as food and energy, and this is what is supporting gold now,' he said."

"Gold for August delivery closed up $3.20 at $655.90 an ounce on the New York Mercantile Exchange after reaching a high of $658. The contract had fallen a total of $6.30 since Monday with dollar strength a key concern."

"On Thursday, the greenback rallied to a new four-and-a-half year peak against the yen and rose against the euro after news of the bigger-than-expected climb in U.S. inflation at the wholesale level. That stoked speculation the Federal Reserve will have to keep interest rates high."

"Other metals prices closed higher. July silver gained 10.5 cents to finish at $13.165 an ounce, September palladium rose 85 cents to close at $371.50 an ounce and July platinum climbed by $3.50 to end at $1,287 an ounce."

"The U.S. inflation figures 'lessened likely interest-rate hikes, which is metal-positive news,' said Martin Hayes, an analyst at BaseMetals.com."

Pressure Remains To The Downside For Gold

2007-06-13T15:21:00.000-07:00

Reuters reports on currencies. "The dollar climbed to a 4-1/2-year high against the yen on Wednesday, helped by data indicating U.S. retail sales growth in May was the highest since January 2006, which many investors took as a sign of a pick-up in U.S. economic growth."

"Limiting the dollar's gains was a dip in the U.S. benchmark 10-year Treasury note yield, which fell from five-year highs even as investors seem more willing to bet that the Federal Reserve's next move could be a hike in interest rates."

"'The market is interest rate focused and retail sales were really quite strong suggesting economists may revise up their forecast for the second quarter even further,' said Meg Browne, currency strategist at Brown Brothers Harriman. 'But a lot of the good news is already in the market.'"

"In late afternoon trading, the dollar rose 0.9 percent against the yen, changing hands at about 122.73 yen, close to the session high of 122.76 yen, a 4-1/2-year high. Dollar/yen also got a boost in technical trading triggered first by investors selling the yen against the euro, said Brian Dolan, chief FX strategist, at Forex.com."

"Investors broke through initial resistance on the euro/yen at 162.80 which had been around the high in the currency pair for the past several sessions. 'Once we got beyond that, dollar/yen popped as well,' Dolan said. Euro/yen last changed hands up 0.9 percent at 163.35 yen."

"The dollar rose to a four-month high of 1.2469 Swiss francs, up for its fifth consecutive session before surrendering some gains to trade at 1.2451 francs. Sterling fell 0.1 percent to $1.9727."

"Over the last week, bond markets have even begun to price in a chance that the Federal Reserve will raise interest rates next year."

"The dollar generally strengthens when dealers anticipate a rise in U.S. interest rates and the dollar index, a gauge of the greenback's performance against a basket of six major currencies, briefly rose above its 100-day moving average for the first time since mid-February, a positive technical signal for the markets."

From MarketWatch. "Gold futures closed modestly lower Wednesday with pressure from a stronger U.S. dollar offsetting support from gains in oil prices, which had helped renew concerns about inflation. 'A tug of war exists between the spate of positive news we see, like retail sales and then the rally in energies,' said Kevin Kerr, editor of Global Resources Trader, a newsletter of MarketWatch."

"'There is so much conflicting data that traders are just uncertain of how much to put into the yellow metal or will they need the cash liquidity to cover stock market margin calls,' he said."

"Gold for August delivery declined by 40 cents to close at $652.70 an ounce on the New York Mercantile Exchange, recovering a bit from the $649.30 low it had seen earlier in the session. But the contract finished well below the day's peak of $656.20."

"During Wednesday's trading session, 'inflation fears' had driven the metal's price higher, according to Kerr. 'With food and energy prices on the rise, inflation is going to come into play there, and all of this other talk is wishful thinking or a form of denial,' he said."

"'Gold is still well below where it should be and that's because of the pervasive strength of the dollar and ongoing good news like retail sales,' he said. The 'real number' to look at will be Thursday's CPI and Friday's PPI figures, he said."

"In the meantime, gold managed an attempt at testing the area near $650 on Wednesday, 'but basically gave it up by the close, in the face of a resilient U.S. dollar,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'The metal did not manage a sustained rally' despite a better than $1 rise in crude oil during high point of the rally Wednesday, he said."

"Nadler admits Kitco was a 'overly optimistic' in its average gold price forecast for 2007. It expected an average of $690 gold this year, 'encouraged by the orderly and robust fashion in which gold prices rose since they recorded their January $605 lows.
But 'with two weeks to go before half-time, we are scaling that number back 5% to the $655 level, at best,' he said."

"That doesn't rule out a visit by gold to the $700 mark for a brief time, maybe even before the year's end, he said. But the 'pressure at the moment remains to the downside,' he said."

"Still, gold saw some support earlier Wednesday from 'physical buying and technical trade, as both gold and silver are at three-month lows,' said Zachary Oxman, a senior trader at Wisdom Financial."

"'Fundamental support is coming in from the uptake by the physical market of the roughly 183 tonnes of extra central bank selling and 30 tonnes of ETF selling,' he said. 'The nearly $60 price sell-off in gold has put a strong floor in the market as physical buying has increased to take up the open supply.'"

"For now, 'we are close to seeing a short-term bottom for many of the metals here, as a few are in oversold territory,' said Edward Meir, an analyst at Man Financial."

"However, much will ride on the inflation figures coming out of the United States on Thursday and Friday," he said in a research note. 'We think that an in-line set of readings is most likely, and will possibly lead to some buying and/or short-covering setting in. And 'unless we see some wildly unexpected PPI and CPI figures out at the end of the week, the tech trading community sees a bottom in the $647-$650 range" for gold, according to Neal Ryan, director of economic research at Blanchard."

"In economic data reported Wednesday, U.S. retail sales rose by 1.4% in May, the largest seasonally adjusted gain in 16 months. The Commerce Department said sales rose for all categories of spending, from gasoline and automobiles to building supplies and clothing."

"As for the other metals, July silver followed gold lower, losing 3 cents to close at $13.06 an ounce, but July copper added 2.6 cents to close at $3.313 a pound.
July platinum fell $12.90 to end at $1,283.50 an ounce and September palladium shed $2.20 to finish at $370.65 an ounce."

"'At the same time, the CPM advisory report makes mention of the fact that global individual investors may well be reluctant to add new metals positions at high price levels, but when they perceive a bargain opportunity in silver, they tend to take advantage of it," said Nadler. 'CPM concludes that silver demand remains 'healthy' despite the declines in India and in the area of traditional photographic use,' he said."

An Onslaught Of Bearishness For Gold

2007-06-12T14:05:00.000-07:00

The Associated Press reports on currencies. "The euro drifted down to nearly two-month lows against the dollar on Tuesday as markets awaited U.S. economic data later this week. The 13-nation euro bought US$1.3321 in afternoon trading, down from US$1.3359 in New York late Monday."

"The dollar was bolstered late last week by news of rising bond yields, which lessened the likelihood of a Fed rate cut. Traders are scrutinizing economic data closely for pointers to the Fed's future course, and inflation figures due Thursday and Friday could help move the dollar."

"The British pound rose to US$1.9736 from US$1.9693, even as a government report showed that consumer price inflation eased to 2.5 percent in May, down from 2.8 percent the month before."

"The dollar was little changed against the Japanese currency, edging down to 121.67 yen from 121.77 yen."

From Bloomberg. "'Treasuries are helping the dollar,' said Brian Taylor, chief currency trader at Manufacturers & Traders Trust, which has $50 billion in assets. 'A couple of months ago there was a good chance that the Fed would lower rates, and now the worst could be behind us.'"

"The boost in yields also helped the dollar rise to the highest since February against the Swiss franc."

"The dollar broke the 100-day moving average of $1.3330 versus the euro, triggering sell orders put in place by traders expecting the European currency to fall further when it reached that price, Taylor said."

"The yield advantage of 10-year U.S. Treasury notes over similar-maturity German bunds widened 2.7 basis points to 61.62, the biggest gap since April 9. It was 46.59 at the end of May."

From MarketWatch. "Gold futures fell Tuesday, ending the session with a loss of almost $6 an ounce, with the market returning much of the prior session's gains as crude-oil prices declined and the U.S. dollar touched a two-month high against the euro."

"'An onslaught of bearishness, a small countertrend rally in the U.S. dollar and seasonal weakness, are all combining to pressure gold toward very key support in the $635-$640 area,' said Peter Grandich, editor of the Grandich Letter. 'It appears the smartest move at the moment is to sell a close below $635 or buy a close above $675,' he said."

"Gold for August delivery declined $5.90 to close at $653.10 an ounce on the New York Mercantile Exchange."

"'Gold continues to react to the dollar in the short term, but the support around the $650 level is formidable, particularly from the physical market,' said Julian Phillips, an analyst at GoldForecaster.com. 'It is now generally accepted in the gold market that around these levels lies the right buying opportunities.'"

"Still, 'it is becoming almost the technical picture against the fundamental picture, with traders and dealers reading the technicals down, against the strong tide of fundamentals absorbing their blows,' he said."

"For gold, 'buying from the physical sector is expected to keep the metal underpinned in the coming sessions,' said James Moore, metals analyst at TheBullionDesk.com. Additional support is pegged at $648/$644 and the 200-day moving average at $638.50, he said. 'Rallies back toward $660 are expected to meet further scaled up selling from funds/investor sources,' Moore said."

"Rounding out the metals action, July silver declined 18.5 cents to close at $13.09 an ounce, July platinum fell $1.60 to close at $1,296.40 an ounce and September palladium shed 15 cents to end at $372.85 an ounce."

US$ Gains Again

2007-06-11T14:05:00.000-07:00

The Associated Press reports on currencies. "The dollar gained again Monday as doubts lingered about the likelihood of an interest rate cut by the Federal Reserve. The 13-nation euro bought $1.3359 in late New York trading, down from $1.3447 late Friday. The British pound declined to $1.9693 from $1.9844."

"The dollar strengthened late last week on news of rising bond yields, which lessened the chances of a Fed rate cut. The yield on the U.S. Treasury's 10-year note passed 5 percent Thursday for the first time since August. The yield rose to 5.13 percent Monday, down from 5.15 percent earlier in the day but still up from 5.11 percent late Friday."

"A significant narrowing of the U.S. trade deficit in April, further boosted the dollar last week. Traders are scrutinizing economic data closely for pointers to the Fed's future course, and inflation figures due Thursday and Friday could help move the dollar."

"On Thursday, the Labor Department releases its producer price index and on Friday the consumer price index is due."

"The dollar was little changed against Japan's currency, edging up to 121.77 yen from 121.74 yen after slipping to as low as 121.50 yen during Monday's session."

"In other New York trading, the dollar bought 1.0609 Canadian dollars, down from 1.0792 late Friday, and 1.2383 Swiss francs, up from 1.2279."

From Bloomberg. "The U.S. currency advanced against all but three of its 16 most active counterparts after Bank of Cleveland President Sandra Pianalto said inflation is 'uncomfortably high.' The euro pared its loss against the dollar as European Central Bank President Jean-Claude Trichet said monetary policy is 'still on the accommodative side.'"

"'Investors have figured out the Fed won't change the rates for many months to come,' said Tim Mazanec, senior currency strategist in Boston at Investors Bank & Trust Co. 'The dollar will probably gain another 1 percent against the euro this week.'"

"The yen advanced today against all but five of the 16 most active currencies on the New Zealand central bank's decision to sell local currency on the foreign exchange market to stem a rally fueled by investors borrowing cheaply in Japan. Investors sold higher-yielding currencies against the yen on speculation other central banks will follow the New Zealand central bank."

"Gold rose from a 12-week low in New York on speculation that last week's slump was overdone because rising equity markets and higher energy costs will boost the metal's appeal as a hedge against inflation. Silver gained."

"'The rally in the equities and the metal stocks, that helped gold itself to do better,' said Marty McNeill, a trader at R.F. Lafferty & Co. 'Oil does have a positive influence on it.'"

"Gold futures for August delivery rose $7.70, or 1.2 percent, to $658 an ounce at 12:12 p.m. on the Comex division of the New York Mercantile Exchange. The price on June 8 touched $647.80, the lowest since March 16."

"Silver for July delivery rose 22 cents, or 1.7 percent, to $13.26 an ounce. The metal plunged 3.3 percent on June 8, the biggest decline for a most-active contract since March 2. The price fell 5.1 percent last week."

"'I think the interest-rate paranoia has been overdone and see gold rallying modestly next week,' William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said on June 8. 'However, to maintain any lasting strength, the metal needs to see a return of significant alternative asset demand and it may be a few months before that occurs.'"

"Before the sell-off in the past two sessions, Hedge-fund managers and other large speculators increased their net-long position in gold futures for the week through June 5, ending a two-week decline, according to U.S. Commodity Futures Trading Commission data."

"Speculative long positions, or bets prices will rise, outnumbered short positions by 107,617 contracts for the week through June 5, up 13 percent from the previous week, the Washington-based commission said in its Commitments of Traders report."

"Platinum futures for July delivery rose $11.20, or 0.9 percent, to $1,298 an ounce on the New York Mercantile Exchange, the biggest increase since May 31. The price fell 0.7 percent last week. Platinum reached a record $1,353.80 on May 7 and has gained 13 percent this year."

"Palladium for September delivery rose $2.40, or 0.7 percent, to $373 an ounce. The metal fell 1.8 percent last week, after two straight weekly gains. Palladium futures have risen 10 percent this year."

An Ugly Day For Precious Metals

2007-06-08T13:30:00.000-07:00

MarketWatch covers the markets. "Gold futures tumbled in a broad commodities sell-off Friday, as the dollar rallied against other major currencies, damping investor appetite for metals. Gold for August delivery closed down $14.90 at $650.30 an ounce on the New York Mercantile Exchange, marking a five-session losing streak. The contract has tumbled $26.60 this week."

"'Gold sustained a further damaging blow on Friday, as price support after price support gave way in the wake of massive selling on the trading floors,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'Silver sustained heavy losses as well ... An ugly day, if we ever saw one,' Nadler said."

"Silver and copper futures plunged about 3%, while energy futures also fell across the board, with crude oil tumbling 3%."

"'The firm U.S. dollar helped trigger the selling today,' said Peter Spina, analyst at GoldSeek.com. 'It appears a break of some technical supports aided the large fall in the metals today. "Once the selling broke some supports, the selling accelerated and the momentum wave was just too strong for the market to see any meaningful reversal from the lows,' Spina said."

"The dollar rallied across the board early Friday, touching a two-month high against the euro. The Dollar Index, which tracks the greenback against the world's major currencies, rose to 82.92, its highest level since April 10."

"The dollar extended some of its gains after a Commerce Department report showed the U.S. trade deficit narrowed by 6.2% in April to $58.5 billion, below the consensus forecast of Wall Street economists of a deficit of $63.5 billion."

"The gold market is in consolidation mode, which may extend through the summer months, Spina said. 'Further weakness as we start next week off should be expected, but buyers are likely to give gold and silver some good bid support just below today's lows,' he said."

"Other metals prices also posted sharp losses Friday. July silver fell 44 cents, or about 3%, to close at $13.040 an ounce. July platinum tumbled $8.70 to $1,286.80 an ounce. September palladium fell $1.85 to $370.60 an ounce."

"'For the moment, it seems gold and the rest of the precious complex will have to weather further weakness as investors look towards assets offering better returns, such as equities and Treasuries,' said James Moore, metals analyst at TheBullionDesk.com, in a research note. 'Gold needs to make a swift move back above the 100-day moving average at $664.80 to avoid further weakness, potentially re-testing last weeks' lows around $650 or possibly extending lower towards the 200-day moving average at $638.40,' Moore said."

"'It seems the US markets are all focused on an economic scenario last seen here in the late 70's: stagflation,' said Edward Meir, analyst at Man Financial, in a research note. 'This is the unwanted combination of slowing growth combined with relatively high inflation and interest rates.'"

"The U.S. Federal Reserve's move to sit tight is being duplicated globally, with the European Central Bank and the Bank of New Zealand both raising rates this week, he said. 'How metals fare given this mindset remains to be seen, but we think the selling, at least in the short-term, could be getting overdone,' Meir said."

A Panic Regurgitation Of Paper

2007-06-07T14:22:00.000-07:00

Dow Jones Newswires reports on precious metals. "Fund and chart-based selling sent gold and silver futures sharply lower Thursday, with weakness triggered in large part by a stronger U.S. dollar and the highest U.S. Treasury yields in 11 months, analysts said. August gold fell $9.40 to $665.20 an ounce on the Comex division of the New
York Mercantile Exchange. Comex July silver fell 23.7 cents to $13.48."

"Gold started softer in response to a stronger dollar and recovered as crude oil moved higher by more than $1 a barrel. But as the euro extended its losses late in the session, the precious metals did likewise, with the move accelerating when technical selling was triggered, a trader reported."

"The euro fell as far as $1.3422 from $1.3504 late Wednesday. 'We hit some stops,' said the trader. 'The euro is back down again and that seems to be the whole story.'"

"'A lot of it has to do with people just wanting out, because the higher market in Treasury yields is just frightening everyone,' said George Gero, vice president with RBC Capital Markets Global Futures. 'They are concerned that higher rates are going to make it much more expensive to hold the metal.'"

"The 10-year Treasury yield climbed as high as 5.11%, a level last reached in July 2006. Currency analysts linked this to the dollar's gains."

"With interest rates seemingly heading higher in many parts of the world, some
participants are exiting so-called yen carry trades, Gero said. 'There are quite a few funds selling,' Gero said."

"This is occurring against a backdrop in which traders are mindful of some central bank selling in recent months, particularly from the Bank of Spain, he added."

"Meanwhile, July platinum fell $4.60 to $1,295.50 an ounce after initially spiking higher to $1,320, its strongest level since May 22. 'Volume dries up there and it turns around on a dime,' said one trader. 'It got pushed above $1,300, but didn't have enough juice to stay above. As soon as the buying stopped, there was a $20 downtick.'"

"Another trader commented that fund buying initially propelled the metal higher, with buy stops hit. Then funds were sellers as platinum backed off, he said. 'It was a big-time speculative whipsaw,' he continued. 'They triggered some stops on the way up, then everybody just bailed.'"

"September palladium finished softer by $2.45 to $372.45, but was more subdued, with an open-outcry range of just $1.25."

From Reuters. "Bond investors' growing concern about global growth and inflation has battered long-dated U.S. Treasury prices and sent their yields higher than shorter maturities, triggering fresh market bets on the spread between the two."

"The rapid flip-flop this week from a so-called inverted yield curve, where 2-year note yields traded above benchmark 10-year Treasury note yields, stunned investors, as the yields on longer maturies rose above yields on short maturities by the most in a year."

"The spread between 2-year and 10-year notes widened on Thursday to 9 basis points, with the 10-year note yield at 5.12 percent, above the 2-year note's 5.03 percent, and the gap could widen further to around 20 basis points in the near term, analysts said."

"'The reasons for the trade include the notion that U.S. and global inflation are rising and that the Fed will lag other central banks (in raising U.S. interest rates) due to ongoing concerns about the housing sector correction,' Marta said."

"The increasing likelihood of more interest rate rises overseas, after the ECB raised rates on Wednesday and the New Zealand central bank surprised with a rise earlier on Thursday, is a main catalyst for the selloff in global sovereign debt that impacted U.S. Treasury prices."

"The speed and timing of the Treasury market's moves 'has taken people by surprise because it seems to be the data abroad that is driving it,' said Matthew Moore, economic strategist with Banc of America Securities in New York."

"By year end, the gap of 10-year Treasury yields over 2-year yields could steepen to between 20 and 25 basis points, Moore predicted."

"Just a month ago, the prevailing market view was that by the end of 2007, the Federal Reserve would start cutting interest rates, which tends to pull short-maturity yields lower. But a resurgence of global inflation worries has effectively extinguished investors' expectations for a Fed rate cut, and the Fed is now expected to hold interest rates steady through the end of this year."

"'What is interesting is that this is a steepening sell off,' said Josh Stiles, bond strategist with IDEAglobal in New York. 'There is a growing concern about global demand and a more lasting global pick up in price pressures under way on a multi-year basis,' he said."

"Stiles expects the benchmark 10-year Treasury yield may have to rise to 5.25 or 5.30 percent before the market sell off abates."

"However, this week's Treasury market sell-off, also driven by mortgage-related selling of U.S. government bonds and a rapid reversal of market positioning, may soon abate and perhaps partly reverse, some argue. 'You have to bear in mind that there is an irrationality going on in markets,' said David Ader, head of government bond strategy with RBS Greenwich Capital. 'This is a panic regurgitation of paper,' Ader said."

"However, he thinks the shift toward steepening of the yield curve could be sustained for a while. Ader expects the curve could steepen to between 17 and 21 basis points near term, levels it last reached in April of 2006."

Gold Is Drifting

2007-06-06T13:42:00.000-07:00

Bloomberg reports on currencies. "The euro dropped from a record high against the yen and fell versus the dollar as comments from European Central Bank President Jean-Claude Trichet reduced speculation on two more boosts in interest rates this year. The European currency weakened as the ECB, which lifted its benchmark lending rate to 4 percent as economists expected, reduced its growth outlook and held its inflation forecast steady for next year. The yen rallied on a decline in U.S. stocks and rising bond yields in Japan."

"'Trichet wasn't as decisively hawkish as the market expected,' said Jens Nordvig, a senior currency strategist in New York at Goldman, Sachs & Co. 'We had expected an upward revision in the inflation forecast next year, but it was kept unchanged.'"

"Australia's currency rose to an 18-year high against its U.S. counterpart after a government report showed Australia's economy grew at the fastest pace in more than three years. The Reserve Bank of Australia held it benchmark rate at a six-year high of 6.25 percent today."

"The yen strengthened against the dollar and euro as a slump in European and U.S. stocks prompted investors to reduce higher-yielding investments financed by loans in Japan, known as carry trades. Morgan Stanley advised clients to reduce European share holdings after three market signals indicated it's time to sell."

"The Japanese currency also got a boost as a decline in Japan's two-year government notes pushed yields above 1 percent for the first time in a decade."

"'As we see risky assets such as equities coming under pressure, it does suggest we will see renewed strength coming through for the yen,' said Ian Stannard, currency strategist in London at BNP Paribas."

"Japan's benchmark rate is 0.5 percent, the lowest among major economies. It compares with the Federal Reserve's 5.25 percent and the Bank of England's 5.5 percent. The yen advanced a third straight day against the dollar, increasing 0.28 percent to 121.05, rebounding from 122.14 on June 1, the lowest since Jan. 29."

The Financial Times. "The high-yielding New Zealand dollar reached a peak of $0.7554 against the dollar Wednesday, its highest level since it was allowed to float freely in March 1985. However, the kiwi eased back later in the session to stand just 0.2 per cent higher at $0.7510 as investors sold the New Zealand dollar aggressively against the yen while risk aversion rose as global equity markets tumbled."

"Gold and silver fell in New York on speculation that higher global interest rates will reduce demand for precious metals as alternative investments."

"'In a higher-rate environment, gold ultimately will suffer,' said Frank McGhee, head metals trader at Integrated Brokerage LLC in Chicago. 'The sentiment has changed toward what the Fed is going to do. The Fed remains steady with a bias toward a raise.'"

