Friday, December 29, 2006


Gold Finishes 2006 Up 23%

A report from Bloomberg. "The value of the dollar fell this year against currencies including the euro, partly on speculation the pace of U.S. interest rate increases would slow. New York oil futures dropped 12 percent this year when measured in pounds and 8 percent in South Korean won. They were up 1 percent in Japanese yen."

"Against the European common currency, the dollar lost 11 percent this year. The exchange rate was $1.3186 per euro today."

"The drop in the dollar also affects oil producing nations because the dollars they get for their exports buy less. Concern that the slide in the dollar has offset the overall gain in prices played a part in OPEC's decision this month to reduce crude supplies to support prices."

"'The recently weakening U.S. dollar may be an early reflection of diminished confidence in U.S. economic prospects,' OPEC's Vienna-based secretariat said in a monthly report. Producers watch for signs of slowing economic growth because it can slow oil demand and create a glut."

The Peoples Daily. "The value of RMB against U.S. dollar hit a new high on the final trading day of 2006. The central parity rate of RMB against U.S. dollar was set at 7.8087 yuan on Friday, breaking the 7.81 mark for the first time."

From MarketWatch. "Gold futures closed the final trading session of the year on a positive note Friday, chalking up a fifth straight day of gains and adding 23% in 2006. Gold for February delivery ended up $1.10 at $638 an ounce on the New York Mercantile Exchange, finding support in the dollar's mixed performance against major rivals."

"'Trading activity slowed considerably in the final hours of 2006, as traders took stock of another exciting year in precious metals,' said analyst Jon Nadler. 'The new year started out in the $520's but springtime had gold prices blossoming in a spectacular display of strength,' he said. 'From the end of March to May 12th, bullion gained about $200 and did not stop until reaching $725 per ounce.'"

"However, just one month later, gold had surrendered almost the entire gain and had fallen back to the mid $500's in an equally spectacular and sharp correction, he said. After that, the metal attempted a mid-summer advance, but fell about $50 short of its earlier peaks."

"For 2007, the direction of gold and the other precious and base metals 'very much depends on economic growth, and whilst there are signs of a slowdown in the developed nations, the powerhouses of the Far East will determine what happens next,' said analysts at U.K. spread betting firm Blue Index."

"But it will also depend on the direction of the dollar with more and more analysts expecting the greenback to have a rocky ride as more central banks switch reserves out of dollars into euros."

"'This was the year when the dollar's waterfall slide not only accelerated, but came to a neighborhood near each individual and institutional investor,' said Nadler. 'Next year may well be the year when the man in the street decides that getting out of some dollars may not only be prudent, but that it may save their very portfolio.'"

"Silver futures closed down 0.5 cent at $12.935 an ounce, but chalked up a 45.5% gain on the year. Platinum futures closed up $23.10 at $1,139.30 and gained 17% on the year. Sister metal palladium rose $10.55 to $338.50 an ounce. The metal has gained 32% in 2006."

Thursday, December 28, 2006


Gold Holds Gain On US Dollar Rebound

MarketWatch reports on the metals trading. "Gold futures closed higher Thursday for a fourth straight session, finding support from a mixed dollar and firmer oil prices after data showed a bigger-than-expected drawdown in crude supplies in the latest week. Gold for February delivery finished up $6.60 at $636.90 an ounce on the New York Mercantile Exchange."

"'Gold is showing a strength beyond oil or the dollar which will stand apart from these other markets,' said Julian Phillips, analyst at 'As we enter into 2007 we do expect to see rising volatility, uncertainty, tensions all sufficient to cause concern enough for gold and silver to become safe haven assets in their own right.'"

"Gold held higher even as the dollar came off its worst levels following a batch of data. The dollar was last trading down 0.1% against the euro and 0.1% against the British pound but was up 0.2% against the yen."

"Jon Nadler, analyst at bullion dealers, said traders were speculating that gold would be even higher if the market had full participation levels, which should return next week. 'In the interim, bullion is zeroing in on quite a decent average value for the trading year that concludes tomorrow,' and could attempt a return to $645 to $652 in the opening weeks of the new year, he said."

"Other metals were mixed. Silver rose 1.5 cent to $12.94 an ounce. Platinum closed higher, but palladium ended lower."

From Reuters. "The dollar slipped on Thursday, but pared losses after stronger-than-expected U.S. data suggested a far more resilient economy than a recent run of reports had indicated."

"U.S. existing home sales for November, the Chicago manufacturing index for December, and the Conference Board's reading on consumer confidence all topped market forecasts, helping the dollar recover some ground after earlier losses."

But the dollar remained under pressure against the euro and other major currencies aside from the yen after a member of the European Central Bank Governing Council, Yves Mersch, said earlier that euro zone interest rates remain low in historical terms."

"Many strategists are downbeat on the prospects for the dollar in 2007, given expectations that the Federal Reserve may cut interest rates to shore up a soft economy, as other central banks such as the ECB ratchet rates higher. 'The market is not predisposed to going on a dollar buying binge right now,' said Michael Woolfolk, senior currency strategist at Bank of New York."

"The dollar rose 0.15 percent against the yen to 118.95 yen. Asia-based traders said Japanese importers actively bought the dollar on Thursday, the last business day of the year for many companies in Japan. Traders said moves were exaggerated, with many currency dealers away from their desks for year-end holidays."

"Meanwhile, the Australian and New Zealand dollars both posted strong gains as investors continued to pour funds into high-yielding currencies. The kiwi dollar, which boasts the highest cash yield in the industrialized world at 7.25 percent, hit a fresh one-year high of $0.7062."

"There is no major economic data due on Friday, suggesting that trade will wind down even further ahead of the New Year's day holiday on Monday. Next week will bring a raft of big economic data releases including the closely watched U.S. nonfarm payrolls report."

From Bloomberg. "Japanese bonds had the biggest two- day decline in more than a year after central bank Governor Toshihiko Fukui suggested in newspaper interviews that policy makers may be considering an interest-rate increase next month."

"Fukui said it would be appropriate to raise borrowing costs 'slowly but in a timely manner' once the economy and consumer prices are moving in line with expectations, he told the Wall Street Journal."

"The yield on the benchmark 10-year bond rose 2 basis points to 1.66 percent as of the 6:05 p.m. close in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. Yields have risen 9.5 basis points over yesterday and today, the most since the two-day period ended Dec. 5 last year, when they climbed 11 basis points. Bonds yesterday had the biggest drop in more than six months as a Jiji Press story signaled policy makers were poised to boost borrowing costs"

"'It's not time to be aggressive on Japanese government bonds,' said Tsutomu Kawasaki, a fund manager who helps oversee the equivalent of $19 billion in Japanese debt. 'The new-home sales report made me think positively on the outlook for the U.S. economy,' which is good for Japan's growth prospects."

Wednesday, December 27, 2006


US Dollar Down On Reserve Move

MarketWatch reports on the US dollar. "The dollar fell against other major currencies Wednesday, after the United Arab Emirates said it's planning to diversify its foreign-exchange reserves away from the U.S. currency. But the greenback trimmed some of its losses after a U.S. government report showed sales of new homes rose more than forecast last month."

"'The better-than-expected new-home sales report will add some weight to notions that the housing market is stabilizing,' said Brian Dolan, director of research at However, 'with home builders offering large discounts and incentives to move unsold inventory, it's difficult to say with any conviction that the housing market has turned the corner.'"

"Late in New York, the dollar was quoted at 118.81 yen, compared with 119.11 yen late Tuesday. The euro changed hands at $1.3115, compared with $1.3