"Gold futures for August delivery fell 50 cents to $674.60 an ounce on the Comex division of the New York Mercantile Exchange. The price earlier rose as high as $677.30 and dropped as low as $670.20."

"The Federal Reserve has kept borrowing costs unchanged at 5.25 percent since June 2006. The ECB's rate increase today was the eighth since late 2005."

"Gold generally moves in tandem with the euro. The metal has climbed 5.7 percent this year, while the euro has climbed 2.3 percent. A rally in the 13-nation currency may still help gold, said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey."

"'I like gold on the long side,' Goodis said. 'The euro is going to rally because the interest rate gap between the U.S. and Europe will start to widen.'"

"Gold has fallen for three straight sessions after climbing 1.5 percent on June 1, the most in three months. The metal faces selling around $675, traders said. 'Gold is drifting,' McGhee of Integrated Brokerage said. 'On a technical level, we've found some fairly stiff resistance.'"

"Silver for July delivery fell 9.5 cents, or 0.7 percent, to $13.717 an ounce. The metal has climbed 6.1 percent this year. In 2006, the metal gained 46 percent, while gold climbed 23 percent."

"'The fundamentals of silver continue to look strong,' said Robert Quartermain, CEO of Vancouver- based Silver Standard Resources. 'They are better than gold. We're seeing much more application of silver' in industry, he said."

"Industrial demand last year was 430 million ounces out of a total 910 million ounces, Quartermain said."

US Dollar-Negative Sentiment Coming Back

2007-06-05T14:03:00.000-07:00

Bloomberg reports on currencies. "The dollar dropped to a more than two-week low against the euro and fell versus the yen as Federal Reserve Chairman Ben S. Bernanke said housing will remain a drag on economic growth 'somewhat longer' than expected. The U.S. currency pared its losses after a private report showed services industries expanded last month at the fastest pace in more than a year, reducing the likelihood the central bank will cut interest rates."

"The yield of two-year Treasuries reached 5 percent for the first time since August, increasing the allure of U.S. assets and capping the dollar's decline."

"The dollar dropped 0.24 percent to $1.3521 per euro at 4:25 p.m. in New York and earlier reached $1.3554, the lowest since May 16. It fell to a record low of $1.3681 per euro on April 27. The U.S. currency fell 0.31 percent to 121.39 yen, declining as low as 121.12. The Swiss franc gained 0.45 percent to 1.2182 per dollar and 0.21 percent to 1.6472 per euro."

"The Swiss franc and the yen were two of the top gainers against the dollar among the 16 most active currencies tracked by Bloomberg after a decline in U.S. stocks led investors to reduce their appetite for risk, exiting so-called carry trades in which they buy higher-yielding assets financed by loans in Japan and Switzerland."

"The dollar weakened earlier on speculation central banks will signal higher interest rates at meetings this week, increasing the value of local currencies. The ECB and Australia's central bank will meet to set rates tomorrow, followed by the Bank of England and New Zealand's central bank a day later. The Federal Reserve's benchmark is 5.25 percent, compared with 3.75 percent in the euro zone, 5.5 percent in the U.K., 6.25 percent in Australia and 7.75 percent in New Zealand."

"The dollar traded at $1.9929 per pound, compared with $1.9914 yesterday, and fell 0.38 percent against the Australian dollar and 0.27 percent versus the New Zealand currency."

"'The dollar-negative sentiment is coming back,' said Greg Salvaggio, vice president of capital markets at currency-trading firm Tempus Consulting Inc. 'The Fed is really pigeonholed to have a hawkish posture on interest rates this year. With central banks in the euro zone and U.K. continuing to raise interest rates, it is very difficult to buy the dollar right now.'"

From Reuters. "Gold gave up gains in New York afternoon trade on Tuesday after hitting a fresh three-week high as continued gold selling by European central banks dampened buying."

"Spot gold rose as high as $673.95 before falling to $669.30/670.80 an ounce by 2:50 p.m. EDT, against $670.50/672.00 late in New York on Monday. Most-active August gold on the COMEX division of the New York Mercantile Exchange settled down $1.20 at $675.10 an ounce, traded in a tight range from $674.10 to $678.80."

"'The market was long, probably on the back of a weakening dollar, expecting more of a reaction as we moved into the New York market. In fact, there has been some selling since the opening and longs have been squeezed out,' said David Holmes, director of precious metals sales at Dresdner Kleinwort."

"'I am sure the move is partly technical. We are likely to remain rangebound,' he said."

"Gold often moves in the opposite direction to the dollar and is generally seen as a hedge against oil-led inflation. But slightly bearish was news that the Bank of Spain sold almost a million troy ounces of its gold reserves during May, following sales of 1.3 million ounces in both March and April."

"'The sale of what looks to be about 30 tonnes of gold is another good amount, although less than the 40 tonnes sold in each of March and April,' said John Reade, head of metals strategy at UBS Investment Bank."

"He said probably Spain was selling gold because the metal was making up an increasing proportion of its reserves. It also appeared likely that the Bank of Spain had received the 100 tonne quota that the Bundesbank had no plans to use, he said. 'Central Bank gold sales always seem to influence market sentiment by more than they should and this news...is not positive for the short-term outlook for gold.'"

"In another news, the European Central Bank said gold and gold receivables held by euro zone central banks fell 29 million euros to 179.995 billion euros in the week ended June 1."

"While gold's longer-term outlook was more positive, with some still eyeing a move back over $700, the metal failed to crack that level three times earlier in the year. It peaked at $693.60 in April, which was its highest in 11 months."

"Jon Bergtheil, global metals strategist at J.P. Morgan, noted that commodities as an asset class were not performing as well as they had done in previous years. 'In the last year, they have significantly underperformed equities,' he said."

"In other precious metals, silver matched Monday's five-week high of $13.79 an ounce and was last quoted at $13.75/13.78, against Monday's $13.69/13.73 late in New York. Platinum dipped to $1,291/1,296 from its previous finish of $1,296/1,300, while palladium was at $365/368 an ounce, compared with $369/373 late in the U.S. market on Monday."

"Francisco Paramés, the best-performing fund manager in Spain for the past five years, predicts that a real estate crash in his homeland will spread, dragging down companies throughout the country. Lending by banks and other credit institutions has almost tripled in Spain since 2000."

"'A lot of people are going to be unemployed,' Paramés said. 'Our most important bet is the one you can't see: that we don't bet on the Spanish economy, which is going to go through some very rough times because of the credit bubble.'"

"'Credit has increased by 25 percent a year for six years,' Paramés said. 'That's never happened anywhere else in the world, even China.'"

US$ Stumbles On Economic Data

2007-06-04T15:05:00.000-07:00

The Associated Press reports on currencies. "The dollar weakened Monday, dragged down by weaker-than-expected factory orders in the United States. The 13-nation euro climbed to $1.3488 in late New York trading from $1.3443 late Friday after the U.S. Commerce Department reported orders to factories rose less than expected in April. It was the weakest result in three months and less than half of the 0.8 percent increase that analysts expected."

"Markets are closely watching U.S. economic data for pointers to the Federal Reserve's future interest rate course. The Fed has left its key interest rate unchanged at 5.25 percent over recent months, even as the European Central Bank has raised the cost of borrowing seven times since December 2005. Analysts expect the ECB to raise the rate to 4 percent when it meets Wednesday."

"The British pound rose to $1.9904 from $1.9821, with markets anticipating that the Bank of England will keep its rate unchanged at 5.5 percent when it meets Thursday."

"The dollar fell to 121.82 Japanese yen from 122.06 yen, even as China's main stock index plunged 8.3 percent, its biggest one-day fall since a February drop that triggered a global market sell-off."

'In other trading, the Canadian dollar continued its climb against the greenback after breaching 94 cents Friday for the first time in 30 years. The U.S. dollar bought 1.0588 Canadian dollars late Monday after hitting a low of 1.0547, or 94.81 U.S. cents to 1 Canadian dollar, earlier in the day. The U.S. dollar bought 1.0618 Canadian dollars late Friday."

"The dollar also weakened against the Swiss franc, falling to 1.2235 from 1.2303 late Friday."

From MarketWatch. "Gold futures failed to find a foothold in positive territory Monday as traders locked in gains late in the session following the metal's rally last week. Gold for June delivery closed down 50 cents at $670.70 an ounce on the New York Mercantile Exchange. The August contract, which trades on the highest volume, fell 60 cents at $676.30 an ounce."

"'Having broken from its $655-to-$665 range, gold is likely to generate some further momentum in the week ahead,' said James Moore, metals analyst at TheBullionDesk.com. He pegged gold's resistance at $675-to-$682 an ounce and said its 'major target' is to be found at $694 an ounce."

"Gold's lackluster performance came amid rallying crude-oil prices and a weakening dollar. Crude-oil futures rallied Monday, boosted by a combination of factors, including an increase in fuel demand, escalating tensions between Russia and the West, and the risk of a cyclone hitting the Persian Gulf."

July silver edged up 5 cents at $13.745 an ounce. July platinum closed up $7.40 at $1,303.0 an ounce. September palladium closed up 5 cents at $377.50 an ounce."

"Gold and coal producers in South Africa have been called on to raise wages for unionized workers by at least 15% as collective bargaining looks set to begin."

"Gold production in South Africa amounted to 62,806.7 kilograms in the first quarter of the year, down 7.6% on the same three months the year before, the Chamber of Mines said in late May. It added cash production costs were almost 20% higher and total operating costs before capital expenditure up nearly 18%."

From SmartMoney. "Investors in a large exchange-traded fund that holds gold bullion have been selling shares recently in response to a pullback in the precious metal, offering a stark reminder of the dramatic swings often seen in gold prices."

"The amount of gold held by StreetTracks Gold Shares has slipped from 500.7 tons on April 19 to 463.6 tons late last week. Riding a bull market for gold, the ETF has gained about 52% since inception, according to its backers."

"Yet gold prices fell more than 3% in May, in part due to a recovery in the U.S. dollar, easing inflation fears and expectations of lower demand from China and India. 'Gold is very different, even different from other commodities such as oil, for cultural reasons,' said Katharine Pulvermacher, managing director of investment research and marketing at the World Gold Council. 'Gold is seen as a wealth protector.'"

"About 70% of global demand for gold is for jewelry, roughly 10% is for industrial usage and the rest is for investment purposes, she said."

"Launched in November 2004, StreetTracks Gold Shares was the first U.S.-listed gold ETF and invests directly in gold bullion rather than holding shares of mining stocks. The amount of gold held in the vault had been climbing before the recent sell-off. In fact, an additional vault had to be built to make room for more gold, Pulvermacher said."

"One reason for the ETF's popularity is that it makes investing in gold easier for individuals and institutions because it removes the costs of buying and storing the metal."

"There are seven gold-bullion ETFs listed globally, Pulvermacher said. In the U.S., besides StreetTracks Gold Shares, iShares Comex Gold Trust also invests in bullion and has about $964 million in assets, according to sponsor Barclays Global Investors."

"PowerShares DB Gold Fund is an ETF-like security that invests in futures contracts to reflect the performance of gold. Meanwhile, ETFs such as Market Vectors Gold Miners and SPDR S&P Metals & Mining hold mining stocks."

"Some observers say the rise of gold-bullion ETFs could increase the metal's price volatility since it's easy to jump in and out of funds that trade throughout the day."

"Individual investors in StreetTracks Gold Shares, which holds enough gold to qualify as the world's 11th-largest central bank, have become net sellers in recent weeks as they locked in profits and scaled back their expectations, said Jon Nadler, analyst at Kitco Bullion Dealers."

"'Gold ETFs have facilitated the entry of players who do short-term trading, which tends to add to the snowballing effect,' he added. Moreover, gold may be moving away from its traditional role as 'life insurance for your portfolio,' he said. 'Gold may end up being treated as just another asset to play for profit.'"

"Sonya Morris, an analyst at investment researcher Morningstar Inc., said a gold ETF, used appropriately, can provide useful diversification for long-term investors since it tends to behave differently from other investments. 'The recent pullback shows speculating on gold is a difficult and dangerous game to play,' the analyst said."

"'All the good news for gold is already out there, as it has been for a while,' wrote Kitco's Nadler in a report late last week. 'The trouble is that the not-so-good news is overshadowing the situation at the moment.'"

Central Bank Selling To Ease

2007-06-01T15:41:00.000-07:00

Bloomberg reports on the markets. "Gold in New York rose the most three months on speculation that central banks will slow metal sales after the European Central Bank said it has no plans to sell more bullion through September. Silver jumped 2 percent."

"The ECB is one of 16 signatories of the so-called Central Bank Gold Agreement, which allows members to sell no more than 500 metric tons of gold each year. The ECB said today it sold 60 tons since September."

"The metal fell 6.6 percent to $651.50 an ounce on May 24 from an 11-month high of $698 on April 20. Some European central banks sold gold worth $912 million last month. 'It's a psychological boost for the market,' said Dennis Gartman, gold trader, economist, and editor of the Gartman Letter. 'You've removed a seller.'"

"Gold futures for August delivery rose $10.20, or 1.5 percent, to $676.90 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage gain since Feb. 21. The metal has climbed 6.1 percent this year. The price gained 2.3 percent this week, marking the first increase in four weeks."

"Signatories of the central-bank accord sold about 290 tons of gold since September, according to George Milling-Stanley, manager of investment and market analysis at the producer-funded World Gold Council. Signatories include central banks in Spain, France and Portugal."

"The ECB's sale of 60 tons doesn't include gold sold by other European central banks, ECB spokesman Raphael Anspach said. GFMS Ltd., a metals-research firm in London, estimates the banks will sell about 400 tons under the accord this year."

"'The banks have been selling aggressively for the past three weeks, and that's kept the market from going anywhere,' said Carlos Perez-Santalla, gold trader and president of Hudson River Futures. 'Now, the market is free to breathe.'"

"'Heavy central bank sales appear to have peaked for now,' said William O'Neill, a partner at Logic Advisors. 'We expect $700 to be revisted.'"

"Silver futures for July delivery rose 27 cents to $13.74 an ounce. The percentage gain was the most since Feb. 23. The price climbed 5.7 percent this week, the most since early December."

"Historical price charts show silver is a better buy than gold after the price rebounded this week, Gartman said. 'Silver's far more important industrial demand trumps gold's mere investment demand,' Gartman said. 'Time to own silver.'"

"Silver has climbed 6.2 percent this year. The metal rose 46 percent last year, while gold climbed 23 percent."

From Nasdaq.com. "Other metal prices moved higher along with the price of gold, with platinum for July delivery closed up $9.80 at $1,295.60 an ounce and palladium for September delivery closed up $4.20 at $377.45 an ounce."

The Financial Times. "When the Roman emperor Constantine struck off a new gold coin, he expected it to give good, durable service. And the extra-durable solidus did, about 700 years' worth. Modern monetary systems have a somewhat shorter shelf life."

"That the current monetary system may not last for the ages was underscored the other day by Kuwait's decision to uncouple its dinar from the US dollar. For years, the two had been lashed together as a preliminary to the projected creation of a common Persian Gulf currency."

"The more the dollar's value sagged, the more dollars the members of the Gulf Co-operation Council have had to absorb just to maintain the desired exchange rates."

"Now Kuwait has chosen to go its own way, leaving Saudi Arabia, Qatar, the United Arab Emirates and Bahrain to ponder their tolerance for open-ended dollar-buying. Little Kuwait just might be the herald of big change, both in the dollar's fortunes and the world's monetary organisation."

"To a degree, the world turns on open-ended dollar buying and the muscular feats of money-printing it calls forth."

"That the paper dollar finds favour the world over must be counted as one of the greatest achievements in the annals of money. To paraphrase Richard Nixon, the president who closed the US gold window, we are all dollar bulls now."

"Or rather, we are up to a point of saturation, a point that Kuwait seems to have finally reached. Its neighbours, too, appear to be on the edge of dollar surfeit. Broad money growth in the Gulf region is running at 20 per cent, in no small part a consequence of rampant dollar absorption."

"'Inflation is a hot topic in the kingdom,' the Financial Times reported from Riyadh recently, 'as city residents feel the pinch of rental and price increases suddenly feeding into an economy that has grown used to inflation of around 1 per cent a year since the 1970s.' The Saudi statistics gatherers today acknowledge a current rate of 3 per cent."

"In most of the dollar-buying states, monetary growth is fast enough to upset the eternal rest of Milton Friedman. In all cases, a slower pace of dollar absorption is an integral part of a monetary cure. It will be said that only some members of the dollar-buying bloc want to be cured."

"The rest, notably, China, are happy to keep on cranking the monetary presses. But the upward track of US interest rates and the downward path of the dollar exchange rate tell a different story. One thing's for sure, the greenback ain't the solidus."

Fed "Definitely Has An Inflation Problem"

2007-05-31T14:26:00.000-07:00

MarketWatch reports on precious metals. "Gold futures closed almost $8 an ounce higher Thursday as news that the U.S. economy slowed to a crawl in the first quarter helped boost investment demand for the precious metal. But prices still suffered a monthly loss of more than 3% with the U.S. dollar trading higher for the month of May on lower odds of a rate cut in the U.S."

"'Gold's start and end to May is quite the contrast,' said Peter Spina, an analyst at GoldSeek.com. 'The market entered the month of May with gold seeing the last of its upwards momentum run, unable to push past the $700 barrier,' he said. 'A major culprit to this was an aggressive amount of central bank selling oversupplying the market in a short period resulting in the current consolidation pattern.'"

"Gold for June delivery closed up $7.90 at $661 an ounce on the New York Mercantile Exchange after climbing as high as $662. June gold ended the week with a loss of nearly $22.50 after finishing the month of April at $683.50."

"'Despite an onslaught of bearish forecasts, gold has more than held its own,' said Peter Grandich, editor of the Grandich Letter. 'This has caused some of the shorts to grow nervous. We could see panic covering on a move above $665' in gold, said Grandich."

"The market is approaching a season that is typically 'the lull in investment demand for precious metals on an annual basis,' said Neal Ryan, director of economic research at Blanchard. But this summer could 'potentially be quite a different seasonal experience than those of years past,' he said."

"'We have the labor strikes, more than likely a slowdown of the increased central bank sales of late, and the market is out of favor at the same time the U.S. economy is showing some serious fatigue and the rest of the globe is continuing to grow,' he said."

"Other metals reflected gold's strength Thursday. The July silver contract closed at $13.47 an ounce, up 1.9%, or 25 cents, but down 0.8% from a month ago. September palladium added $1.50 to end at $373.25 an ounce, down more than $6 for the month, while July platinum tacked on $21.80, or 1.7%, to close at $1,285.80 an ounce, down almost $13 for the month."

From Reuters. "Europe's central banks are again likely to sell less gold this year than an agreed annual limit of 500 tonnes, despite a pick up in recent weeks, analysts say."

"The pace has risen in the recent past due to higher sales by Spain's central bank, but total selling during the current year, which ends in September, is estimated between 380 and 420 tonnes, against 396 tonnes last year and 497 tonnes in 2004-05."

"Total sales by all banks now stand at around 250 tonnes. The Austrian central bank said on Thursday it sold 14 tonnes of gold from its reserves in 2006."

"'Overall, CBGA sales are most unlikely to be maintained at this recent rate. However, we could end the agreement year a bit above 400 tonnes, rather than at or below the level,' Philip Klapwijk, chairman of metals consultancy GFMS Ltd, said."

The Street.com. "An increase in a key inflation measure had investors scrambling to buy hard assets and sent precious metals rallying Thursday in New York. Helping the metals was a report from the Commerce Department on the economy. The government said that gross domestic product grew at only a 0.6% annual pace in the first three months of the year, but the chain deflator, which measures prices of goods and services, jumped 4%, more than double the rate in the fourth quarter."

"'The Federal Reserve definitely has an inflation problem,' says T.J. Marta, a fixed-income strategist at RBC Capital Markets in New York."

"Indeed, the minutes of the last Fed meeting, released during the prior session, indicated that policymakers still have the threat of rising prices on their radar. Even though officials are closely monitoring the slowdown in housing, their primary concern appears to remains inflation."

"Elsewhere, there was more evidence of some investors losing their love for streetTracks Gold Shares, the largest gold exchange-traded fund. New figures show bullion holdings by the ETF dropped nine tons Wednesday to 464 tons. Gold Shares inventories, which are held in London vaults, reached their peak of 501 tons on April 17 before reversing over the past few weeks."

Fed Minutes 'Dollar Positive"

2007-05-30T16:51:00.000-07:00

Marketwatch reports on the markets. "Gold futures closed lower Wednesday to log their first loss in three sessions as traders fretted about the potential for a slowdown in Chinese demand after that nation tripled taxes on stock trades. 'The story of the day was the growing danger of a serious potential reversal of fortune for the metals markets, coming out of their best customer of late: China,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Chinese officials are 'dead-serious about curbing rampant speculative fever in that country's red-hot stock markets,' he said."

"Gold, silver or copper cannot ignore the China factor, he said. 'Previous assessments about the never-ending Chinese consumption party...must now yield to more sober analyses of just what the 'real' demand that can be expected out of that country will be.'"

"Gold for June delivery closed down $4.10 at $653.10 an ounce on the New York Mercantile Exchange. The contract had gained $3.90 during a two-session win."

"China's Shanghai Composite Index tumbled 6.5% on Wednesday after the government unexpectedly tripled duties charged on stock trades, the latest in a series of official steps taken to cool speculative activity and head off what many believe is a runaway equity-market bubble."

"Currencies trading provided little guidance for gold prices Wednesday. The dollar traded mixed against other major currencies in narrow ranges, showing little reaction to minutes from the Federal Reserve's latest interest-rate meeting, which offered few surprises."

"Crude-oil futures edged higher as traders awaited data on U.S. petroleum supplies due Thursday, one day later than usual because of Monday's Memorial Day holiday."

"There's a giant short position in the gold market that's hoping seasonal weakness, a consolidating U.S. dollar and no geopolitical concerns currently on the front page, can all help gold break below key support around $640, said Peter Grandich, editor of the Grandich Letter. 'It would be best to wait for a close above $665 before assuming the shorts have lost another battle,' he said."

"Silver prices spent most of the session trading lower, but recouped nearly all of their losses by the close. The July contract finished at $13.22 an ounce, down 0.3 cent, after gaining 22.3 cents in the previous session."

From Bloomberg. "The yen rose from a record low versus the euro after Chinese stocks slumped and investors sold emerging-market assets bought with money borrowed in Japan."

"Japan's currency advanced after China raised a tax on securities transactions to stem surging share prices. The yen has fallen 3.8 percent versus the euro this year as investors have been taking advantage of low borrowing costs in Japan to fund investment in higher-yielding assets elsewhere."

"The currency trimmed its gains as U.S. shares rose, easing concern that investors will flee global stocks. 'The yen has improved a bit on the back of the news from China,' said Christian Dupont, a senior currency trader at Societe Generale SA in Montreal. 'It will be short-lived. It isn't going to buck the trend of a lower yen.'"

"Japan's currency increased 0.1 percent to 163.45 per euro at 4:15 p.m. in New York, rising from a record low of 164.29 yesterday. It earlier reached as strong as 162.96 per euro in Asian session. The yen was little changed at 121.67 per dollar, after reaching 121.30 per dollar in Asian trading."

"The dollar strengthened against the euro as minutes from the Federal Reserve's May 9 meeting showed policy makers saw inflation as the 'predominant' concern for the economy."

"The Fed held borrowing costs at 5.25 percent at this month's meeting. The European Central Bank's benchmark is 3.75 percent and the Bank of Japan's key rate is 0.5 percent."

"The U.S. currency gained 0.1 percent to $1.3432, after earlier reaching $1.3407, the strongest since April 10. It has rebounded from a record low of $1.3681 set April 27."

"The Fed said in the minutes that inflation remains 'uncomfortably high,' and that the dollar's drop may 'reinforce the upward pressure on import prices.' They also pointed out the housing recession is likely to be a drag on the economy for longer than anticipated."

"The minutes are 'modestly dollar friendly,' said Alan Ruskin, head of currency strategy at RBS Greenwich Capital Markets. 'This is more evidence that the Fed is a long way away from supporting the easing story, that has faded fast, but is still priced in as a likely early 2008 event.'"

"Futures traders scaled back bets last week that the Fed will cut its overnight lending rate after reports showed consumer confidence gained and the housing market improved. Futures contracts show the chance of a cut in September has fallen to 12 percent, from 40 percent at the end of last month."

"The Taiwan dollar, also used to fund investments abroad, also advanced today as traders sold higher-yielding assets. Taiwan's dollar climbed against 12 of the 16 major currencies."

"China's benchmark CSI 300 Index of stocks tumbled 6.8 percent, the most in three months, after the Finance Ministry tripled the stamp duty on stock trading to 0.3 percent."

"A 9.2 percent slump in China's shares on Feb. 27 triggered a global stock rout, fueling a 2.3 percent gain in the yen against the dollar, the biggest increase since July 2005, as investors unwound so-called carry trades."

"The yen's gains were capped as U.S. stocks rebounded, erasing earlier losses. The Standard & Poor's 500 rose to a record. 'The decline in stocks triggered some correction in the yen carry trades,' said Dixon Fung, a currency trader at MG Financial Group. 'But the episode won't last long. The yen will remain weak until the Bank of Japan does something about interest rates.'"

"The yen has dropped against all 16 major currencies this year. It has fallen 2.1 percent versus the dollar, 6.5 percent against the Australian currency and 11 percent versus the Canadian currency."

"Euro declines may be limited after ECB council member Nicholas Garganas said the central bank will probably raise its inflation forecast next month and is keeping options ``open'' on rate increases after June."

"M3 money supply, which the ECB uses as a gauge of future inflation, rose 10.4 percent last month from a year earlier, after increasing 10.9 percent in March, the most since February 1983, the ECB said today."

"The Norwegian krone dropped against all 16 most actively traded currencies after the country's central bank signaled it will boost borrowing costs only gradually. The Norges Bank lifted the rate to 4.25 percent today."

Central Banks Warn On Inflation

2007-05-29T15:02:00.000-07:00

The Associated Press reports on currencies. "The dollar narrowed earlier losses Tuesday after a U.S. survey showed an unexpected recovery in consumer confidence. The 13-nation euro rose to $1.3453 in late New York trading, up from $1.3447 late Friday. The euro traded as high as $1.3520 during Tuesday's session after European Central Bank board member Axel Weber was quoted as pointing to possible inflationary pressures in the euro zone."

"The dollar pared its losses against the euro after the New York-based Conference Board said its Consumer Confidence Index rose to 108.0 in May, up from a revised 106.3 in April. Analysts had expected the reading to fall to 104.5."

"But news on the housing sector was less positive, with the Standard & Poor's housing index indicating that U.S. home prices fell 1.4 percent in the first quarter compared to a year ago, the first time since 1991 that prices posted a quarterly drop."

"U.S. economic data are being watched closely for pointers to the Federal Reserve's future interest rate course."

From MarketWatch. "The yen briefly rallied after news that China raised its stamp tax on securities trading triggered some unwinding of carry trades. But gains in the yen later fizzled as investors believed the hike is unlikely to have a major impact on China's stock market and currencies."

"'The news out of China is especially striking against the government's series of [recent] attempts to tighten liquidity,' said Sophia Drossos, currency strategist at Morgan Stanley. 'While we believe that the announcement may cause a wobble in risk appetite, it is unlikely to significantly derail market trends, as seen in the quick recovery from the late February Chinese stock plunge,' she said."

"The dollar was quoted at 121.63 yen, compared with 121.69 yen. Most financial markets in the U.S. and Europe were closed Monday. The British pound stood at $1.9810 vs. $1.9843. The dollar changed hands at 1.2253 Swiss francs, compared with 1.2276 francs."

"The euro touched a fresh record high against the yen after Weber, ECB council member and president of the German Bundesbank, in an interview with the Financial Times, said the current cycle of interest rate hikes is not over. 'If necessary we also have to move into a territory that is portrayed as being restrictive if that is needed to control inflation,' Weber said."

From Bloomberg. "The Bank of Canada said for the first time in a year that it's ready to increase interest rates because inflation is accelerating faster than it expected."

"The central bank may raise rates 'in the near term' should inflation stay above its 2 percent target, policy makers said today in a statement from Ottawa. The Canadian dollar rose to the highest level in more than 30 years and government bond yields surged. The bank, which kept the benchmark rate at 4.25 percent today, next meets on July 10."

"'The Bank is sending a point-blank warning,' about raising interest rates, said Doug Porter, an economist with BMO Capital Markets in Toronto. He predicts two quarter-point moves at the next meetings, in July and September."

"Gold futures climbed Tuesday for a second-straight session but finished below the day's best level, finding support from some weakness in the U.S. dollar, but pressured by a steep drop in oil prices."

"Gold for June delivery closed up $1.90 at $657.20 an ounce on the New York Mercantile Exchange, retreating from an earlier high of $661.90. The contract climbed $2 on Friday, but still lost $6.70 last week."

"Overall, 'not since the secular bull market began more than five years ago has there been such a pronounced increase in bearishness towards gold without an accompanying decline,' said Peter Grandich, editor of the Grandich Letter."

"'Unless these bears can get gold below $640 fairly soon, they may see their shorts squeezed all the way up to and through $700,' he said."

"'Traders are looking at gold as a strong value buy since stocks are recovering, and with the strong housing numbers last week and with higher gasoline prices, it appears that inflation can still present a problem,' said John Person, president of NationalFutures.com. 'Therefore it is a great time to add long positions.'"

"Also, the June gold futures contact has a first notice day on Thursday, 'so last week we may have seen a long liquidation and now traders are re-entering the further out months,' he said. 'This is adding to support in the gold market.'"

"The gold market 'has withstood tremendous pressure in the last few weeks with investment buying turning to selling and central bank sales at high levels again,' said Peter Spina, an analyst at GoldSeek.com. 'The market has held up solidly above support in the lower $650s, but [has been] unable to get over $663,' he said.

"Meanwhile, Spina pointed out that there's news the $11.4 billion Swiss-based Novartis Pension Funds will invest 4% of the funds into precious metals."

"'Gold and silver have upside bias during this shortened weak with terrific support just below these current levels,' Spina said."

"Silver prices were the biggest gainers among the metals Tuesday, with the July contract gaining 22.3 cents to close at $13.223 an ounce. September palladium fell 50 cents to finish at $372.55 an ounce and July platinum gave back $13, or 1%, to end at $1,264.80 an ounce."

Central Bank Sales "Weigh On Prices"

2007-05-25T13:51:00.000-07:00

Reuters reports on the markets. "Gold ended higher in New York afternoon trade on Friday, bouncing back from the nine-week low set on Thursday, and analysts said the metal might recover on bargain hunting and physical buying. But larger-than-usual gold sales by European central banks in the past weeks might weigh on prices, they said."

"'At some stage, we would expect the downside to fade a little bit, giving some room for an upside swing. You start to feel now that there is some hesitation in the selling,' said Frederic Panizzutti, precious metals analyst at MKS Finance. 'We would expect gold to bounce back from around these levels. The dollar remains a key factor,' he said, adding physical buying was likely to be good."

"Gold was quoted at $655.35/655.85 an ounce by 3:02 p.m. EDT, against $653.20/653.70 in New York late on Thursday, when it fell as low as $651.30. Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled up $2.00 at $655.30 an ounce, trading between $653.30 and $656.90."

"'The fact that the speculative community is still holding relatively large long positions in gold adds an additional layer of downside risk if U.S. dollar strength continues,' Deutsche Bank said in a research note. 'We are maintaining our core bullish view on gold based on U.S. dollar strength fading and new record lows being hit during 2007.'"

"Traders said gold sales by European central banks under a five-year pact that started in late 2004 had dampened sentiment. On Tuesday, the European Central Bank said it sold 280 million euros of gold and gold receivables. Some analysts said the bank had accelerated sales recently to catch up with its slower sales pace early this year."

"In May, the Bank of Spain sold 1.3 million ounces of gold from its reserves, after it sold another 1.3 million ounces in March. In April, the Bank of France disclosed that it had sold 105 tonnes of gold in 2006."

"Silver rose 13 cents to $12.95/12.98 in New York compared with its last quote on Thursday in New York."

From MarketWatch. "Gold futures closed higher Friday as news reports that North Korea has test-fired several missiles boosted the metal's appeal as a safe-haven investment, but prices still closed out the week 1% lower after tumbling more than $9 an ounce in the previous session."

"'Once gold prices hit close to $650, that level is considered a bargain by many traders...especially if you see energy prices accelerating inflationary pressures,' said John Person, president of NationalFutures.com. 'The housing numbers are strong, the U.S. and global economy is still strong, so gold is considered a value play here, especially since it has traded close to $650 this week,' he said."

"Among the other metals trading in New York, platinum and palladium prices moved lower Friday. 'There is some jawboning in the market now from investment houses sponsoring ETFs on European bourses that a U.S. ETF in platinum or palladium will never happen,' said Neal Ryan, direct of economic research at Blanchard. But even without the advent of a U.S. platinum-group metals exchange-traded fund, the European PGM ETFs are 'starting to show that while small and slow so far, there is some appetite for investing in the PGM ETFs in Europe.'"

"'If these platinum and palladium ETFs can end up impacting even 3% to 5% of the demand side of the market, they will significantly influence the price, he said."

"July platinum closed down $12.90 at $1,277.80 an ounce. It lost 3.6% from a week ago. June palladium fell $1.30 to close at $367.80 an ounce, which was up 0.7% from the week-ago close."

Gold Is Precariously Hanging On

2007-05-24T14:51:00.000-07:00

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.'"

A Prescription For Dollar Weakness

2007-05-23T13:59:00.000-07:00

Reuters reports on currencies. "The dollar fell on Wednesday after minutes from a Bank of England policy meeting and strong data on euro zone industrial orders suggested interest rates in Europe could rise more than previously thought. The pound surged against the dollar after the BoE minutes showed that, contrary to expectations, the central bank's decision to raise rates this month was unanimous, and some members even had considered a half percentage point rise."

"'There's been a complete readjustment of interest rate expectations that caught everyone flat-footed, and now you're starting to see some short covering and the dollar strength that we've seen getting reversed,' said Boris Schlossberg, senior currency strategist at DailyFX.com."

"By late afternoon, the euro was trading at $1.3458, up 0.1 percent but off an earlier session high of $1.3502. Sterling was up nearly 0.6 percent at $1.9857, having rallied more than 1 cent after the release of the minutes."

"Elsewhere, the Canadian dollar hit a 29-1/2-year high of 1.0817 to the U.S. dollar, extending a rally driven by rising oil prices and a bidding war by foreign suitors for Canadian companies in the natural resources sector."

"But the dollar still faces a rough road ahead, said Alex Beuzelin, market analyst at Ruesch International in Washington. 'While the market has ratcheted back expectations of U.S. rate cuts, the euro zone and UK numbers today suggest higher rates there, and that's a prescription for renewed dollar weakness,' he said."

The Associated Press. "Gold and silver futures rose in light trading conditions Wednesday, boosted by a softer U.S. dollar. June gold settled up $2.70 at $662.60 a troy ounce on the New York Mercantile Exchange. July silver settled up 11.5 cents at $13.105."

"'You have the dollar coming back down, which is supporting the precious metals,' said Michael Gross, broker and futures analyst with Liberty Trading."

"July platinum settled up $8.30 at $1,307 an ounce. June palladium settled down $1 at $377.55."

From MarketWatch. "'Although far from being out of the woods, gold enjoyed a more constructive mid-week session as light buying emerged on the back of a marginally declining U.S. dollar against the euro,' said Jon Nadler, metals analyst at Kitco Bullion Dealers."

From Bloomberg. "Former Federal Reserve Chairman Alan Greenspan said he was concerned Chinese stocks might undergo a 'dramatic contraction' after its main stock index jumped more than 90 percent this year."

"The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose to a record 3938.95 today. The index more than doubled last year as investors bet corporate profits would be boosted by the world's fastest-growing major economy."

"'It is clearly unsustainable,' Greenspan told a conference in Madrid today by satellite. 'There is going to be a dramatic contraction at some point.'"

"China last week increased the amount it lets the yuan move against the dollar and raised interest rates to restrain economic growth and a swelling trade surplus. U.S. lawmakers said the steps weren't enough to forestall legislation to punish China for maintaining what many charge is an artificially cheap yuan to stoke exports."

"Greenspan today said the global financial system remains resilient. 'I am not worried about the system overall, but I am worried about some parts,' he said. 'I am concerned for example about China.'"

From CNN Money. "Cheap debt has never flowed as freely as it does now, but the credit boom won't last forever, experts say. 'The numbers have gotten so big and there is such a lack of recognition of risk. Whenever you go this far, things tend to turn out very badly,' said David Tice, manager of the Prudent Bear funds."

"Defaults are likely to mount quickly if a notable company unexpectedly collapses, says Sean Egan, managing director of independent ratings firm Egan-Jones. 'It has to be a major company, it could be an auto company that has difficulty with cash flow - in order for it to really be a drag on the market,' he said."

"While the economy has slowed, fundamentals still remain strong, said Eric Takaha, director of high-yield research and portfolio manager for Franklin Advisers. 'We don't see a dramatic surge in defaults in the near future; there just aren't enough companies that are close to the edge,' he said."

"Hedge funds have become important lenders in the booming market for leveraged loans, those loans given to highly-indebted companies. Leveraged loans have ballooned amid the buyout frenzy and keep growing. Leveraged loan volume surged to $183 billion in the first quarter, up 55 percent from the same period a year ago, according to Standard & Poor's."

"But many of these hedge fund lenders haven't experienced the ups and downs of the credit cycle, and it's unclear how they will react when market conditions take a turn for the worse, industry watchers said."

The Bearish Tone Is Not Over

2007-05-21T14:00:00.000-07:00

The Associated Press reports on currencies. "The euro slid against the U.S. dollar in trading Monday, but rose to a new high against the Japanese yen on moves by China. The 13-nation euro bought US$1.3440 in afternoon trading, down from the US$1.3505 it bought in New York trading late Friday."

"Against the yen, the euro rose after the Japanese currency was ignored by a weekend meeting of finance officials with the Group of Eight near Potsdam, Germany. The yen's fall came after China on Friday agreed to let its yuan rise faster against the dollar and to cool its sizzling economy ahead of what are expected to be contentious talks in Washington over Beijing's soaring trade surplus."

"The free-floating yen sometimes acts as a proxy to the tightly managed yuan on currency markets. The U.S. dollar bought 121.54 yen, compared with 121.15 yen late Friday."

"The Chinese central bank cautioned that the latest change, widening the band in which the yuan is allowed to fluctuate against the dollar, will not lead to "large appreciations" for the yuan."

From Reuters. "'The dollar is doing well against the euro and yen and (is helped by) the Goldilocks scenario in the U.S., where's there's not too much worry about a hard landing,' said David Powell, currency strategist at IDEAglobal in New York."

"'In terms of the dollar's performance against the euro, long euro/dollar has been a very crowded trade based on the specs (trading) data last week. Euro longs hit another record high and people are reluctant to bring it any higher without a fundamental story to back it up,' he added."

"Following China's move, Kuwait over the weekend switched to a basket system from a dollar peg. Analysts said the pressure for managed currencies to move toward a floating regime will only intensify."

"'It will do so because countries can't cope with the liquidity created by fixed currency systems when the dollar is weak and it will also do so because there is political pressure from G7, particularly the U.S.,' said Bear Stearns in a research note."

From MarketWatch. "Gold futures climbed Monday, overcoming strength in the U.S. dollar to follow oil prices higher and regain some lost ground, after a more than $10-an-ounce loss last week. 'After the declines last week, we expected some bounces,' said Jon Nadler, an analyst at Kitco Bullion Dealers. The climb is 'probably good for $665 or so at the least.'"

"'It may take a handful of closing at levels of well over $665 to turn this ship around for sunnier climes and somewhat warmer waters,' he said. 'The bearish tone is not over.'"

"Gold for June delivery closed up $1.80 at $663.70 an ounce on the New York Mercantile Exchange, bouncing from a low of $657.50. Other metals prices closed higher, with the exception of platinum, which saw its July contract give back $6.50 to close at $1,319.70 an ounce, extending last week's loss of more than $15."

"June palladium tacked on $9.05 to end at $374.30 an ounce, July silver added 12.7 cents to close at $13.13 an ounce."

"Meanwhile, the World Gold Council reported that investment demand was down in the first quarter, according to Nadler. 'Gold cannot ignore a 26% drop in investment demand at a time when physical demand was already not so hot,' he said."

"So, 'yes, it does look like $650/$630/$605 are the next bowling pins down the lane,' he said. 'But we are sure to hear that all is well and the bull market has resumed, as soon as we get the next $20 upside pop.'"

"Palladium is moving higher 'underscoring what we have seen from some clients taking positions in the physical metal,' said Neal Ryan, director of economic research at Blanchard. 'This is allowing some investors to benefit from increasing ETF demand in Europe and the potential, however remote, that ETFs may possibly spring up in the United States.'"

"At the same time, Ryan pointed out that while platinum and palladium continue to grab the headlines in the precious-metals markets and sentiment around the markets become increasingly bearish toward the outlook for gold and silver, 'we believe it is the true contrarian that will benefit from the situation at hand.'"

"'The fundamental picture for the market continues to improve and it might be good to have the gold and silver markets take some time away from the constant market analysis while some technical damage is repaired,' Ryan said."

Gold Bounces On China Move

2007-05-18T12:34:00.000-07:00

MarketWatch reports on the markets. "Gold futures posted modest gains Friday, as weakness in the dollar, which fell against the yen after China widened the yuan's trading band, underpinned demand for the precious metal. Gold for June delivery closed up $4.80 at $662.0 an ounce on the New York Mercantile Exchange. However, gold futures have lost more than $10 on the week."

"'The dollar giving up some of its recent gains certainly propped gold higher today,' said David Meger, senior metals analyst at Alaron Trading. 'It prompted a bit of short covering in the precious metals market.'"

"There has also been 'a lot of speculation about the bank of China tightening their monetary policy,' Meger said. That speculation will likely be a negative force towards both the base and the precious metals in the near term."

"'This [move was] in an effort to curb rampant speculative fever and overheating conditions in its markets,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'We cannot over-emphasize the bearish implications of this initial move to curb the euphoria that has buoyed speculators for so long,' Nadler said."

"Japan's yen gained on the news from China. The dollar traded mixed against other major currencies ahead of a report expected to show U.S. consumer sentiment fell slightly this month."

"Other metals prices also posted gains. July platinum closed up $8.30 at $1,326.20 an ounce. June palladium rose $4.85, or 1.4%, to close at $362.25 an ounce. July silver ends up 12.0 cents at $13.003 an ounce."

From China Daily. "China will widen the floating band of yuan against US dollar from 0.3 percent to 0.5 percent as of May 21, the People's Bank of China, or the central bank, announced on Friday."

"'The higher flexibility indicated that the fluctuations of yuan will rely more on market forces. It's a good step forward in the correct direction,' said Zuo Xiaolei, an analyst with Galaxy Securities."

Shorts In Control Of PM Market

2007-05-17T13:37:00.000-07:00

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 Forex.com."

"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."

Bullish Gold Sentiment "Almost Nil"

2007-05-16T15:00:00.000-07:00

MarketWatch reports on metals. "Gold futures dropped $13 an ounce to close Wednesday at their weakest level in two months, as better-than-expected U.S. housing starts and industrial production in April lifted the dollar to an almost three-month high against the yen, weakening demand for the precious metal."

"Gold for June delivery lost 1.9%, or $13, to close at $661.50 an ounce on the New York Mercantile Exchange, a level not seen since March 19. 'We believe the fall in gold reflected the performance of the dollar,' said Julian Phillips, an analyst at GoldForecaster.com."

"July silver also dropped 2.9%, or 38.5 cents, to close at $12.93 an ounce. That was its lowest closing level since March 5."

"The dollar rallied across the board Wednesday, touching its highest level in almost three months against the yen after reports showed stronger-than-expected U.S. housing starts and industrial production for last month."

"'Funds are obviously increasing their yen carry trade loans given the weakness in the Japanese yen,' said Ned Schmidt, editor of the Value View Gold Report. 'Those monies are flowing into paper assets. All of this is creating an excellent buying opportunity' for gold, he said."

"'While it's the worst seasonally favorable period for gold (May-August), numerous technical indicators are screaming for a major bottom as early as today or on a wash-out to $650,' said Peter Grandich, editor of the Grandich Letter. 'The bullish sentiment among gold timers is almost nil -- another bullish factor that says we're close to a major bottom,' he said."

"'The emergence of support around $665 yesterday is encouraging, with further support expected at $662 to $660 and around the 100-day moving average at $658.75,' said James Moore, metals analyst at TheBullionDesk.com. 'However, further failures to climb towards key resistance pegged at $694 might encourage another round of long liquidation from fund players,' he said."

"Other metals prices were lower Wednesday. June palladium shed 95 cents to close at $357.50 an ounce and July platinum fell $13.80 to end at $1,325.80 an ounce."

From Bloomberg. "The yen traded near a three-month low against the dollar on speculation signs of weakening growth will keep the Bank of Japan from lifting borrowing costs at a faster pace this year."

"'The BOJ is hesitant to hike interest rates aggressively as economic data have been on the soft side,' said Brian Dolan, research director at Forex.com. 'The market doesn't expect the BOJ to do anything in the near term, which encourages yen selling.'"

"The yen traded at 120.79 per dollar and 163.26 per euro at 6 a.m. in Tokyo. The Japanese currency fell 0.5 percent against the dollar yesterday and touched 120.84, the weakest since Feb. 26. The yen also reached an all-time low of 163.90 per euro yesterday."

"The dollar traded at $1.3515 per euro. The U.S. currency strengthened 0.6 percent yesterday against the euro, the most since March 5. The U.S. currency tumbled to a record low of $1.3681 per euro on April 27, and has lost 2.3 percent this year against the euro on bets the U.S. economy will trail Europe's."

"New Zealand's dollar fell on speculation the U.S. economy is performing better than expected, reducing the prospect of a cut in interest rates there and luring investors back to the dollar."

"The U.S. currency rose to its highest in almost three months against the yen after reports showed industrial production increased more than expected and housing starts unexpectedly advanced, diminishing chances the Federal Reserve will cut rates."

"The New Zealand dollar, known as the kiwi, gained 17 percent in the past 12 months, supported by borrowing costs 2.5 percentage points higher than the U.S.' 5.25 percent rate."

"'The U.S. data pushed at the timing of Fed rate cuts,' Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington said. 'The U.S. dollar made a recovery and that kept the kiwi under pressure.'"

"The New Zealand dollar fell 0.6 percent to 73.29 U.S. cents at 9:11 a.m. in Wellington, from 73.73 cents in late Asian trading yesterday."

"New Zealand's record official cash rate is the highest after Iceland's among countries with the top rating at Moody's Investors Service. It is the best performing major currency tracked by Bloomberg in the past 12 months."

"The currency has gained 29 percent against Japan's yen in the past year, buoyed by the so-called carry trade, where investors borrow cheaper currencies to invest in higher yielding assets elsewhere. Japan's 0.5 percent target rate is the lowest among major economies, and is 7.25 percentage points lower than New Zealand's."

"The local dollar's decline was helped by Japan's Trade Minister, Akira Amari, Hampton said. Interest rates will eventually rise to levels where it would diminish the impact of the carry trade, Amari said May 16 in Paris, according to the Reuters newswire."

"'The comments knocked the kiwi lower against the yen,' Hampton said. New Zealand's currency traded at 88.54 yen, from 88.84 yen in late in Asia yesterday."

US$ Down On Inflation Report

2007-05-15T13:57:00.000-07:00

The Associated Press reports on currencies. "The dollar fell against the euro and British pound Tuesday after a tame U.S. inflation report damped expectations for higher interest rates in the world's largest economy. The euro rose as high as $1.3608 before settling back to $1.3592 in late New York trading, up from $1.3541 late Monday. That put the 13-nation currency back within one cent of its all-time high of $1.3682, reached last month."

"The pound rose to $1.9853 from $1.9732, while the dollar barely fell to 120.26 Japanese yen from 120.29 yen."

"The U.S. Labor Department reported that consumer prices rose by 0.4 percent last month following a 0.6 percent jump in March. The April increase was slightly lower than expected, even though gasoline prices surged."

"Economic data are being watched closely for clues on the Federal Reserve's future interest rate course. Higher interest rates, used to combat inflation, can bolster a currency by making certain types of investments more attractive."

"The European Central Bank has increased rates steadily over recent months and is expected to raise them at least once more, while the U.S. Federal Reserve is expected to continue leaving its rates unchanged."

"In other trading, the dollar bought 1.2153 Swiss francs, down from 1.2189 late Monday, and 1.0982 Canadian dollars, slipping from 1.1072."

From MarketWatch. "Gold futures climbed more than $4 an ounce Tuesday to close at a nearly one-week high, moving inversely with weakness in the U.S. dollar on the heels of fresh U.S. economic data, which showed that consumer inflation eased a bit in April."

"Gold for June delivery closed up $4.40 at $674.50 an ounce on the New York Mercantile Exchange after trading at $675. The contract marked its strongest close since May 9."

"Strength in oil prices, which sparked concerns over the economy, also contributed to gold's climb Tuesday. June crude climbed above $63 a barrel for the first time since May 4."

"Other metals prices were mixed. June palladium fell $2.25 to finish at $358.45 an ounce while July platinum tacked on $10.30 to end at $1,339.60 an ounce.
Prices for the platinum group metals declined Monday after a report released Monday from metals refiner Johnson Matthey said palladium demand fell in 2006 and the market ended the year with a surplus of supplies."

"Meanwhile, July silver followed gold higher, closing 8 cents higher at $13.315 an ounce on Nymex. The '2007 Silver Yearbook,' issued by researchers CPM Group late Monday, painted a 'bullish picture for the silver market as surging investment demand and lower mine supplies easily negated lower industrial demand,' James Moore, an analyst at TheBullionDesk.com, said."

"Jon Nadler, metals analyst at Kitco Bullion Dealers, also cited the CPM Group report, pointing out that global investors, for the first time since 1989, were net buyers of silver during 2006."

"'This development is seen by CPM as being as important to the silver market as our oft-cited gold market news that since 2005 investors own more gold than all central banks put together,' Nadler said."

Gold "Cracks A Bit"

2007-05-14T14:24:00.000-07:00

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 TheBullionDesk.com'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.'"

Gold Sentiment "Damaged"

2007-05-11T13:39:00.000-07:00

MarketWatch reports on precious metals. "Gold futures closed higher Friday, staging a partial recovery from a more than $15-an-ounce drop in the previous session as strength in oil prices and some weakness in the U.S. dollar lent support to the precious metal.
But Thursday's drop in the benchmark June gold contract to its lowest closing level since late March was the biggest contributor to the $17.40, or 2.5%, loss in prices for the week."

"'Only about a third of yesterday's damage was offset by today's bounce, and the mood remains cautious, at best. A marginal decline in the U.S. dollar gave gold prices the smelling salts they so badly needed after yesterday's swoon,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Gold for June delivery rose $5.30 to close at $672.30 on the New York Mercantile Exchange Friday."

"'Gold is recovering after this morning's clearly disappointing retail-sales number and PPI lift,' said Kevin Kerr, editor of Global Resources Trader. 'Bond bulls are back and the dollar bears seem to have all the ammunition they need to take the greenback down a few pegs at this point, and they likely will,' he said."

"But the contract closed down $15.50, or 2.3%, at $667 an ounce Thursday to mark a seven-week low after the dollar rose to a one-month high against the euro. Peter Grandich, editor of the Grandich Letter, said traders were disappointed that gold could not breach the $700 level. That 'led to some chart selling, a short-covering rally in the U.S. dollar and an unusually high number of outstanding contracts that need to be rolled over on the Comex,' he said. 'So, gold is back at the key support level around $665.'"

"'I expect some sloppiness for the near term, but I see the $700 level being taken out before the end of June,' he said."

"Still, sentiment has been 'damaged' as gold lost around 3% in the latest slide since April 23, said Nadler. 'Traders are suddenly much more aware of minute details such as the cessation of the May Indian wedding season tomorrow,' he said. 'The astounding drop in retail sales that hit the markets...yesterday still should be fully factored in before making any rash trading decisions.'"

"In the backdrop, the dollar dipped against other major currencies after government reports showed weaker-than-expected U.S. retail sales and benign core wholesale inflation for April."

"For now, strength in oil prices appeared to provide some support, with higher energy prices raising gold's appeal as an investment hedge. Crude-oil and gasoline futures extended their gains Friday as traders continued to show concern over U.S. gasoline supply levels ahead of the summer-driving season."

"Other metals prices followed gold higher, with July silver up 16.5 cents to close at $13.305 an ounce, though it was 1.7% below last week's close. July platinum rose $17.50 to finish at $1,341.70 an ounce, up almost $13 from a week ago. June palladium added $4.90 to close at $368.65 an ounce, finishing below last week's close of $377."

From Reuters. "Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled up $5.30 at $672.30 an ounce amid heavy volume, after prices also hit a five-week low on Thursday. Traders said short positions were being reversed after data showed tumbling U.S. retail sales and subdued inflationary pressures."

"'It took a while, but the dollar came off after the data, people started to think about rate cuts,' a London-based trader said. 'Higher oil prices will help precious metals.'"

"However, even though the dollar is lower, it is still near one-month highs against the euro. That, combined with Thursday's stock market losses, points to a nervous mood among investors, who are likely to sell their holdings, including gold, much as they did earlier this year."

"'There's a whiff of risk aversion in the air, and that seems to be encouraging people to reduce risk,' said John Reade, analyst at UBS, adding that many asset prices had returned to levels before the correction started in February."

"Gold bulls expected prices would eventually test the 26-year highs of $730 an ounce set last May. But that hope faded and gold's prospects could deteriorate further if U.S. Treasury Secretary Henry Paulson's support for a stronger dollar is the beginning of a new trend."

"Analysts also cited heavy sales by European central banks for gold's decline. The Bank of Spain on Thursday said it sold 1.3 million ounces of gold from its reserves in April and another 1.3 million ounces in March."

"Another major indicator of investor sentiment is the volume of flows into and out of exchange-traded gold funds. The New York-listed StreetTracks gold fund, the world's largest gold ETF, which accounts for about 80 percent of the metal jointly held by such funds, lost more than five tonnes between Wednesday and Thursday."

"'We tend to concur with the ETF trends,' JPMorgan said in a note. 'Combined with a weak volatility environment, the most likely outcome in the very short term is further selling on rallies towards the top end of the $685 to $695 ounce range.'"

Gold Consolidates On Rate Questions

2007-05-10T13:37:00.000-07:00

MarketWatch reports on the markets. "Gold futures dropped more than $15 an ounce Thursday to close at their lowest level in seven weeks, as mixed U.S. economic data and comments from the European Central Bank chief helped push the U.S. dollar to a one-month high against the euro. Gold for June delivery closed down $15.50, or 2.3%, at $667 an ounce on the New York Mercantile Exchange. That was the contract's lowest closing level since March 23 though during the session, it fell to $666, an intraday level not seen since April 2."

"The June gold contract has now lost $23.40 in a three-session losing streak."

"The 'dollar looks stronger today, [so] the funds are pressing gold down to support levels,' said Julian Phillips, an analyst at GoldForecaster.com. 'The dollar is fighting hard not to fall, despite a fundamental picture that says it should. Once it gives us clear direction, gold will react too,' he said."

"Overall, 'it does seem the market is lacking some clarity in short-term direction, and may suggest further consolidation could be on the cards,' said James Moore, an analyst at TheBullionDesk.com."

"On Thursday, the European Central Bank left its interest rates at 3.75% and signaled a rate increase in June. Comments from ECB President Jean-Claude Trichet indicated 'that maybe the ECB's tightening campaign is a little bit closer to the completion than people had thought, and that has caused some of the change-over in sentiment,' said David Watt, senior currency strategist at RBC Capital Markets. So some investors 'are taking some long euro and short dollar positions of the table.'"

"Against this backdrop, the dollar touched two-month peak against the yen and a one-month high vs. the euro Thursday."

"Meanwhile, the Bank of England implemented its fourth rate rise since August, raising base rates by a quarter-point to 5.5%. And the Federal Reserve decided Wednesday to hold short-term interest rates steady and said nothing that indicates it is prepared to move interest rates anytime soon."

"'What rattled the markets was their statement that inflation risks are `somewhat elevated',' according to Mike Rapson, an analyst at Man Financial. Rapson wrote in his daily metals report that 'those looking for a rate cut this year now need to reevaluate their positions.'"

"But Phillips pointed out that the 'impression given is that it will react to higher inflation but will not preempt it. [So] the dangers of inflation with falling growth [stagflation] are now apparent,' he said. 'This is gold-positive and dollar-negative as the trade deficit will continue at excessive levels in a climate that could discourage the investment of surplus dollars [Asian nations in particular] back into the States,' he said."

"Other metals prices also posted losses. July silver fell 33 cents to close at $13.14 an ounce, marking the contract's lowest closing level since March 14."

"July platinum fell $15.30, or 1.1%, to close at $1,324.20 an ounce and June palladium declined $6.65 to end at $363.75 an ounce."

Gold Follows Oil On Fed Inaction

2007-05-09T13:43:00.000-07:00

Reuters reports on the US dollar. "The dollar gained against the euro and yen on Wednesday after the Federal Reserve held benchmark U.S. interest rates steady and said its main worry is that inflation will fail to moderate."

"'The dollar is gaining across the board because the Fed made no recognition of the March slowdown in core inflation, the slowdown in payrolls, industrial production, and consumer spending,' said Ashraf Laidi, chief FX analyst at CMC Markets in New York. 'The fact that the Fed shrugged off these important factors is a signal to the market that the Fed will hold rates steady for the rest of the year.'"

"The euro was down 0.1 percent at $1.3525 after the decision while dollar/yen gained 0.1 percent at 120.09 yen."

"In a statement outlining its decision that hewed closely to its last announcement in late March, the Fed nodded to recent sluggish economic growth, but held to its view that the economy was likely to expand at a moderate pace in coming quarters. It also said: 'Core inflation remains somewhat elevated.'"

"Investor focus now shifts to rate decisions on Thursday from the Bank of England, which is seen raising rates to 5.5 percent, and the European Central Bank, which is likely to hold rates at 3.75 percent but signal a hike in June. Sterling was up 0.2 percent at $1.9934."

"A spate of soft U.S. economic data has helped push the dollar to record lows against the euro and 26-year lows against sterling. Michael Woolfolk, senior strategist at The Bank of New York, said the euro may test its lifetime high above $1.3680 and make a run at $1.3700 by the end of the week."

From MarketWatch. "Gold futures closed lower Wednesday, as crude-oil prices plunged, dragging metals prices down along with them. Before the Federal Reserve announced that it kept rates on hold as expected, gold for June delivery ended down $4.90 at $682.50 an ounce on the New York Mercantile Exchange."

"'Despite indications that waiting for the Fed to decide the fate of interest rates was going to at least hold gold near $685, the falling price of crude oil impacted the bullion market first,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'Any post-Fed rebound may indeed be feeble at this point, as the market appears to be looking for renewed tests at lower levels,' Nadler said."

"'The latest Fed decision should have little or no impact on the secular bull market in gold past a few hours or days,' said Peter Grandich, editor of the Grandich Letter. 'There's no way the Fed can raise rates, especially after they noted the housing decline is still 'on-going.'"

"'This means little help for the terminally ill U.S. dollar, other than short-covering rallies and profit-taking,' Grandich said. 'Gold's ability to march towards $700, albeit slower than some expected, is a testament to the physical demand in the face of heighten central bank selling and bears trying to cap the market.'"

"In after-hours, electronic trading, gold futures fell $5.10 to $682.30 an ounce. After the Fed decision, the dollar edged higher against the euro."

"Also on Nymex Wednesday, July silver fell 13.0 cents, or 1%, to $13.470 an ounce, July platinum fell $3.70 to $1,339.50 an ounce, and June palladium fell $5.55 to $370.40 an ounce."

Markets Hesitate Ahead Of Rate Moves

2007-05-08T14:37:00.000-07:00

The Associated Press reports on currencies. "The dollar rose against the euro Tuesday after German industrial production fell more than expected in March. The 13-nation euro was quoted at $1.3545 in late New York trading, down from $1.3603 Monday and well off last month's all-time high of $1.3682."

"The euro dropped after the German Economy Ministry reported industrial production in the country fell 0.1 percent in March, compared with a 0.4 percent gain the month before. Analysts had expected the figure would remain unchanged."

"The British pound fell to $1.9889 from $1.9931 late Monday, and the Japanese yen slid to 119.95 from 120.11. In other trading, the dollar bought 1.2172 Swiss francs, up from 1.2115 late Monday, and 1.1048 Canadian dollars, rising from 1.1020."

"The drops came as central banks in Europe, Britain and the United States are set to meet this week."

From Bloomberg. "New Zealand's dollar may strengthen on speculation the interest-rate gap with the U.S. will remain unchanged, luring investors to the nation's higher-yielding assets. The local dollar bought 73.73 U.S. cents at 9:12 a.m. in Wellington, from 73.82 cents in late Asian trading yesterday."

"New Zealand's currency fell yesterday after investors trimmed their investments in the carry trade, said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. The New Zealand currency traded at 88.44 yen, from 88.47 yen late in Asia yesterday. The carry trade has helped the local currency gain 27 percent against the yen the past year."

"'The market tends to interpret Federal Reserve comments as quite dovish and hasn't fully discounted the risk of rate cuts,' said Meg Browne, currency strategist at Brown Brothers Harriman & Co. in New York. 'We'll probably see some strength in the kiwi on anticipation of that U.S. dollar weakness.'"

From Reuters. "A stronger dollar against the euro and follow-through sales from the previous session sent gold futures to a lower finish on Tuesday, as investors held their bets ahead of interest-rate decisions from major central banks this week."

"Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled down $3.00 at $687.40 an ounce, traded in a range of $684.10 to $691.30."

"The euro slid against the dollar on technical chart-based selling. A stronger greenback makes dollar-denominated assets like gold more expensive for investors holding other currencies. Bart Melek, global commodity strategist at BMO Capital Markets, said in a note that gold stayed relatively firm after easing in early morning trade as investors positioned ahead of the Federal Open Market Committee rate-setting announcement on Wednesday."

"Melek said he expected selling pressure in the dollar and global inflation concerns should lift gold 'materially' above $700 an ounce later in the year."

"With the Federal Reserve, European Central Bank and Bank of England all setting interest rates this week, precious metals investors were unwilling to add to their current positions."

"Investors will take their cues from the rate-setting decisions, which often affect gold prices because of interactions in the currency markets."

"Spot gold was quoted at $684.30/5.80 an ounce, below a late quote of $688.90/9.40 in New York on Monday. The London afternoon gold fix was set at $684.25 an ounce."

"COMEX July silver finished down 4.0 cents at $13.600 an ounce, traded from $13.405 to $13.665. Spot silver was quoted at $13.48/3.51 versus $13.51/3.54, its previous finish late Monday in New York. Silver fix was set at $13.48 an ounce in London."

"Platinum futures fell on Tuesday after they hit a life-of-contract high on Monday due to strong buying in the Asia markets. July platinum ended down $7.70 at $1,343.20 an ounce. Spot platinum fetched $1,333.00/1,338.00."

"June palladium dropped $3.25 to close at $375.95 an ounce. Spot palladium was quoted at $370.00/374.00."

"It's All A Currency Play"

2007-05-07T13:14:00.000-07:00

MarketWatch reports on the markets. "Gold futures advanced on Monday to mark a three-session win of more than $15 an ounce as the U.S. dollar fell against other major currencies, underpinning demand for the precious metal. For this week, 'it's all a currency play,' said Neal Ryan, director of economic research at Blanchard. 'With the Europeans and Asian central banks continuing to raise rates while the Fed is in no position to do the same,' gold and, to a smaller extent, silver are 'becoming great currency plays.'"

"Gold for June delivery gained 70 cents to close at $690.40 an ounce on the New York Mercantile Exchange. The contract closed below the day's high of $693.20, but it's tallied a $15.30, or 2.3%, gain in three trading sessions."

"The dollar fell against other major currencies but stayed in narrow ranges Monday, as investors awaited central-bank meetings on interest rates in the U.S. and Europe later in the week."

"'Precious metals and the dollar index will be very volatile on interpretation of the language in the Fed statement, but we believe that after the news is digested and the ECB/Bank of England raise rates on Thursday, the dollar should come under renewed pressure to the downside while precious metals enjoy the bounce,' said Ryan."

"'This week should go a long way toward underscoring the importance of gold and silver trading as currency alternatives,' Ryan said. For now, he said he's 'waiting to see if today or tomorrow we challenge the $694-$695 resistance level that a lot of analysts have pegged as the major resistance point right now.'"

"'If we reach and eclipse that level before the Fed meeting and get some dollar-negative news out of the Fed this week, I think we'll finally be up and over the $700 and off to test the $730 high in a flash,' Ryan said."

"Also on the Nymex Monday, July silver rose 11 cents to close at $13.64 an ounce, July platinum gained 1.7%, or $22.10, to finish at $1,350.90 an ounce and June palladium rose $2.20 to close at $379.20 an ounce."

"Crude futures fell Monday to close at their lowest level in almost seven weeks, tallying a loss of more than 7% during a losing streak that's spanned six sessions. Traders were betting that U.S. data, due later this week, will reveal ample supplies of crude and gasoline inventories may have even declined."

"Crude oil for June delivery fell 46 cents, or 0.7%, to close at $61.47 a barrel on the New York Mercantile Exchange after a low of $60.90. The contract hasn't traded or closed at a level this low since March 21."

"It 'looks like some [supply] estimates have builds or only small draws likely this week,' said Jason Schenker, an economist at Wachovia Corp. 'That price is bearish.'"

From Bloomberg. "Central bank officials are not the only people distressed by lax lending standards. Even the deal makers who depend on low-cost financing with few strings attached are complaining that money is too cheap and there are not enough strings."

"'There's too much liquidity in the system,' Philip Yea, chief executive of the largest publicly traded venture-capital and buyout firm in Europe, said last month. 'There's too much debt available.'"

"Steve Rattner, co-founder of Quadrangle Group, a buyout firm, said in January that 'the world isn't pricing risk appropriately. Investors are simply not being paid for the risks they're taking.'"

"Larry Fink, chief executive of BlackRock, a fund manager based in New York, said the subprime debacle had had a domino effect on the rest of the credit market - just not the one you might have expected."

"'We're seeing fewer investments in subprime, but that money needs to be put to work so they're going into other credit markets,' said during a recent interview with The Financial Times. 'Historically, when we've seen one problem, we've seen an adjustment throughout the marketplace. We've seen no indication of that yet. We've seen the actual opposite.'"

"US$ Weakness Remains Focal Point"

2007-05-04T14:43:00.000-07:00

MarketWatch reports on the markets. "Gold futures closed near $690 an ounce Friday to mark their strongest finish in nearly two weeks as the U.S. dollar fell against major currencies in the wake of data that showed the smallest increase in payroll employment since November 2004."

"'The U.S. dollar's ,' said Peter Spina, an analyst at GoldSeek.com. 'Gold will push up against the $700 resistance and either see another rally fizzle or see a large wave of momentum kick in and take this market much higher.'

"Still, Spina said the outlook is unclear. 'I am unable to foresee which route we are headed as the bears and bulls struggle to get the upper hand.' For now, 'the market remains firm on pullbacks, so the inevitable break of $700 is just a question of when,' he said."

"Gold for June delivery gained $5.30 to close at $689.70 an ounce on the New York Mercantile Exchange, its highest closing level since April 23. On Thursday, gold futures gained $9.30, the benchmark contract is up $7.90, or 1.2%, for the week."

"'Look for continued strength as the day wears on, but keep a keen eye on next week as all market participants will be back in full force and as the Fed watching gets under way,' said Jon Nadler, analyst at Kitco Bullion Dealers. The Federal Reserve will meet Wednesday."

"'A test, if it comes, of the $695 area [for gold] may succeed this time around,' said Nadler."

"The dollar's weakness contributed to gold's latest rise. The greenback edged lower after the Labor Department said that non-farm payrolls expanded by 88,000 in April, less than the 100,000 expected by economists surveyed by MarketWatch. See full story.
The euro was last up 0.3%, while the dollar was down 0.2% vs. the yen. See Currencies."

"'Earlier speculation that U.S. jobs growth may reveal the weakest number in some 24 months, became a stark reality,' said Nadler. 'This news further undercut the dollar and extended expectations that next week's Fed meeting will result in (at least) a continuation of the thus far neutral stance on dollar rates that it had to adopt due to the conundrum posed by rising inflation and sluggish growth (in certain sectors of the economy)."

"So 'gold once more became a bet to the long side for funds (if not quite yet for the individual investor who may seek a validation of above $695 to join the party),' he said. 'Spot bullion rose by $4.50 as soon as the news hit the wires.'"

"Silver also strengthened. July silver added 2 cents to finish at $13.53 an ounce after a one-week high of $13.70. But it was down 0.3% for the week."

From Bloomberg. "Platinum rose the most in two weeks in New York on increased demand from automakers that use the metal to make pollution-control devices. Palladium fell."

"Consumption of platinum for catalytic converters rose 6.5 percent last year to a record 4.2 million ounces, London- based research company GFMS Ltd. said in a report April 25. Before today, platinum had gained 15 percent this year. China's car sales surged 25 percent last year, boosting demand."

"The underlying tightness of the supply demand situation remains supportive for platinum,' said Daniel Vaught, a commodity analyst at A.G. Edwards & Sons Inc."

"Platinum futures for July delivery gained $23.70, or 1.8 percent, to $1,334.50 an ounce on the New York Mercantile Exchange at 9:20 a.m., the biggest gain since April 20. The price rallied 3.2 percent this week after dropping 3.6 percent last week, the biggest weekly drop since December."

"Palladium for June delivery dropped $1.50, or 0.4 percent to $375 an ounce on the Nymex. Before today, most-active futures had gained 11 percent this year."

A Replay Of 1987?

2007-05-03T14:22:00.000-07:00

MarketWatch reports on currencies. "The dollar rose to a two-month peak against the yen and a one-week high vs. the euro Thursday, after a report showed the U.S. economy's non-manufacturing sectors grew at a faster-than-expected pace last month, easing some concerns about the fragile U.S. economic expansion."

"'Consolidation of short [dollar] positions ahead of tomorrow's non-farm-payrolls number remains the prevailing theme, as market players question whether U.S. sentiment has become overly pessimistic,' said Michael Woolfolk, senior currency strategist at Bank of New York."

"Late in New York, the euro traded at $1.3551 compared with $1.3592 late Wednesday, after touching $1.3544, the lowest level since April 23. The dollar was quoted at 120.37 yen, compared with 120.08 yen."

"The British pound traded at $1.9878 vs. $1.9890. The dollar also changed hands at 1.2161 Swiss francs, compared with 1.2136 francs."

"'The risk is that tomorrow's U.S. jobs data disappoints consensus estimates,' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. 'Nearly all the inputs economists use to arrive at a guesstimate have been weak.'"

The Dow Jones Newswire. "The U.S. dollar declined 1.1% on a trade-weighted basis in the first quarter of 2007 from the previous quarter, appreciating at the start of the period but reversing gains later on, the Federal Reserve Bank of New York said Thursday."

"U.S. monetary authorities didn't intervene in currency markets during the quarter, said William Dudley, executive vice president of the New York Fed, in the bank's quarterly report on Treasury and Federal Reserve foreign exchange operations."

"From late February until mid-March, global asset markets experienced a sharp repricing episode, during which the yen appreciated against the dollar and even more so against most high-yielding currencies, it said."

"'This broad-based reduction in risk appetite across global financial markets was largely attributed to renewed uncertainty regarding the U.S. economic growth outlook,' the report stated."

"Market participants cited 'concerns that weakness in the U.S. housing market, and developments in the subprime mortgage sector in particular, could reduce consumer spending and impact the broader U.S. economy,' it said."

The Financial Times. "Investors in US stocks have viewed the recent decline in the dollar as a green light to buy into large companies with international exposure. But analysts warn that a faltering currency looms as a double-edged sword for equity investors."

"'At some point, foreign investors will either hedge their US assets or repatriate,' says Dominic Konstam, head of interest rate strategy at Credit Suisse."

"So far, the dollar is seen to have made an orderly decline to compensate for a divergence between US and global growth rates. In the wake of last week's news that the US economy grew just 1.3 per cent during the first quarter, the dollar fell to a record low against the euro and multi-year lows against sterling and the Canadian, Australian and New Zealand dollars."

"This, analysts say, has encouraged local and some foreign investors to buy US stocks, which now look relatively cheap in their domestic currencies. 'The lower dollar has helped equities as the currency has adjusted for the slower economy and lower US investment returns,' said Mr Konstam. 'If the dollar doesn't fall, stock prices would come under pressure.'"

"While the dollar has fallen by about 2.75 per cent against the euro for the year to date, the Dow Jones Industrial Average is up 6.1 per cent and the S&P 500 is up 5.9 per cent. But if the dollar continues to weaken substantially, there will soon come a tipping point when foreign investors will no longer be satisfied with the returns from US assets."

"Jack Ablin, chief investment officer at Harris Private Bank, said he was 'a little worried about a replay of 1987 where the stock market kept going higher while the dollar quietly fell, adding: 'Eventually, investors stood up and noticed.'"

"The prospect of higher inflation beckons from a lower dollar, an outcome that, if accompanied by a slowly growing economy, represents the worst environment for stocks later this year, analysts say."

"The one factor keeping back the risk of a massive net selling of US stocks by foreigners is the weak yen, according to Mr Konstam. 'So long as the dollar is stable against the yen, the threat of such an outcome will stay contained. Dollar-Asia is a very important gauge of repatriation risk,' he says."

From Bloomberg. "Gold gained for the first time this week after Gold Fields Ltd., the world's fourth-biggest producer of the metal, said output declined at seven of its eight mines. Silver also increased."

"The Johannesburg-based company said today that its third- quarter production dropped 3 percent. Gold prices climbed 23 percent last year as global mine supply fell to a 10-year low, according to London-based GFMS Ltd."

"Gold for immediate delivery rose $2.20, or 0.3 percent, to $675.35 an ounce at noon in London, after declining $8.40 in the first three days of this week. Silver rose 11 cents to $13.325 an ounce, its first gain this week."

"Bullion is benefiting from dwindling supply and 'incredibly strong' demand from China, Gold Fields Chief Executive Officer Ian Cockerill told reporters today. Prices should climb above $800 over the next year, he said."

US$ Rallies As Spreads Narrow

2007-05-02T15:02:00.000-07:00

Bloomberg reports on currencies. "The dollar traded near a two-month high against the yen on speculation signs of growth in the U.S. manufacturing and services industries will alleviate concern over a slowdown in the world's largest economy. The U.S.currency has strengthened as evidence of economic resilience reduces expectations of a cut in borrowing costs by the Federal Reserve."

"'The dollar has some further upside to go,' said Samarjit Shankar, director of global strategy for the foreign exchange group in Boston at Mellon Financial Corp. 'You have basically had a one-way trade against the dollar over the past month. A string of positive data is going to introduce two-way risk.'"

"The dollar traded at 120.15 yen at 6:08 a.m. in Tokyo. It gained 0.24 percent yesterday and touched 120.28, the highest since Feb. 27, when equities tumbled in a global rout. The U.S. currency traded at $1.3591 per euro, up from the all-time low of $1.3681 set April 27."

"Investors aren't willing to place big bets involving the dollar before tomorrow's Labor Department payroll report forecast to show job growth slowed last month, said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York."

"'People don't want to short the dollar before the payroll,' he said. 'The dollar will sell off if we have a weak payroll number.'' A short position is a bet on a currency's decline.'"

"'A soft number will counter dollar bulls' notions that the job market still maintains its pace,' said Boris Schlossberg, senior currency strategist in New York at DailyFX.com."

"New Zealand's dollar may fall a second day as its yield advantage over the U.S. narrowed after a report showed factory orders in the word's largest economy rose in March, reducing the chance of a cut to interest rates."

"The New Zealand and Australian dollars had the biggest fluctuation of any currency yesterday as their yield advantage declined. The spread between New Zealand and U.S. two-year bonds has contracted further to the narrowest in two-and-a-half weeks. U.S. factory orders rose 3.1 percent in March after a 1.4 percent gain in February, the Commerce Department said yesterday."

"'The shine's been taken off the kiwi as eyes turn to what's happening in the U.S. dollar and its recovery story,' Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. 'It's led the market to think rates might not be cut as soon as we think and to a narrowing in the bond spread.'"

"The local dollar bought 73.77 U.S. cents at 9:11 a.m. in Wellington, after falling 0.7 percent to 73.76 cents in late Asian trading yesterday. It may fall to around 73.60 cents today, Hampton said."

"The yield premium, or spread, on New Zealand's two-year bonds over similar-maturity Treasuries was 2.48 percentage points, the narrowest since April 18."

From theStreet.com. "Precious metals prices were falling again Wednesday in New York on the back of a rallying dollar. June-dated gold contracts were dipping $3.90 at $673.40 an ounce in recent action. Silver was dropping 7 cents at $13.30 an ounce."

"Helping boost the greenback was a Commerce Department report showing a 3.1% jump in factory orders for March. The consensus forecast was for 2.1% growth. In addition, the figure for February was upwardly revised."

"'This was very good news coming right on the heels of Tuesday's strong [Institute for Supply Management] report,' says Ellen Beeson Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ in New York. 'This pushes worries about the business sector aside, and now we can concentrate on the housing slump and its effect on the consumer.'"

"In the official sector, the European Central Bank says it sold 195 million euros of gold and receivables, or about 12 tons, last week, down from around 17 tons the week before."

"Platinum fell for the first session in three in New York on expectations that demand for the metal will weaken during holidays in Asia. Palladium rose."

"Markets in Japan shut this week for the 'Golden Week' holidays and China's market will be closed until May 7 for Labor Day. Japan was the biggest market for platinum jewelry and glass applications last year, accounting for 18 percent of demand, a report from London-based research company GFMS Ltd. showed."

"'This is the spring holiday season in Japan and China and the gift-giving season for them,' said Dan Vaught, a commodity analyst at A.G. Edwards & Sons Inc. 'They tend to buy a lot of jewelry before the holiday season, but once that holiday passes there's the tendency for them not buy as much.'"

"Platinum futures for July delivery dropped $1.80, or 0.1 percent, to $1,299.10 an ounce as of 1:21 p.m. on the New York Mercantile Exchange. Prices have gained 13.5 percent this year. Palladium for June delivery rose 80 cents, or 0.2 percent, to $374.95 an ounce."

Stronger Economy Lifts US$

2007-05-01T14:02:00.000-07:00

The Associated Press reports on currencies. "The dollar recovered slightly against the euro on Tuesday after U.S manufacturing activity showed surprising strength in April that drove up prices for certain commodities. The euro dropped to $1.3620 from $1.3651 in New York late Monday, though remained within range of its all-time high of $1.3683, which it hit last week. The British pound edged up to $1.9996 from $1.9991."

"The manufacturing sector grew faster than expected and boosted prices for fuel, metals and corn-based products, according to the Institute for Supply Management. It was the highest reading in 11 months. The news supported the dollar, as it lessens the likelihood that the Federal Reserve will lower interest rates to encourage spending, especially as costs rise."

"The dollar climbed against the yen amid thin activity over Japan's Golden Week holidays, buying 119.72 yen compared to 119.56 yen late Monday. In other trading, the dollar rose against the Swiss franc, buying 1.2134 compared to 1.2077 late Monday."

From MarketWatch. "Gold futures closed Tuesday with a loss of more than $6 an ounce, with some strength in the U.S. dollar and weakness in oil prices easing investment demand for the precious metal."

"The market saw 'technical selling and some disappointment [that] gold could not test $700,' said Peter Grandich, editor of the Grandich Letter. 'Since the $665-$670 area was key resistance until recently, a retest of that area is healthy and likely the foundation gold needs to go through $700 later this spring.'"

"Gold for June delivery declined $6.20 to close at $677.30 an ounce. It hasn't closed at a level this low since April 9, but the day's low of $674.70 was the weakest intraday level since Thursday. The metals market saw thin trading Tuesday with markets in China and most of Europe closed for holidays."

"Looking ahead, 'the dollar is likely to be the key driver for gold in the coming sessions with a break through $1.37 against the euro potentially propelling gold back toward the $694 resistance line,' said James Moore, metals analyst at TheBullionDesk.com."

"'However, there is the risk that further failed rallies will trigger another correction, potentially leading to a test of chart support located around $664-$669,' Moore said."

"Crude-oil futures fell Tuesday, extending their prior-day decline ahead of the release of weekly data on supplies Wednesday that's expected to show a modest build in crude stocks. But news that Venezuela's government took over the country's last privately run oil fields provided some support."

"Back on the metals market, prices finished the session on a mixed note. June palladium added 15 cents to close at $374.15 an ounce while July platinum added $2.50 to close at $1,300.90 an ounce. July silver followed gold lower to finish at $13.37 an ounce, down 1.5%, or 20.5 cents."

Falling Dollar Trend "Intact"

2007-04-30T14:01:00.000-07:00

Bloomberg reports on currencies. "The dollar traded near a record low against the euro, posting the biggest monthly loss since November, as U.S. reports showing moderating inflation and slowing growth increased bets the Federal Reserve will reduce interest rates. The U.S. currency erased its earlier advance as the speculation on borrowing costs dimmed the allure of dollar- denominated assets."

"'You are continuing to see a flow of data from the U.S. on the weak side,'' said Greg Salvaggio, vice president of capital markets in Washington at currency trader Tempus Consulting Inc. 'Money is going to flow to the euro zone and away from the U.S. The trend of a falling dollar and a rising euro is intact.'"

"The dollar traded at $1.3648 per euro at 4:19 p.m. in New York compared with $1.3652 yesterday. It earlier touched $1.3679, near the record low of $1.3681 set April 27. The dollar dropped 2.19 percent against the euro in April for its biggest drop since falling 4.06 percent in November."

"The U.S. currency rose as high as $1.3590 in Asian and European trading as some investors sold the euro to book profits and as a government report showed German retail sales unexpectedly fell last month."

"The yen lost this month against all 16 major currencies as investors added to their holdings in higher-yielding assets financed by borrowings in Japan, a practice known as the carry trade. Japan has the lowest interest rates among major economies."

"The Japanese currency dropped 3.56 percent against the euro, for its biggest monthly decline since a 4.02 percent loss in November 2003. The yen gained 0.18 percent today to 162.98 versus the euro as investors exited some of their carry trades."

"The dollar dropped against 13 out of 16 major currencies this month, falling 2.2 percent against the euro, 1.6 percent versus the British pound and 4 percent against the Canadian currency. The Swedish krona was the biggest winner against the dollar this month, rising 4.3 percent, while the yen was the biggest loser, declining 1.4 percent."

"'The trend is clearly toward a weak dollar,' said Dennis Gartman, economist and editor of The Gartman Letter in Suffolk, Va. 'The only concern is that there are an awful lot of dollar bears around.'"

From MarketWatch. "Copper futures were a standout among the metals Monday, as news of a strike among Peru's labor unions helped raised concerns about production, prompting prices to tally a gain of more than 13% for the month. Helped by copper's strength, as well as weakness in the U.S. dollar, gold for June delivery closed up $1.70 at $683.50 an ounce. It posed a climb of 2.2% for the month of April. "

"Gold rose Monday mainly because prices held support at $675 '"and funds and a few previously cashed-out sellers were back buying the dips,' analyst Jon Nadler said. Gold is forming a base near here and was 'poised to move higher if conditions (economic data) permit later in the week and next month,' he said."

"For now, gold is "looking interesting,' said James Moore, an analyst at TheBullionDesk.com, and if the dollar continues lower, and particularly if it sets a fresh low again vs. the euro, 'then we might have a little pop up towards [the] $690-to-$692 resistance band' in spot gold prices.
'If not, I think it could mean further consolidation around $670 to $680,' he said."

"Other metals prices gained Monday, with the exception of June palladium, which gave back 45 cents to end at $374 an ounce. It was up 4.7% for the month. July silver closed at $13.575 an ounce, unchanged for the session and nearly flat for the month as well. July platinum rose $5.40 to close at $1,298.40 an ounce, up 3.5% for the month."

Gold "Resumes Journey" AS US$ Falls

2007-04-27T14:51:00.000-07:00

The Associated Press reports on currencies. "The euro climbed to an all-time high against the dollar Friday as weak U.S. growth figures reinforced fears of a widening economic disparity between Europe and the United States. The euro hit $1.3682, shooting past its previous high of $1.3667 from December 2004, after the U.S. Commerce Department reported that economic growth slowed to a 1.3 percent annual rate in the first quarter, its weakest performance in four years."

"The 13-nation currency then settled back to $1.3655 in late European trading, still up from its $1.3601 level in New York late Thursday."

"The euro also hit a record against the Japanese yen after inflation data from Germany, coupled with improved business and consumer sentiment, pushed it to 162.91 yen, up from the previous high of 162.53 yen on Thursday."

"Along with the rise in the British pound, which broke through $2 earlier this month for the first time in nearly 15 years, the stronger euro makes visits to much of Europe more expensive for travelers from elsewhere and makes shopping trips to the U.S. more appealing to Europeans."

"'Restaurants are too expensive and I find myself eating pizzas and paninis at grocery stores,' said Krysta Taylor, a 38-year-old transportation worker from Calgary, Canada. 'My next destinations will probably be less expensive countries, such as South East Asia and South America.'"

"On Friday, the British pound was trading at $2.0022, up from $1.9910 late Thursday. The dollar fell against the yen, dropping to 119.41 yen from 119.63 yen in New York."

From MarketWatch. "Gold futures closed almost $4 higher Friday, boosted by the euro's record high against the dollar after data showed that the U.S. economy posted its weakest expansion in four years in the first quarter. But the day's gain wasn't enough to recoup the week's losses. The price of the precious metal finished the week with a loss of 2% as traders weighed investment-demand expectations for gold in the wake of U.S. stocks' climb into record territory."

"Gold for June delivery gained $3.80 to close $681.80 an ounce on the New York Mercantile Exchange. It was down $14 from last Friday's closing level of $695.80."

"'For several years now, gold has gone through short, but sharp corrections on its march to new all-time highs,' said Peter Grandich, editor of the Grandich Letter. 'The surprise going forward is how fast it rebounds and hits $700.'"

"'A return to $682-$685 is indeed required in order to resume whatever journey we were on prior to this eventful week,' said Jon Nadler, an analyst at Kitco. 'Until then, more than a few participants will nervously ponder if this was 'it' or if there is more room to fill some chart points and redraw the lines.'"

"Other metals prices gained for the session along with gold, but July platinum gave back $10.60 to end at $1,293 an ounce, down 3.6% for the week. May silver rose 11.8 cents to finish at $13.443 an ounce, but it was down 3.7% from a week ago. June palladium tacked on $1.05 to close at $374.45 an ounce, up almost $14 for the week."

Gold Falls Away From $700 Mark

2007-04-26T14:42:00.000-07:00

Bloomberg reports on the markets. "Gold in New York fell the most in eight weeks on speculation a rebound in the dollar may reduce the appeal of the precious metal as an alternative investment. Silver declined more than 3 percent. 'The weakness in the currencies are bearing down on the gold market,' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. 'There's disappointment that gold wasn't able to break through to $700, so we've seen a pulling back in investment demand.'"

"Gold futures for June delivery fell $9.40, or 1.4 percent, to $678 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage drop since March 2."

"Gold is sold in dollars and five of the past six bear markets in the U.S. currency have led to a higher gold price. The dollar yesterday touched an all-time low of $1.3666 per euro, previously set on Dec. 30, 2004. The European currency started trading in January 1999 at $1.17."

"'The surprising strength in the dollar overnight has had a negative impact in the gold market,' said Daniel Vaught, a commodity analyst at A.G. Edwards Inc. 'You're seeing general weakness in gold because it didn't break out of $700 when it had the chance.'"

"Silver, which has wider manufacturing use than gold, fell as a slump in the U.S. housing market sparked speculation that demand for copper and other base metals will slow. 'Silver seems to be backtracking,' Platt said. 'The market is going to need some fresh impetus in terms of industrial demand to get it going.'"

"Silver for July delivery fell 44.2 cents, or 3.2 percent, to $13.455 an ounce, the most since March 2."

"July platinum settled down $13.60 at $1,303.60 an ounce, while June palladium settled down $9.65 at $373.40 an ounce. Spot gold at 1:31 p.m. ET traded at $675.05, down $11 an ounce."

"The front-month June light, sweet crude contract settled down 78-cents at $65.06 a barrel. May gasoline settled up 0.77 cent at $2.2903 a gallon. May heating oil settled down 1.24 cents at $1.8891 a gallon."

The Associated Press. "The dollar traded mostly higher Thursday after holding off an all-time high by the euro. The British pound fell from record territory. The 13-nation euro rose as high as $1.3653, just short of its all-time high of $1.3667 in December 2004. It later retreated to as low as $1.3582 before climbing to $1.3601 in late New York trading. That compared with $1.3640 on Wednesday."

"The U.S. Labor Department reported that applications for jobless benefits totaled 321,000 last week, a drop of 20,000 from the previous week, making it the largest dip in nine weeks and double economists' expectations."

"The pound rose as high as $2.0059 before falling to $1.9910 in late trading. It bought $2.0020 on Wednesday after breaching $2 last week for the first time in nearly 15 years."

"The drop came after British housing prices surged in April, signaling that the Bank of England was likely to raise interest rates above the current 5.25 percent."

"In other New York the dollar moved little against Japan's currency, dipping to 119.63 yen from 118.69 yen. It bought 1.2079 Swiss francs, up from 1.2047 Wednesday, and 1.1205 Canadian dollars, up from 1.1150."

US$ Near All-Time Lows

2007-04-25T14:00:00.000-07:00

Reuters reports on currencies. "The dollar fell on Wednesday to a record low against a trade-weighted basket of major currencies tracked by the Federal Reserve, reflecting prospects for slower growth in the U.S. economy. The index has dropped to the 79.20 area only two other times in the 34-year history of the gauge, once in April 1995 during a period of U.S. trade frictions with Japan and again in December 2004 when financial market concerns about the U.S. trade deficit reached a peak."

The Associated Press. "The dollar traded within a whisker Wednesday of an all-time low against the euro, which passed $1.3660 on rising business confidence in Germany and disappointing sales of new homes in the U.S."

"The euro, which peaked at $1.3667 in December 2004, climbed to $1.3664 in late afternoon European trading after the release of Germany's closely watched Ifo business confidence index. The euro bought $1.3626 late Tuesday in New York."

"The euro fell back to $1.3640 after the U.S. Commerce Department reported that sales of new homes rebounded slightly in March, but not enough to offset declines in January and February."

"Meanwhile, the pound rose as high as $2.0062, climbing from $2.0000 late Tuesday, after data showed the British economy defied expectations of a slowdown in the first quarter and expanded 2.8 percent from a year earlier."

"The British currency rose in late New York trading to $2.0020. It broke through $2 last week for the first time in nearly 15 years."

"The dollar barely budged against Japan's currency, edging up to 118.69 yen from 118.68 yen. It bought 1.2047 Swiss francs, up from 1.2028 Tuesday, and 1.1150 Canadian dollars, down from 1.1228."

"Gold prices held firm on Wednesday as weak U.S. housing market data hit dollar sentiment and as crude oil prices rose after news of falling gasoline stocks in the United States. Spot gold was up at $685.25/685.75 an ounce at 1500 GMT compared with $684.10/684.60 late in New York on Tuesday, when it hit a session low around $680."

"'The dollar has been the main thing behind gold's move this afternoon, and U.S. gasoline stocks fell,' a London-based trader said. 'If the dollar falls to new record lows, we could see gold trying the $690 level again.'"

"'Physical activity is strong in the mornings and has offset long liquidation in the afternoons,' said Frederic Panizzutti, analyst at MKS Finance. 'Physical demand is likely to remain strong, but the market needs a catalyst to move prices much higher.'"

"Also supportive were comments by a Chinese central bank official, who said the country should put its $1.202 trillion of foreign exchange reserves to better use by ploughing more money into gold, oil and metals."

"Analysts say the new ETFs may boost platinum prices in the longer term. 'If the platinum ETFs take more than about 500,000 ounces...of platinum out of the market then we would expect a material and sustained tightening of platinum forwards and much higher prices,' UBS said in a note."

"Silver gained to $13.83/13.87 an ounce from $13.78/13.81 late in New York on Tuesday and platinum was down at $1,306/1,310 an ounce from $1,315/1,320. Palladium was a touch softer at $378/383 an ounce from $379/384."

A Harsh Reality Check For The US$

2007-04-24T12:46:00.000-07:00

MarketWatch reports on currencies. "The dollar approached an all-time low against the euro Tuesday after reports showed sales of existing homes plunged at the fastest pace in 18 years last month while consumer confidence dropped more than forecast in April, fueling worries that the U.S. economy is decelerating. The dollar has come under heavy pressure, hitting multiyear lows last week on the prospect of the Fed remaining sidelined or cutting rates, even as central banks elsewhere continue to lift borrowing costs."

"'To the surprise of the market, this morning's U.S. data was extremely ugly,' said Kathy Lien, chief strategist at DailyFX. 'Today's reports only reinforce the Federal Reserve's need to keep interest rates unchanged. The problems that the U.S. economy is facing are not going away, and today's numbers provide a harsh reality check,' she said."

"In New York trading, the euro stood at $1.3617, compared with $1.3571 late Monday. In intraday trading, the euro had climbed to a high of $1.3635, just a third of a cent below its all-time high of $1.3666. The dollar was last quoted at 118.54 yen, compared with 118.59 yen."

"The British pound traded at $2.0009 vs. $2.0006. The pound had climbed as high as $2.0133 last Wednesday, sterling's loftiest level since 1981. The dollar changed hands at 1.2032 Swiss francs, compared with 1.2095 francs."

"In other trading, the Australian dollar was the biggest decliner among major currencies, slumping 0.7% versus the greenback, after a report showed consumer prices rose less than expected in the first-quarter, denting any hopes for an imminent rise in interest rates."

"The below-expected CPI 'killed off any chance' of a rate hike by the Reserve Bank of Australia next week, said David Watt, senior currency strategist at RBC Capital Markets. 'The weakness spilled over into New Zealand and other high yielding currencies, on a moderate unwind of carry trades.'"

From Bloomberg. "Gold and silver fell the most this month in New York as a drop in prices for oil and other commodities reduced the appeal of precious metals as a hedge against inflation."

"Oil fell as much as 2.7 percent and the Reuters/Jefferies CRB Index of 19 commodities lost the most in more than six weeks after a drop in home sales sparked speculation an economic slowdown in the U.S. will curb demand for raw materials."

"'There's some selling around the oil drop and the housing numbers,' said Marty McNeill, a trader at R.F. Lafferty Inc.. 'If there's an economic slowdown, it's going to hurt commodities and gold, too.'"

"Gold futures for June delivery fell $6.50, or 0.9 percent, to $687.70 an ounce on the Comex division of the New York Mercantile Exchange, the biggest drop since March 23. The price failed for a second day to challenge last week's peak of $698."

"'Gold is facing stiff resistance as it heads toward the big number of $700,' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc."

"Losses accelerated after gold dropped below $691, said Steve Phillips, a trader at Eagle Futures Inc. 'Everybody knew gold was too high,' he said. 'There are a lot more sellers than buyers at these prices.'"

"Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended April 17, according to U.S. Commodity Futures Trading Commission data."

" Silver, a precious metal with industrial applications in medical devices and batteries, fell the most since March 2 as copper used in pipes and wiring slumped as much as 3 percent. 'Silver came off on copper,' said Frank McGhee, head metals trader at Integrated Brokerage LLC."

"Silver for May delivery fell 26.8 cents, or 1.9 percent, to $13.782 an ounce on the Comex. Before today, the price had gained 8.6 percent this year."

US$ "Recovering"

2007-04-23T14:34:00.000-07:00

Reuters reports on currencies. "The dollar gained across he board on Monday in generally light trading, recovering from last week's sell-off, as investors trimmed bearish bets ahead of a slew of U.S. economic data this week. 'The yen aside, the dollar is just going through a small corrective phase,' said Matt Kassel, director of foreign exchange at ING Capital Markets."

"'There's nothing going on that's changed the scope of dollar-bearish sentiment. The market has had several weeks of dollar selling and I think this just a little bit of profit-taking on the lack of upside momentum in other currencies,' he added."

"In late morning trading, the euro eased 0.2 percent to $1.3565, with investors taking profits after the single currency last week climbed within half a cent of the 2004 record high of $1.3670. The dollar was flat at 118.71 yen."

"'One source of solace for greenback bulls may be this week's housing data,' Boris Schlossberg, senior currency strategist at DailyFX.com, wrote in a research note. 'If the numbers meet or beat expectations, talk of some sort of a bottom in housing could help fuel a more sustained rally.'"

"U.S. gold futures finished slightly lower on Monday as a recovering dollar prompted investors to lock in profits after last week's rally, but rising oil kept prices from falling further. The platinum group metals also ended down after a report showed that speculative long positions were building up, and that indicated the precious metals were at risk of liquidation."

"Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled down $1.60 at $694.20 an ounce, traded from $690.50 to $697.70. Spot gold was quoted at $688.90/9.40 an ounce, below a late quote of $691.70/2.20 in New York on Friday. London's afternoon gold fix was $688.70."

"Bernard Hunter, director of precious metals marketing at ScotiaMocatta, said that selling after spot prices ran into resistance at around $690.50."

"Palladium and platinum also closed down after solid gains last week on proposals for physically backed exchange-traded funds. UBS Investment Bank said in a research note that futures positioning was approaching risky levels for precious metals, especially for palladium."

"'But we believe further short-term gains in metals can occur, especially in platinum and palladium due to the impending launch of the platinum and palladium ETFs, this week in London and then next month in Zurich,' UBS said."

"Platinum fell after hitting a one-year high last week. July platinum ended down $9.50 at $1,331.70 an ounce. Spot platinum was quoted at $1,315.00/20.00. June palladium eased 85 cents to finish at $387.40 an ounce. Spot palladium fetched $380.00/385.00."

"COMEX May silver reversed early losses to close up 9.50 cents at $14.050 an ounce, traded from $13.860 to $14.110. Spot silver was quoted at $13.90/3.95, compared with $13.92/3.96 late Friday. Silver was fixed at $13.860 in London."

Gold Closes In On $700

2007-04-20T14:26:00.000-07:00

Reuters reports on precious metals. "Gold hit an 11-month high on Friday and platinum rose to its highest in five months, buoyed by a weaker dollar and hopes that proposed exchange-traded funds would boost demand for precious metals. Gold rose as high as $693.60 an ounce and was quoted at $691.50/692.00 an ounce by 3:08 p.m. EDT, sharply higher than $681.70/682.20 late in New York on Thursday."

"'I think that the prospect of more ETFs has supported the entire precious metals complex,' said James Steel, analyst at HSBC."

"The euro hit a two-year high against the dollar, coming within half a cent of a lifetime peak, but had largely erased its gains by afternoon in New York."

"'Gold is still keeping an upward pattern and a weaker dollar is a very supportive feature,' said Jon Bergtheil, global metals strategist at J.P. Morgan, adding a rally in platinum also was helping gold."

"But some traders remained cautions because of the condition of the Chinese stock market. Commodities prices tumbled in late February after a plunge in Chinese equities triggered a heavy sell-off in global shares."

"Chinese stocks rose sharply on Friday after tumbling 4.52 percent on Thursday in response to high inflation data, which further fueled expectations of an early interest rate hike."

"'The metal (gold) remains at the moment in an uptrend, but a healthy level of cautiousness that prevents the market from overheating for the time being prevails at the same time, making it difficult to pass the $700-mark with flying colours,' said Wolfgang Wrzesniok-Rossbach of Germany's Heraeus."

"Platinum gained upward momentum after breaking through $1,300 as speculators were keen to take new positions after recent plans to launch platinum ETFs. Spot price rose as high as $1,330 an ounce and was last quoted at $1,328/1,332, against its previous finish of $1,295/1,299 in New York on Thursday. It reached a record high of $1,395 in November."

" Gold ETFs have accumulated more than 650 tonnes of gold so far, while silver funds have about 4,200 tonnes."

"Palladium rose to $382/387 from $375.50/379.50 an ounce at its previous close in New York, while silver rose to $13.92/13.97 an ounce from $13.65/13.69 late in the U.S. market on Thursday."

Gold Down On China Rate Talk

2007-04-19T15:57:00.000-07:00

Daily FX reports on currencies. "Liquidation of EUR/JPY carry trades sent the Euro tumbling to 1.3565 against the US dollar. Despite this minor hiccup, Euro traders are still intent on taking the currency pair for a test of its December 2004 1.3667 all time highs as their determination was evidenced in the currency pair’s complete turnaround during the US trading session."

"For the first time in this latest wave of Euro strength, we heard comments from ECB officials about the level of the currency."

"After plunging back below the 2.000 mark momentarily, the GBP/USD stabilized throughout the US trading session. Now trading at 2.0018 at the New York close, the sterling bid tone may return with a vengeance as traders set their targets on tomorrow's retail sales report."

"The Japanese Yen was the story of the day as stronger economic data from Japan and China sent the currency tumbling against everything in sight. The early Asia trading session started with a sharp surprise in the tertiary activity index for the month of February."

"Originally expected to drop by 0.5 percent, activity actually accelerated by 1.0 percent. We expect this trend of upside surprises to continue as the recent weakness of the Japanese Yen boosts overall economic growth."

From MarketWatch. "Gold futures dropped $5 an ounce Thursday to close at their lowest level in a week, as news of faster-than-expected growth in China in the first quarter triggered worries that the government will have to take measures to slow down its economy, reducing demand for metals."

"Gold for June delivery finished down 0.7% at $688.30 an ounce on the New York Mercantile Exchange after a low of $682.50. These are the contract's weakest levels since April 12."

"The metals had 'a very negative session in Shanghai, where copper closed limit down," said Edward Meir, analyst at Man Financial. 'Negative sentiment in Shanghai was fueled by talk that the Chinese may once again raise interest rates in light of reports that China's economy grew at a faster-than-forecast 11.1% pace in the first quarter of this year,' Meir said."

"Metals traders have 'looked to the energy sector for direction today,' said James Moore, an analyst at TheBullionDesk.com. rude-oil futures dropped to a level not seen since April 10 as traders worried about the potential for weaker Chinese energy demand."

"The correction in gold prices Thursday, however, 'comes as no great surprise considering the metal's lack of traction above $690,' said Moore."

"Silver prices also declined to a two-week low of $13.58 an ounce, with the May contract closing down 1.7%, or 24 cents, at $13.735."

"'Currencies and oil presented a somewhat nebulous picture and oil retreated under $63 per barrel,' said Jon Nadler, analyst at Kitco Bullion Dealers."

"'Then, there is the problem (if one can call it that) of China's amazingly hot rate of growth,' he said. It has prompted 'anxieties once again that the authorities will intervene in some manner to try to curb what could well become overheating.'"

"For now, other metals prices were sharply lower, with the exception of platinum, whose July contract continued higher, closing up $2.90 at $1,309.80 an ounce, extending Wednesday's 2% gain."

"'The metal is being pushed along by anticipatory fever for the platinum-oriented [exchanged-traded fund],' said Nadler. Sister metal palladium saw its June contract decline $2.80 to end at $380 an ounce."

"Sinking Dollar" Supports Gold

2007-04-18T13:50:00.000-07:00

The Economic Times reports on currencies. "The euro surged past 1.36 dollars for the first time since December 2004 on Wednesday while sterling hit a near 26-year high against the dollar on fears for US economic prospects. 'The weakened dollar "reflects a combination both of concerns about the US economy, and at the same time the contrasting strength of the European economy which is growing much more rapidly,' Capital Economics analyst Jonathan Loynes said in London.

"Owing to strengthening European economies, particularly in Germany, the market is forecasting higher interest rates for the euro zone and Britain in the coming months."

"The euro reached as high as $ 1.3616 in early European trading before falling back to 1.3576 against 1.3564 late Tuesday in New York. The pound sterling struck 2.0133 dollars to reach its highest reading since June 1981. It later traded at 2.0040 against 2.0063 on Tuesday."

"'With the currencies like the British pound, euro and Japanese yen looking to benefit from rate hikes in the near future, the greenback is starting to lose its appeal in the global market,' said John Kicklighter at Forex Capital Markets."

From MarketWatch. "Gold futures closed a bit higher, but remained below the previous session's seven-week high of $695.50. The metals markets are 'vacillating on currency moves and searching for additional market data with which to take out some psychologically important levels,' $700 for gold, $1,300 for platinum and $14.50 for silver, said Neal Ryan, director of economic research at Blanchard."

"Gold for June delivery finished 80 cents higher at $693.30 an ounce on the New York Mercantile Exchange. It traded as high as $695.30 during the session."

"The metals market saw conflicting reports on activity at Freeport-McMoRan's Grasberg mine. Dow Jones Newswires reported that operations at the Indonesian unit are continuing as normal, despite a labor group's statement that a strike has halted all operations there."

"'Grasberg is the largest copper/gold mine in the world in terms of reserves and in the top three in terms of production,' said Ryan. 'Shutting down for a day isn't going to be too big an issue for the gold market (much more so for copper, where supplies are far tighter currently), but should this strike extend a few more days, we could be looking at more bullish news for gold prices entering the market.'"

"Indeed, 'should the dispute escalate to hit output, then it would be impacting an already tight concentrate market,' said William Adams, metals analyst at BaseMetals.com."

"Platinum was the biggest winner among the metals Wednesday, with its July contract up 2%, or $26, to close at $1,306.90 an ounce in New York."

"'Platinum has been particularly volatile the last few days as news has hit the market of a new [exchange-traded fund] being launched in Switzerland,' said Blanchard's Ryan. 'This one ETF being offered on a small bourse and available to only Swiss investors will not move the metal price a great deal on its own.'"

"But 'platinum and palladium are even thinner than gold and silver in terms of overall available supply and annual mine production. [So] should one or two ETFs socking away bullion in vaults begin to have some success, the impact on the market will be much more profound in platinum and palladium than in the gold and silver ETFs,' he said."

"Platinum's sister metal, palladium, saw its June contract tack on $2.45 to end at $382.80 an ounce. May silver finished down 4.5 cents at $13.975 an ounce."

"'In the final analysis, gold got its support for the day from the ever-reliably sinking dollar, a bit from oil, and the rest from the inflationary expectations that the biggest consumer price rise in 11 months has likely generated,' said Jon Nadler, analyst at Kitco."

Gold Traders "Cash In Chips"

2007-04-17T13:45:00.000-07:00

FX Street reports on currencies. "The U.S. dollar weakened to a new 2-year low versus the euro this morning after a report showed core U.S. consumer prices rose by less than expected in March, supporting a view that U.S. interest rates may be set to move lower."

"The British pound rallied to $2 overnight, touching levels not seen for almost 15 years as news of accelerating British inflation last month stoked expectations of a further rise in borrowing costs from the Bank of England. Data showing a 3.1 percent annual jump in British consumer price inflation in March, the highest since comparable records began in 1997, served as the impetus for the pounds appreciation."

"Currency market analysts believe that further pound gains are likely. A move above $2.01 would herald the highest level in over quarter of a century."

"The Japanese yen continued to weaken across the board, primarily as a result of weak Japanese fundamentals and a continuation of the carry trade phenomena. The yen hit a record low versus the euro yesteray after a weekend meeting of Group of Seven finance officials expressed no concerns about the Japanese currency's weakness, prompting traders to load up on carry trades."

"The Chinese yuan closed slightly higher against the dollar overnight, stabilizing after its third-biggest one-day fall of the year on Monday as dollar supplies in the market felt a temporary pinch. Monday's fall came after the People's Bank of China set the yuan's daily mid-point at a post-revaluation high of 7.7220, indicating the market was at odds with the central bank's apparent willingness to let the yuan rise toward 7.7200."

From MarketWatch. "Gold futures took second billing Tuesday, easing back after Monday's climb. June gold fell $2 to close at $692.50 an ounce on Nymex. 'Some participants cashed in their chips,' explained Jon Nadler, analyst at Kitco Bullion Dealers."

"'Some traders feel that there may be more consolidation ahead before gold prices manage to break the psychologically important $700 mark,' Action Economics said in a research note."

"James Moore, metals analyst at TheBullionDesk.com, said gold 'appears to be catching its breath.' However, 'momentum is still firmly to the upside with further diversification away from the dollar looking set to propel gold through $700 and on to challenge the $732 high we saw last May,' Moore said."

"Most other metals prices moved lower along with gold, though June palladium rose $1.35 to close at $380.35 an ounce. May silver fell 6 cents to end at $14.02 an ounce and July platinum fell $8.60 to close at $1,280.90 an ounce."

US$ Pales Versus Rivals

2007-04-16T13:37:00.000-07:00

The Associated Press reports on currencies. "The dollar gave up more ground to the euro, which climbed to within one cent of its all-time high, and the pound neared $2 Monday. Supported by crackling economic growth, falling jobless figures and interest rates much lower than those in Britain and the United States, the 13-nation euro bought $1.3549 by afternoon in Europe after climbing as high as $1.3576, its highest point since January 2005 and near its record of $1.3667 from December 2004."

"Kristian Siggaard-Jensen, a foreign exchange strategist with Saxo Bank in Copenhagen, Denmark, said markets had factored in the increases, noting the steady guidance by the European Central Bank and the Bank of England. 'People have been expecting this sort of volatility...to pick up for some time,' he said."

"The British pound rose to $1.9938, a 14-year high, on unexpectedly higher prices for manufactured goods and news that the sizzling housing market was not cooling off. Analysts said they expected the currency to cross the $2 mark this week. It later fell back to $1.9920, still less than a penny off of $2 barrier. That compared with $1.9870 on Friday in New York."

"'Clearly many are eyeing a test of the key $2 level, something that hasn't been seen since 1992,' said David Jones, chief market analyst for CMC Markets in London."

"The dollar rose to 119.54 Japanese yen from 119.06 yen late Friday after officials from the Group of Seven wealthiest nations did not press Japan to raise its own interest rates to buoy its currency at a weekend meeting."

"'The tenor of European rhetoric at the G-7 was surprising, and on the face of it, positive, as it's always good to see a lack of equivocation on the part of central bankers,' Siggaard-Jensen said of last weekend's meeting of G7 officials in Washington."

"'The fundamentals are in line to go higher and the politicians seem to be welcoming that,' Siggaard-Jensen said. 'The investors are more confident, too, and realize 'We can take euro/dollar above the all-time highs without getting too much (government) intervention.'"

"Worries about the U.S. trade and budget deficits were a key factor in the euro's surge to its all-time high in 2004, but those worries were submerged over the past two years by the Federal Reserve's campaign of interest rate increases. The Fed has left rates unchanged over recent months, with markets watching U.S. data closely for pointers as to the Fed's course."

From AFX News. "The swiss franc meanwhile, which strengthened earlier following comments from Swiss National Bank chairman Jean-Pierre Roth, fell back as it is also a widely used currency in carry trades. Roth said the SNB has to be vigilant 'as the weak swiss franc and falling unemployment could pose a risk to price stability.'"

From MarketWatch. "Gold futures finished near $695 an ounce Monday to mark their strongest closing level since late February, finding support from strength in oil prices as well as some weakness in the U.S. dollar."

"'Gold continues to benefit from a declining U.S. dollar strong physical and investment demand, and the inability to cap its price for any real length of time by the shorts,' said Peter Grandich, editor of the Grandich Letter.
'While $700 is a psychological resistance level, the next real battle will be around the old highs from last year in the $735 area,' he said."

"Gold for June delivery closed up 0.7%, or $4.60, at $694.50 an ounce on the New York Mercantile Exchange, its highest close since Feb. 26. The contract had touched $695 during the session, its strongest intraday level since Feb. 27. The metal closed last week with a gain of 1.5%."

"'While the bullish trend remains intact, some traders feel that there may be a period of consolidation before gold prices manage to break the psychologically important $700 mark,' according to Action Economics."

"In the backdrop, May crude held their ground above $63 a barrel, nearly recovering from a low of $62.58 on the heels of uncertainty related to the elections in Nigeria."

"Elsewhere in metals trading, silver prices posted a modest decline, with the May contract down 1 cent to close at $14.08 an ounce. It traded as high as $14.13 during the session."

"'The $14 level is a point of resistance, so it will slow the silver price, but once solidly over that hurdle, $15 looks a small climb,' said Julian Phillips, an analyst at GoldForecaster.com."

"Rounding out the metals action, June palladium fell $2.05 to end at $379 an ounce while July platinum rose $3.10 to finish at $1,289.50 an ounce."

Gold Breaks Resistance

2007-04-13T12:38:00.000-07:00

The Associated Press reports on currencies. "The dollar rebounded against a nearly record-high euro Friday on expectations that the Group of Seven would maintain its position on addressing worldwide economic imbalances. The euro bought $1.3511 in afternoon trading after climbing as high as $1.3547 earlier in the session; its highest level since January 2005."

"That compared with the $1.3480 it bought in New York late Thursday, and was about one cent short of its all-time high from December 2004 of $1.3667."

"The dollar bounced back on expectations that the G-7 finance officials' communique Friday would not propose continued weakness to stabilize global trade and account imbalances. Word from an Italian representative, though, that yen carry-trading would enter the discussions prompted some dollar selling, according to Michael Woolfolk, senior currency strategist at the Bank of New York."

"The dollar also lost ground against the British pound, which rose to $1.9825 from $1.9783, while strengthening against Japan's currency to 119.25 yen from 119.06 yen."

"The euro slipped slightly after the release of data showing that U.S. wholesale prices increased by 1 percent in March, although, with volatile energy and food prices removed, other prices were flat. Evidence that inflation hasn't spread through a wider range of goods might put less pressure on the Fed to raise rates."

"Separately, the Commerce Department said the U.S. trade deficit lessened for a second month, with oil imports down sharply and the politically sensitive deficit with China narrowing to its lowest point in nine months."

"In other trading, the dollar bought 1.2157 Swiss francs, down from 1.2167 late Thursday, and 1.1384 Canadian dollars, up from 1.1348."

From MarketWatch. "Gold futures rose sharply Friday, as the dollar fell to a more than two-year low versus the euro, boosting demand for the precious metal. Gold for June delivery closed up $10.20 at $689.90 an ounce on the New York Mercantile Exchange. The contract gained 1.5% on the week."

"'Gold finally made a successful attempt at overcoming resistance at the $682/$685 level, after the US dollar sank to a 24-month low against the euro and oil prices firmed,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'A combination of adverse factors keeps gnawing at the US currency and may leave the Fed in the unwelcome predicament of having to boost rates to throw out a life-preserver to the greenback,' Nadler said."

"Weakness in the dollar, firmer crude-oil prices and strong physical demand for gold have supported gold prices, said James Moore, metals analyst at TheBullionDesk.com.
Crude-oil futures were flat Friday, having surged 3% in the previous session, drawing support from U.S. refinery outages and concerns over declining OPEC production."

"Other metals prices also gained. May silver closed up 23.5 cents at $14.090 an ounce, gaining 2.5% on the week. June palladium rose $6.75 at $381.05 an ounce, gaining 6.9% on the week, and July platinum rose $6.90 at $1,286.40 an ounce, gaining 1.6% on the week."

Gold Falls From "Key Technical Levels"

2007-04-12T13:20:00.000-07:00

The Associated Press reports on currencies. "The euro fortified itself on recent gains against the dollar on Thursday, trading around two-year highs as the European Central Bank kept its interest rate steady and U.S. jobless claims hit a two-month high."

"The 13-nation euro bought US$1.3488 in afternoon European trading, up from US$1.3427 in New York late Wednesday. That put it at less than two U.S. cents short of its all-time high of US$1.3667, reached in December 2004."

"The euro was up amid the ECB's decision to keep its interest rate unchanged at 3.75 percent and Bank President Jean-Claude Trichet's tacit admission that it would likely lift the rate to 4 percent by June."

"The U.S. Federal Reserve has left rates unchanged over recent months even as the ECB steadily increased the cost of borrowing. The dollar was also hurt by worse-than-expected jobless claims in the U.S. which saw the number of Americans filing new claims for unemployment benefits reach a two-month high."

"That helped push the British pound up slightly to US$1.9791 from US$1.9753 and caused the dollar to fall to 119.01 Japanese yen from 119.30 yen."

From MarketWatch. "Gold futures fell in volatile trading Thursday, as traders locked in gains, shrugging off weakness in the dollar and strength in crude-oil prices. Gold for June delivery closed down $2 at $679.70 an ounce on the New York Mercantile Exchange."

"'Today's gold trading session was agonizingly lackluster as the metal tried to get its bearings, but was unsuccessful at either rising convincingly through the $682 price, or at falling under $670 per ounce,' said analyst Jon Nadler. 'Bullion has been repeatedly running into strong headwinds of resistance near the $682 area, despite continuing perceptions that the US dollar is on a basically one-way street lower,' Nadler said."

"'While the bullish trend remains intact, some traders feel that there may be a period of consolidation before gold prices manage to break resistance at $682 and the psychologically important $700 mark,' according to Action Economics."

"Other metals prices were mostly lower. May silver fell 3.5 cents to $13.855 an ounce, July platinum closed down $1.80 to $1,275.50 an ounce. June palladium bucked the trend, rising $4.75 to $374.30 an ounce."

From Reuters. "Palladium climbed to a new 11-month peak on Thursday and platinum touched its highest in nearly five months, buoyed by technical buying and positive momentum in the market."

"'Palladium's fundamentals are pretty poor. It's really a technical rally more than anything else,' said Robin Bhar, metals analyst at UBS Investment Bank. 'It's a small market and liquidity is poor. One can argue that it's easier to push up palladium than some other markets. We don't trust this rally and think it is unsustainable.'"

"Dealers said gold was supported by a weaker dollar but the metal struggled to break key technical levels."

"'The fundamentals remain positive for gold, but the market appears to lack conviction that the upside potential is not exhausted,' Dresdner Kleinwort said in a daily report."

Palladium In "Technical Breakout"

2007-04-11T14:47:00.000-07:00

Bloomberg reports on currencies. "Canada's dollar reached a four- month high as technical analysts said the currency's recent advances suggest further gains and the government said housing starts rose in March. The currency's appreciation accelerated after it moved past its average of the past 200 days, traders said. For some investors who use historical patterns to forecast the currency's future, that break was bullish."

"The Canadian economy is performing much better than people had thought,' said Jonathan Gencher, vice president of foreign exchange sales at BMO Capital Markets in Toronto. 'There is a lot of interest to buy the Canadian dollar.'"

"The Canadian currency rose 0.7 percent to 87.74 U.S. cents at 4:46 p.m. in Toronto. One U.S. dollar buys C$1.1398, the strongest for Canada's dollar since Dec. 5. The Canadian dollar's 200-day average is about C$1.1450 today."

"The move below C$1.1447 meant '`our bullish forecast for the U.S. dollar is at risk,' said George Davis, chief technical analyst at RBC Capital Markets in Toronto. RBC, Canada's largest bank by assets, forecast the Canadian dollar weakening to C$1.2100 this year."

"The currency got a boost earlier today after a report showed housing starts rose to 210,900 on an annual basis in March from 196,000 in February. Canada Mortgage and Housing Corp. released the data today."

From MarketWatch. "Gold futures closed marginally higher Wednesday, as the dollar recouped some of its prior-session losses and crude-oil futures traded flat on conflicting supply data. Gold for June delivery ended up 20 cents at $681.70 an ounce on the New York Mercantile Exchange."

"'Bullion closed Wednesday's session on a markedly less enthusiastic note,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'The gold rally shows some signs of fatigue and now has to contend with a rebounding US dollar and a renewed anti-inflation stance from the IMF as well as the Fed.'"

"Other metals prices were mixed. May silver fell 4 cents to $13.89 an ounce. July platinum closed up $7.70 at $1,281.30 an ounce, June palladium rose $6.10 at $369.55 an ounce."

"U.S. Federal Reserve members were very uncertain about the economic outlook and changed their policy statement to gain more flexibility to respond to the incoming data, the minutes said. 'The FOMC agreed that further policy firming might prove necessary to foster lower inflation, but in light of increased uncertainty about the outlook for both growth and inflation, the FOMC also agreed that the statement should no longer cite only the possibility of further firming,' the FOMC minutes said."

"'Instead the statement should indicate that future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information,' the minutes said."

"Elsewhere on the commodity markets, reformulated gasoline futures rallied Wednesday to an eight-month high, as a greater-than-expected draw on gasoline stocks helped support the belief that demand will remain strong through the summer driving season. Crude oil for May delivery was up 14 cents at $62.03 a barrel on NYMEX, but had been up as much as 67 cents at its intraday high of $62.56."

From Reuters. "Commission-house and technical buying sent U.S. palladium futures to a ten-month high on Wednesday, while gold contracts finished a touch higher after breaking above trading ranges a day earlier."

"Most-active palladium futures for June delivery on the COMEX division of the New York Mercantile Exchange settled up $6.10 at $369.55 an ounce."

"Ralph D'Esposito of RJ Futures cited a technical breakout on the charts, along with commission house short covering, the buying back of futures or options previously sold to close out short positions."

"'We are hitting commission-house (buy) stops and speculative buying in palladium,' D'Esposito said, adding he also saw some good trade and commercial selling at the same time."

"The June palladium contract has risen more than 10 percent after setting a low of $336.20 on March 5."

A "New Selling Wave" For US$

2007-04-10T14:26:00.000-07:00

The Associated Press reports on currencies. "The dollar fell against other major currencies Tuesday amid worries over trade troubles between the U.S. and China and persistent concern about the strength of the U.S. economy. The 13-nation euro traded at $1.3424 in late New York trading, up from $1.3360 late Monday. The British pound rose to $1.9716 from $1.9610, while the dollar slipped to 119.12 Japanese yen from 119.30 yen."

"The dollar bought 1.2181 Swiss francs, down from 1.2264 late Monday, and 1.1475 Canadian dollars, dropping from 1.1529."

"On Tuesday, the United States filed two new complaints against China at the World Trade Organization over copyright policy and restrictions on the sale of American movies, music and books. The Chinese Commerce Ministry expressed 'strong dissatisfaction.'"

"'The fear is that China will retaliate to U.S. action and sell U.S. treasuries or simply not buy more,'analysts at Brown Brothers Harriman said. But they also noted that such concerns are largely unfounded, because 'China gains nothing by retaliating by selling treasuries (bonds) and driving the dollar down.'"

From MarketWatch. "Gold futures climbed to a five-week high Tuesday, as renewed trade tensions between the U.S. and China and a slide in the U.S. dollar boosted demand for the precious metal. Gold for June delivery settled up $4.60, or 0.7%, at $681.50 an ounce on the New York Mercantile Exchange. It reached a high of $686.80 in intraday trading, the highest price seen for that contract since Feb. 28."

"'The U.S. currency took another hit this morning after overnight data showed a widening (actually a doubling) Chinese trade surplus,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'Bullion was also bolstered by rising crude oil prices which showed strength after several sessions of significant weakness.'"

"'Many are expecting the dollar to come under some significant pressure in the near term with new rhetoric out of the U.S. government yesterday about another set of piracy and trade issues with China,' said Neal Ryan, director of economic research at Blanchard."

"'Again, this is a slippery slope and should the US ramp up the trade sanctions and protectionist trade policies, China will hit back,' he said. '[Since China is] one of the largest holders of our treasuries and dollar denominated assets, it doesn't take long to figure out how they could hurt the U.S. economy the most.'"

"The dollar 'enters a new selling wave' as the U.S. trade action 'is fuelling speculation of retaliatory acts from Beijing, which has already reported it will not attend this week's [Group of Seven] meeting in Washington, D.C.,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets."

"James Moore, metals analyst at TheBullionDesk.com, said: 'Gold again looks well-placed to continue higher both short and long-term with negative dollar sentiment likely to be the main catalyst in the coming sessions.'"

"'Oil prices seem to have found some stability and may look to add additional momentum as we head towards peak summer demand period,' Moore said. 'Resistance in gold is now pegged at $684/89, but having spent some time consolidating the metal may now look to challenge $700.'"

"May silver settled up 12.0 cents at $13.930 an ounce on NYMEX. 'Silver is looking set for further gains short-term as the improved sentiment in gold and the phenomenal movements in the base metals seem set to draw further interest from investors and speculators,' Moore said."

"July platinum settled up $9.30 at $1,273.60 an ounce on NYMEX, while June palladium closed up $5.45 at $363.45 an ounce."

"'Platinum was in part aided this morning by a UBS AG report which raised its forecasts for platinum because of demand from automakers that use the metal in car parts to reduce harmful emissions,' Nadler said."

"Blame for the recent turmoil in global stocks should not be laid at China's feet, a new study released Tuesday found."

"Although stocks' sharp drop in late February began in Shanghai, 'the broad and global scope of the sell-off suggested the underlying causes lay elsewhere,' the International Monetary Fund said in its latest report about stability in financial markets."

"On Monday, IMF chief Rodrigo de Rato described global financial markets as a 'dry forest' in which sparks could set off unintended forest fires, and Tuesday's report served to flesh out his comments."

"The growth of carry trades is a sign that 'market participants do not view the cyclical factors contributing to the low-volatility environment, abundant low-cost liquidity, low leverage in the corporate sector, and high risk appetite, are likely to reverse in the near term,' the report said."

US$ Recovery "Unconvincing"

2007-04-09T13:43:00.000-07:00

MarketWatch reports on currencies. "The dollar hovered near a six-week high against the yen and rose against the euro Monday, as traders played off growth in U.S. nonfarm payrolls for March that was much stronger than expected. The growth in payrolls raised the prospect that the Federal Reserve's next move on interest rates may be a further hike rather than a cut."

"'Thin trading conditions have kept the U.S. dollar in narrow trading ranges, while the stronger-than-expected employment data before the weekend is lending it support,' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman."

"That said, 'the dollar's recovery...has thus far been unconvincing,' he said. 'It could be a function of the lack of participation, even though that very same fact could have produced a more violent reaction.'"

"Late in New York, the dollar was quoted at 119.28 yen, compared with 119.30 yen late Friday. The euro stood at $1.3356, compared with $1.3373. The British pound traded at $1.9615 vs. $1.9650. The dollar changed hands at 1.2262 Swiss francs, compared with 1.2189 francs."

"The Fed's scheduled to release the minutes from its most recent interest-rate meeting on Wednesday. The minutes will give 'some color on the Fed's decision to abandon its outright tightening bias,' said David Watt, senior currency strategist at RBC Capital Markets."

"Another key piece of data for currency traders will be producer prices for March, due for release on Friday at 8:30 a.m. Eastern time. Also on Friday, the Commerce Department releases data on the U.S. trade deficit for February. Economists expect the trade gap to have widened to $60.3 billion from $59.1 billion in January."

"'With few expecting the BoJ to hike this week, carry trades will remain in favour,' Watt said."

"Gold for June delivery ended down $2.50 at $676.90 an ounce on the New York Mercantile Exchange Monday, reversing early-session gains, as falling crude-oil prices and the rising dollar weakened demand for the precious metal."

"With economic data lacking until the latter half of the week, 'gold will have to find its bearing on internal market conditions and show strength or weakness based mainly on the appetite of physical buyers and the gut feelings of speculative institutionals,' said analyst Jon Nadler."

"'Gold's ability to withstand a marked increase in central bank sales recently implies that physical demand is quite strong,' said Peter Grandich, editor of The Grandich Letter. 'In addition, another failed attempt to cap the gold price by the shorts has led to a breakout on the charts.'"

"Other metals prices were mixed. May silver ended down 7 cents at $13.81 an ounce. July platinum fell $1.60 at $1,264.30 an ounce, while June palladium rose $1.60 at $358.0 an ounce."

US$ Bears "Remain Firmly In Control"

2007-04-05T14:51:00.000-07:00

The Associated Press reports on currencies. "The 13-nation euro rose to a two-year high against the U.S. dollar on Thursday, before the Easter holiday, after Washington reported increased unemployment. In late European trading the euro hit as high as US$1.3442, the highest since March 2005, before retreating slightly to US$1.3425."

"The British pound dropped to US$1.9707 from US$1.9753, after the Bank of England held interest rates steady at 5.25 percent, while the dollar rose slightly to purchase 118.69 Japanese yen from 118.67 in New York."

"The euro has been trading near its all-time high of US$1.3667, set in December 2004, on concerns over the U.S. economy and the massive trade and budget deficits."

From MarketWatch. "Dollar bears 'remain firmly in control,' said Sophia Drossos, currency strategist at Morgan Stanley. 'Our sense is that it was a combination of thinner than usual liquidity, given the holidays, and overwhelming dollar pessimism that pushed price action.'"

"'In light of the tone of dollar weakness that has dominated recent trading sentiment, dollar bears appear to already be anticipating a weak non-farm payrolls report tomorrow,' she said."

"Late in New York, the dollar was quoted at 118.71 yen, compared with 118.68 yen late Wednesday. The British pound traded at $1.9706 vs. $1.9754. The dollar changed hands at 1.2149 Swiss francs, compared with 1.2196 francs."

"Timothy Mazanec, senior currency strategist at Investors Bank & Trust Co., said 'even if payrolls number is strong tomorrow, that doesn't change the outlook' for the U.S. economy and interest rates."

"'People are still going to speculate about when the Fed will cut rates and when the European Central Bank, the Bank of England and all the other central banks will be raising rates,' he said."

"Gold futures closed higher Thursday to tally a two-session win of almost $10 an ounce with traders unwilling to sell the precious metal ahead of the long Easter holiday. Gold for June delivery rose $2 to close at $679.40 an ounce on the New York Mercantile Exchange, its strongest closing level since Feb. 27. The contract is up $9.60, or 1.4%, from Tuesday's closing level."

"'Gold prices continued their ascent, albeit at a slower pace,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'Market watchers now believe that gold received a new lease on life by virtue of its passing over previous resistance levels and a close above $672 per ounce.'"

"'At least on the surface, it appears that gold is executing a de-coupling from oil (content near $64 and rising prospect of $60 in the cards), the U.S. dollar (weak but not terminal by a long shot) and from geopolitics (the Iran drama basically came and went without being the primary catalyst for substantial movements in the price of gold),' Nadler said."

"'The return of fund interest to the market has finally allowed gold to clear the $668-$670 resistance area and should now look to propel the metal back toward the highs of February ($689) and potentially beyond,' said James Moore, metals analyst at TheBullionDesk.com."

"A slight weakness in crude failed to put pressure on gold. May crude fell Thursday, extending Wednesday's decline as traders unwound the risk premium built into prices during a 13-day standoff between the U.K. and Iran."

"Other metals prices closed higher Thursday. June palladium rose $2.25 to close at $356.40 an ounce, and the July contract for sister metal platinum added $7 to end at $1,265.90 an ounce. May silver rose 12 cents to close at $13.74 an ounce."

"'Although we expect to see this bull run extend considerably further in the months ahead, we feel that we are in the short-covering squeeze part of the rebound at the moment and that things may pull back once the shorts have covered,' William Adams, analyst at BaseMetals.com told clients. 'We do not think the environment is as bullish as it was this time last year and therefore we should be prepared for some volatile trading,' he said."

"Regular metals trading on the exchange will be closed Friday and reopen Monday following the Easter holiday."

US$ Weak On Economic Worries

2007-04-04T15:22:00.000-07:00

MarketWatch reports on currencies. "The dollar fell against the euro and yen Wednesday after a report showed nonmanufacturing sectors of the U.S. economy expanded at a slower pace in March, fueling concerns about the outlook for the U.S. economy."

"'The drop in U.S. services ISM to a four-year low is offsetting any upside reaction from Iran's decision to free the 15 British sailors,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets. 'The fact that the much touted services sector is now joining its manufacturing counterpart into slowdown mode raises questions about the prospects of a soft economic landing.'"

"Late in New York, the dollar was quoted at 118.68 yen, compared with 118.95 yen late Tuesday. The euro stood at $1.3369, compared with $1.3328. The British pound traded at $1.9754 vs. $1.9737. The dollar changed hands at 1.2196 Swiss francs, compared with 1.2222 francs."

"Also weighing on the dollar was an Automatic Data Processing employment survey showing U.S. private-sector nonfarm payrolls increased by about 106,000 in March. The ADP report 'suggests downside risk for the nonfarm-payrolls report,' said T. J. Marta, strategist at RBC Capital Markets."

"Elsewhere, the yen touched fresh five-week lows versus the dollar and euro on Wednesday before recovering as risk appetite was on the rise again amid easing tensions between the U.K. and Iran. See futures movers."

"Mitul Kotecha, foreign-exchange analyst at French bank Calyon, said as interest rates remain the dominant driver in the currencies market, 'there seems to be little that will dent this carry attraction over coming weeks, with market volatility remaining low and risk appetite high.'"

"Gold futures climbed Wednesday to close at a five-week high, underpinned by weakness in the dollar and physical demand, even as Iranian President Mahmoud Ahmadinejad triggered a decline in crude-oil prices by saying captured British sailors would be freed."

"Gold for June delivery rose $7.70 to close at $677.40 an ounce on the New York Mercantile Exchange. It climbed to $681 earlier, its strongest intraday level since March 1."

"'The current rise in the gold price is overdue, but overhead resistance got in the way,' said Julian Phillips, an analyst at GoldForecaster.com. 'It is now out of the way so the jump is happening now."

"'This is caused not solely by the situation in Iran but a combination of factors,' he said. 'The factors include the fall in the dollar and expectations for more declines, oil prices holding above $60 a barrel, strong physical demand for gold at just under $660 and overall 'global uncertainty,' especially in the Middle East, he said."

"Indeed, 'there has been an aggressive shorting campaign to keep gold below $666,' said Peter Grandich, editor of the Grandich Letter. But 'like all previous capping exercises, this one is failing also thanks to an incredibly strong physical market.'"

"Neal Ryan, director of economic research at Blanchard said 'it's the physical supply side of the market in London that's been influencing prices so much the last few weeks.'"

"'Gold sales have been swamping the market the last three weeks...and the price has held up considerably well and even increased under that pressure,' he said. 'I think what we've seen today is the end of that selling pressure.' So, 'we're going to see prices jump up and challenge the May '06 high in 2-3 weeks in my opinion,' he said."

"Other metals prices climbed along with gold, though palladium was a lone loser, with its June contract closing down $1.60 at $354.15 an ounce. May silver rose 19 cents to end at $13.62 an ounce and July platinum rose $6.60 to close at $1,258.90 an ounce."

Gold "Range-Bound"

2007-04-03T14:45:00.000-07:00

The Associated Press reports on currencies. "The dollar strengthened against most major currencies Tuesday as the yen fell on expectations that Japanese investors will resume selling the currency in the new fiscal year. The dollar bought 118.88 yen in late New York trading, up from 117.79 yen late Monday."

"The 13-nation euro traded at $1.3331, down from $1.3364, while the British pound fell to $1.9746 from $1.9782."

"Yen-funded carry trades are picking up again after unwinding throughout March, and some expect the currency to lose more steam as investors buy up foreign bonds in Japan's new fiscal year, which began April 1, said David Gilmore, a partner at Foreign Exchange Analytics."

"In other trading, the dollar bought 1.2221 Swiss francs, rising from 1.2148 late Monday, and 1.1591 Canadian dollars, up from 1.1562."

From MarketWatch. "June gold declined by $1.80 to close at $669.70 an ounce in New York, after reaching a high of $673.20 as traders remained focused on developments surrounding standoff between Iran and the U.K.."

"'For the moment, dips are still being viewed as a good buying opportunity, a theme likely to continue as we approach the wedding/monsoon season in India,' said James Moore, a metals analyst at TheBullionDesk.com. In a note to clients, he called 'encouraging' the emergence of technical support around the $656 chart line."

"However, 'with the market still largely long, there remains the risk of a deeper correction short-term,' Moore said."

"On Monday, June gold had closed at $671.50, up $2.50, after trading as low as $661.70."

"Movements in the price of crude oil also filtered into metals trading. Crude for May delivery closed 2% lower with tensions between Iran and the U.K. easing slightly."

"May silver climbed 8 cents to close at $13.43 an ounce, while June palladium added $2.05 to end at $355.75 an ounce and July platinum rose $3.30 to close at $1,252.30 an ounce."

From Reuters. "Spot gold rose to $667.50 an ounce, its highest for the session, before easing to $664.20/665.20 by 3:35 p.m. EDT, compared with $664.50/665.00 in New York late on Monday."

"'We are range-bound ahead of Easter. The market is long and new buyers are reluctant to enter into the market until we break through some resistance levels, which in my mind would be $670,' said David Holmes, director of precious metals sales at Dresdner Kleinwort Wasserstein."

"Many analysts were not convinced that buying interest was enough to take prices up through $670 and toward the psychologically important $700 area."

From RIA Novosti. "Russia's gold and foreign currency reserves could stop growing by 2010-2011, the Central Bank first deputy head said Tuesday. 'By 2010-2011, the gold and currency reserves will stop growing,' Alexei Ulyukayev said."

"Ulyukayev said capital inflow would not compensate for a decline in trade surplus starting from 2008. The growth of gold and currency reserves will slow down by $30-$40 billion in 2007, year-on-year, he said, adding that the trend would persist in 2008."

"'Consequently, the Central Bank should buy less foreign currency on the domestic market,' Ulyukayev said adding that this was the best way to reduce the growth of money supply, which the Central Bank expects to be 33%, against 50% in 2006."

Trade "Continues To Weigh On US$"

2007-04-02T14:19:00.000-07:00

Bloomberg reports on currencies. "The dollar was little changed against the euro and the yen after an industry report showed slower U.S. factory growth last month while a gauge of prices manufacturers pay rose more than economists forecast. The evidence of accelerating inflation suggests the Federal Reserve will be more likely to keep borrowing costs at a six-year high, reducing pressure on the dollar."

"The dollar fell to $1.3366 against the euro at 4:11 p.m. in New York, from $1.3354 on March 30. The U.S. currency was unchanged at 117.83 yen."

"'I don't think the report will have a big impact on the dollar,' said Christian Dupont, a senior currency trader in Montreal at Societe Generale SA. 'The weaker ISM number simply gave some dollar bears an excuse to sell the dollar. The sentiment surrounding the dollar has been negative.'"

"The dollar fell against the euro and the yen last week after the U.S. added tariffs on imports from China and on speculation mounting tension in the Mideast will increase geopolitical risks. 'The news about levies on imports from China will continue to weigh on the dollar,' said Scott Schultz, a currency trader in New York at Brown Brothers Harriman & Co. 'Protectionism is not good for trade flow and is negative for the dollar.'"

From MarketWatch. "Gold futures climbed Monday to close at their highest level in three trading sessions, taking a turn higher as some traders viewed developments in the stand-off between Iran and the U.K. as taking a slight turn for the worst."

"Gold for April delivery climbed $2.70 to close at $665.70 an ounce on the New York Mercantile Exchange, reversing from an earlier dip to $657. Although April remains the front-month contract for futures, most of the trading volume has moved to the June contract, which closed at $671.50, up $2.50, after trading as low as $661.70 earlier."

"'Geopolitics should not be ignored as the pendulum could swing from diplomacy to confrontation over a single word or nuance,' said Jon Nadler, an analyst at Kitco.com."

"Overall, gold's price action 'screams physical selling (or leasing) in the London market which means the gold is coming out of central bank vaults,' said Neal Ryan, director of economic research at Blanchard. 'There is no other explanation for this type of price activity.'"

"'Oil has been up and down all morning and gold prices [hadn't] reacted to oil price fluctuations until the London market closed,' he said. May crude closed slightly higher Monday."

"Juxtaposed against this uncertain backdrop, gold's earlier weakness came as a bit perplexing to some analysts. 'There is no clear reason, with the dollar down, oil prices volatile (but still holding over $65), no resolution to the U.K./Iran standoff now going into it's second full week and only bullish news entering the market from a demand standpoint, that precious metals should be falling,' said Ryan."

"And looking further ahead, 'we are now moving into what is traditionally the strongest period for physical demand, with the start of the monsoon/wedding season later in the month,' said James Moore, metals analyst at TheBullionDesk.com."

"Most other metals prices moved lower. May silver lost 0.7%, or 10 cents, to close at $13.35 an ounce. July platinum fell $5.80 to end at $1,249 an ounce and June palladium skidded $3.55 to close at $353.70 an ounce."

The Asia Sentinel. "Amid the myriad booms and bubbles the asset world has witnessed in recent months, one stands out, at least for originality: Vietnam. It is awash in more money than it can handle."

"In mid-March, a thousand portfolio investors, investment bankers and fund managers crowded into Hanoi’s Melia Hotel for an investment conference that coincided with a flurry of announcements about new funds being formed to invest in Asia’s latest miracle economy."

"Here was the successor to China of the past decade, Thailand-Malaysia of the 1985-1995 era, Taiwan and Korea of 1975-1985 and Japan during the post-1965 boom. Vietnam is the latest to fly in the Asian geese formation."

"New markets are particularly prone to speculative excesses and Vietnam is no exception. This has been a money-and-momentum driven market with scant regard for such niceties as price-to-earnings or price-to-book ratios. They are there for quick profits and an improvement on the modest yields of bank deposits."

"The estimated $2 to 3 billion of new foreign portfolio money waiting in the wings is a huge amount for this market to absorb. It may not seem so big relative to a $16bn market capitalization but it is huge relative both to the free float of those listed and bearing in mind that foreign holdings for some counters, mainly banks, are close to their limits (30 percent in the case of banks)."

"As the banking system is largely state-owned it may not be in danger of the kind of meltdown suffered in many countries during the Asian financial crisis of 1997-1998. However, credit has almost certainly been growing too fast even for an economy with 13 percent nominal growth and still in the process of monetization."

"In short, Vietnam has probably not done enough during this period of easy money to reduce risk by increasing its forex reserves. So it will need to be on guard so that today’s inflow excesses do not become tomorrow’s outflow flood and drain those reserves."

Trade, Safe-Haven Issues Drive Gold Higher

2007-03-30T16:35:00.000-07:00

The Associated Press reports on the US dollar. "The dollar ended the week with an ugly sell-off, triggered largely by news the United States will no longer exempt Chinese companies from U.S. anti-subsidy laws, which offset a slew of largely dollar-positive data. While the greenback was able to retrace some of its losses against the yen in particular, it ended the New York session down across the board."

"'Hope that the dollar could start a rally next week off of (Friday's) U.S. data was quickly extinguished by news of U.S. tariffs against China,' Michael Woolfolk, senior currency strategist at The Bank of New York, 'The market's reaction demonstrates how sensitive an issue this is.'"

"Late in New York, the dollar was changing hands at 117.87 yen versus 117.97 late Thursday, while the euro stood at $1.3356 from $1.3335, according to EBS. The dollar was at 1.2157 Swiss francs versus 1.2175, while sterling was at $1.9673 from $1.9623 late Thursday."

"Higher inflation would stem from higher prices consumers would have to pay due to the tariffs, T.J. Marta, fixed-income strategist at RBC Capital Markets said."

"'This is not a positive development for the U.S. economy,' Marta said, particularly as higher inflation would put pressure on the Federal Reserve to refrain from accommodating any potential U.S. economic weakness due to the housing downturn."

"Dollar-selling also came Friday amid continued geopolitical tensions between the U.K. and Iran."

"The National Association of Purchasing Management-Chicago said Friday its index of manufacturing activity rose to 61.7 in March from 47.9 in February, hitting its highest level in two years and versus an expected reading of 50."

"'The stronger-than-anticipated U.S. data virtually across the board throughout the morning was not enough to get dollar-bulls out of the woodwork,' Dustin Reid, currency strategist at ABN Amro said. 'This clearly indicates that fundamentals are likely to take a back-seat,' as geo-political tensions may come to a boil next week."

From MarketWatch. "Gold futures made fresh gains Friday to close almost $6-an-ounce higher for the week as developments in Iran and China punctuated the metal's appeal as a safe-haven investment. But gold's April contract finished the month of March with a loss of more than 1%."

"Gold for April delivery closed at $663 an ounce on the New York Mercantile Exchange, pulling back a bit from an earlier high of $665 to finish $1.50 higher for the session. The contract closed $5.70 higher than last Friday's closing level, but it's down about 1.4%, or $9.50, from the end of February."

"'Save-haven status is being confirmed,' said Neal Ryan, director of economic research at Blanchard & Co. 'But don't forget the performance-asset aspect.'"

"Prices haven't passed $700 per ounce yet because of the 'gold that has been dumped on the market in the past few weeks,' he said. Looking further ahead, gold prices will 'cross $700 in weeks -- and will quickly challenge the $730 May high without the corresponding wicked correction,' Ryan said, adding that gold has the potential to 'spike up to $800 by late fall.'"

"Gold prices had fallen by $5.30 to close Thursday at $661.50 an ounce, trading down some $11 an ounce at one point during the session. 'While one hopes that the event was a one-off, it comes on the heels of the recent safe-haven disappointment that gold generated in the wake of falling global equities,' said Jon Nadler, an analyst at Kitco.com."

"Other metals prices were higher Friday. May silver rose 11 cents to close at $13.45 an ounce. It was up 1.7% for the week, but down 5.5% for the month. June palladium climbed $1.25 to close at $357.25 an ounce, down over $2 for the week, but up a few cents for the month. And April platinum added $5.70 to finish at $1,248.30 an ounce, up almost $15 for the week but down around $8 for the month."

Fund Sell-Off Takes Gold Lower

2007-03-29T16:28:00.000-07:00

MarketWatch reports on currencies. "The dollar rose against the yen Thursday after a government report showed the U.S. economy grew at a faster pace than initially reported in the fourth-quarter. The yen fell across the board, snapping a two-session rise, as steadying global equity markets encouraged investors to reestablish carry trades. Weaker-than-expected Japanese retail sales data further weighed on the yen."

"'The dollar/yen extended its rebound by a full yen from yesterday's 116.40 low amid rebounding equities, a neutral [Federal Reserve Chairman Ben] Bernanke and a 0.2% decline in Japanese retail sales,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets. 'The redress in risk appetite is now boosting the higher yielding currencies.'"

"Late in New York, the dollar was quoted at 117.94 yen, compared with 116.86 yen late Wednesday. The euro stood at $1.3333, compared with $1.3312. The British pound traded at $1.9623 vs. $1.9612. The dollar changed hands at 1.2172 Swiss francs, compared with 1.2165 francs."

"In the GDP report, the year-over-year increase in core personal consumption expenditure price index was unrevised at 2.2%, described by Bernanke as 'uncomfortably high.' The Fed has an implied target of about 1% to 2% for core inflation."

"'Core inflation has remained elevated,' said Michael Woolfolk, senior currency strategist at The Bank of New York. 'Until core inflation falls back below the 2% [year-over-year], a Fed rate cut will remain a remote possibility. This may help to explain why Bernanke made a point yesterday of indicating that the Fed had yet to change its inflation bias.'"

"Gold futures fell Thursday, as traders locked in gains before the end of the quarter, despite rallying crude-oil prices and mounting tensions between Iran and the U.K. 'Fund liquidations hit bullion and hit it pretty hard,' said Jon Nadler, analyst at Kitco.com."

"Gold for April delivery closed down $5.30 at $661.50 an ounce on the New York Mercantile Exchange."

"Crude oil for May delivery rallied $1.95, or 3%, to close at $66.03 a barrel Thursday, marking the contract's highest closing level since Dec. 20. It touched a high of $66.50, its strongest intraday level since Dec. 5."

"'That gold is willing to give up some of its recent gains despite the lack of resolution to the hostage impasse is a caution sign in the making,' said Jon Nadler, metals analyst at Kitco.com. 'Fund liquidations hit bullion and hit it pretty hard.'"

"'The risk/reward picture is back in favor of taking profit or shorting bullion until at least such time as either the crisis deepens or other markets give a compelling 'buy' signal and drag gold along with it,' Nadler said."

"'While the current environment remains supportive for gold, the metal continues to meet strong resistance which may remain in place till after the end of the month/quarter,' said James Moore, metals analyst at TheBullionDesk.com."

"Other metals prices were lower. May silver fell 11.5 cents at $13.34 an ounce, April platinum ended down $8.20 at $1,242.60 an ounce and June palladium fell $1.85 at $356 an ounce."

"The number of B, or junk, credit ratings assigned to U.S. companies surged to 42% of all ratings in 2006, up from 36% in 1998 and up from just 7% in 1980 when A-rated credit dominated the market, according to S&P. Analysts say the shift away from sound credit at companies reflects a belief among managers that they can grow themselves out of debt and a comfort level with high interest rate risk."

"Last year, S&P issued two downgrades for every upgrade, the highest rate in three years."

"S&P said there were 300 new B-rated credits last year compared to just 66 in 2001, the average for companies getting assigned a rating for the first time has tumbled to B-minus from B-plus and the spread between investment grade and junk bonds has narrowed."

"'We're not saying this is Armageddon,' said Nicholas Riccio, a managing director at Standard & Poors. 'But we think the credit risk has increased over the last two years.'"

"Dollar volume of LBOs rose to more than $350 billion last year, up from less than $150 billion in 2005 and $50 billion in 2003, according to S&P. 'By the end of this year the default rates are going to increase,' Riccio said. 'If you look at the new issuance we're rating, it's coming in lower. Historically, if you look at the pattern, it's not too far afield before the default rates start moving higher.'"

"So, can anything be done to avert the coming credit crunch for corporations? No. And that's answered without hesitation. Look at any market. The cycle moves up and down. It may shift in a month or a year, or two years, but the credit cycle will change again."

"Corporate borrowers and the banks that bankroll them know the score. So far, no one is twisting the tap handle. But it will change. It may not be Armageddon, but it could be a recession."

Precious Metals Ride Oil Price Surge

2007-03-28T15:09:00.000-07:00

Bloomberg reports on currencies. "The dollar may gain a second day against the euro after Federal Reserve Chairman Ben S. Bernanke said inflation remains the central bank's main concern. Traders bought the U.S. currency, paring the dollar's losses against the euro this month to 0.6 percent, after Bernanke told Congress the bank's policy is 'still oriented towards control of inflation.' The comment also helped the dollar trim losses versus the yen."

"'Bernanke is still vigilant on inflation, and this is giving the dollar a short-term boost,' said Scott Schultz, a currency trader at Brown Brothers Harriman & Co. in New York. 'Longer-term, the dollar is still under pressure.'"

"The dollar traded at $1.3317 per euro and 116.91 yen at 6:26 a.m. in Tokyo. Scott said the dollar will rebound to 117.20 yen and to $1.33 against the euro before 'the rally sputters.'"

"Volatility climbed on yen options as investors exited bets on riskier assets financed by borrowing in Japan's currency."

"The yen reached a nine-day high against the dollar as a slowing U.S. economy and tension between Iran and the U.K. led investors to pare back on so-called carry-trade bets. Japan's currency touched a three-month high in early March when investors trimmed carry-trade wagers amid a slide in global stocks."

"'The market is concerned about funding carry-trade positions with yen,' said Paul Mackel, a senior currency strategist at HSBC Holdings Plc in London. 'There is concern about the outlook for the U.S. economy; geopolitical risk is helping bring a bid to volatility.'"

"'The market is due for a re-pricing of risk, which for the foreign exchange market will result in a stronger yen and a stronger Swiss franc,' said Phyllis Papadavid, a currency strategist at Lehman Brothers Holdings Inc. in London. Lehman forecasts a yen rally to 112 per dollar at year-end."

From MarketWatch. "Gold futures closed higher Wednesday, as the stand-off between Iran and the U.K., surging oil prices and the falling dollar boosted demand for the precious metal. Gold for April delivery ended up $4.30 at $666.80 an ounce on the New York Mercantile Exchange."

"'The principal driver for the surge in bullion was once again rising crude,' said Jon Nadler, a metals analyst at Kitco.com. 'The delayed reaction to Iran's initial abduction of the British sailors is now showing all of the signs of turning into a rush to safety of significant proportions.'"

"'The combination of heightened Middle East tension, the knock-on effect this is having on the oil market, and the continued poor performance by the dollar do still favor an upside breakout despite technical indicators suggesting otherwise,' said James Moore, metals analyst at TheBullionDesk.com. Technical factors include options expiration and month/quarter-end positioning."

"Crude for May delivery was last up $1.27, or 2%, at $64.20 a barrel on the New York Mercantile Exchange, retreating a bit from a peak of $64.85 -- the highest intraday price seen for that contract in a regular trading session since Dec. 22."

"Other metals prices also posted gains. May silver ended up 17.5 cents at $13.455 an ounce, April platinum rose $8.80 at $1,250.80, and June palladium gained $1.85 at $357.85 an ounce."

Weakening Economy Knocks US$

2007-03-27T15:21:00.001-07:00

The Financial Times reports on currencies. "Weaker-than-expected US consumer confidence data ensured that the dollar remained on the back foot Tuesday with its defences against the euro crumbling due to stronger German business sentiment. Stuart Bennett, economist at Calyon, said: 'Stronger activity will put greater pressure on already stretched capacity and should intensify those upside risks to inflation that the ECB has warned are likely to come through later in the year.'"

"Canada's dollar jumped against its US counterpart as results from the Quebec election made it less likely a referendum on separation was imminent."

"Marc Chandler at Brown Brothers Harriman suggested that other factors behind the currency's strength, including cross-border merger deals and rising commodity prices. 'Oil prices near the high for the year may be helping underpin sentiment,' he said."

From Bloomberg. "The New Zealand dollar may rise on speculation the U.S. Federal Reserve will cut interest rates this year, luring investors to higher-yielding currencies."

"The local currency reached a 22-month high yesterday after a report showed U.S. consumer confidence dropped from a five-year high. The data prompted traders to increase bets the Fed will cut borrowing costs, spurring investment in riskier assets offering higher yields. New Zealand's record 7.5 percent interest rate is 2.25 percentage-points higher than the benchmark rate in the U.S."

"'Our view is price pressures will decline enough this year for an easing of rates' in the U.S., Todd Elmer, currency strategist at Citigroup Global Markets. As the U.S. dollar falls, 'New Zealand's high-yielding assets are a particularly attractive target,' he said."

"The local dollar bought 71.69 U.S. cents at 9:30 a.m. in Wellington, from 71.76 cents in late Asian trading yesterday. It reached 72.04, the highest since May 12, 2005."

The Statesman. "Iran has significantly reduced the amount of US dollars it holds in its foreign reserves, the head of its central bank has revealed. Dollars now make up 20% of reserves, in line with the policy of lower exposure to the currency, Ebrahim Sheibany said."

"Iranian industry officials have said 60% of its oil trade with other Opec members is now in non-dollar currencies, although this figure has not been corroborated."

"The Reuters news agency reported Chinese sources as saying that state-owned oil producer Zhuhai Zhenrong Corporation had moved out of the dollar for its Iranian trade late last year. If correct, this would be significant since Zhuhai imports 240,000 barrels of oil a day from Iran while China is one of Iran’s most important customers."

From MarketWatch. "Gold futures closed lower Tuesday, tracking a pullback in crude-oil prices a day after a strong rally sparked by tensions between Iran and the U.K."

"Gold for April delivery closed down $1.40 at $662.50 an ounce on the New York Mercantile Exchange. 'Another largely sideways day has been seen in the precious metals despite a weaker than expected confidence reading from the New York Conference board,' said James Moore, metals analyst at TheBullionDesk.com."

"'Both oil and the dollar will provide intra-day direction, while traders now will likely wait for Bernanke testimony tomorrow and the impact it might have on the greenback,' said Moore. On Wednesday, Federal Reserve Chairman Ben Bernanke is scheduled to testify on the nation's economic outlook before the Joint Economic Committee on Capitol Hill."

"'Bullion market participants expect they will get a better sense of gold's immediate trading direction once they hear from Mr. Bernanke again regarding the state of the U.S. economy,' said Jon Nadler, analyst at Kitco.com."

"Gold prices are meeting strong resistance between $664 and $666, though the continuing stand-off between Iran and Britain may spark further safe-haven buying, Moore said."

"Other metals prices were mainly lower. May silver ended down 13 cents at $13.28 an ounce, June palladium fell $3 at $356 an ounce and May copper ended down 8.10 cents at $3.0575 a pound. April platinum gained $5.50 at $1,242 an ounce."

"Nervous Traders" Take Gold Lower

2007-03-23T15:23:00.000-07:00

Reuters reports on currencies. "The dollar firmed against the euro on Friday as a surprise jump in U.S. existing-home sales tempered the case for lower benchmark interest rates by the middle of the year. It also recovered losses against the yen sustained overnight when data showed the first annual rise in Japanese land prices in 16 years."

"The data also helped the dollar wipe out losses suffered earlier this week when the Federal Reserve adopted a more neutral monetary policy stance at its latest meeting, suggesting to some investors that a rate cut was imminent."

"By late afternoon, the euro was trading at $1.3288, down 0.3 percent on the day. It hit a two-year high of $1.3411 on Thursday following the Fed's policy shift."

"The dollar last changed hands at 118.07 yen, unchanged from late Thursday, and ended the week up 1.5 percent against the Japanese currency. The yen got a boost overnight when Japanese Finance Minister Koji Omi told a news conference that recent rises in Japan's land prices reflected a strengthening economy."

"Against the Swiss franc, a safe-haven currency, the dollar reversed losses that were initially sparked by reports that 15 British Royal Navy sailors and marines had been seized by Iran. The dollar was last up 0.4 percent at 1.2183 Swiss francs."

"In the long run, traders said the dollar's fortunes looked gloomier since higher euro zone interest rates are expected to keep cutting into the dollar's yield advantage. 'Fundamentally, I see very little reason to buy the dollar at the moment,' said Greg Salvaggio, vice president of trading at Tempus Consulting."

"Friday's relief rally stems from the 'enormous amount of fear the subprime situation built into the system,' Schlossberg said. 'Does that mean the problems have gone away? Absolutely not, and we will see further evidence of a U.S. slowdown,' he added."

"The Canadian dollar ended lower against the U.S. currency on Friday, as the greenback rallied late in the session, offsetting a Canada-positive rise in the price of oil."

"The currency finished at C$1.1608 to the U.S. dollar, or 86.15 U.S. cents. down from C$1.1582 to the U.S. dollar, or 86.34 U.S. cents, at Thursday's close."

"'The declines today are really consistent with the fact that the U.S. dollar is gaining strength almost across the board,' said Carolyn Kwan, markets economist at Scotia Capital."

"For the week, however, the Canadian currency rose a sharp 1.2 percent, due to mid-week gains on the back of stronger than expected Canadian inflation data and U.S. Federal Reserve statements that sparked talk about possible U.S. rate cuts."

From MarketWatch. "Gold futures closed with a loss Friday as traders locked in a six-session gain of more than 3%, but prices still finished the week over $3 higher. 'Nervous and technical traders moved in to take gold lower Friday using U.S. housing data as the excuse to lock in gains and in the process hit a technical support level to sell gold off further,' said Peter Spina, chief investment strategist at GoldSeek.com. 'Gold is grinding its way higher, while still consolidating from the prior correction,' he said."

"Gold for April delivery closed down $6.90 at $657.30 an ounce on the New York Mercantile Exchange after a decline to $655.50. On Thursday, the contract closed at a three-week high of $664.20. It had climbed $21.70, or 3.4%, over the course of six trading sessions."

"'Gold bullion prices quickly retreated to the $660 level after gaining nicely over several sessions during the week, said Jon Nadler, a metals analyst at Kitco.com. 'This week's ascent, while looking promising, was not only stalling at higher levels, but was subject to some mild pull-backs soon.'"

"June palladium climbed $1.75 to close at $359.50 an ounce, up 2% for the week. Sister metal platinum saw its April contract give back $7.60 to close at $1,233.40, though it was up 1% for the week. Silver, copper, palladium and platinum all ended the week higher."

"Silver dipped to $13.17/13.22 an ounce from its Thursday close of $13.41/13.46."

"Sentiment had turned positive after gold broke $650 an ounce last week and stayed above that level, triggering buying by people who had sold the metal to cover losses after a sell-off in global equities in early March."

"'Risk markets generally seem to have recovered a long way after the recent concerns they had about the U.S. housing market,' said John Reade, head of metals strategy at UBS Investment Bank. 'And if risk markets continue to do well, then the gold price will likely go higher and we are forecasting $700 in one month and $750 in three months.'"

"'But I am concerned that if we do get another wobble coming through in equity markets etc., they could put some pressure on gold,' he added."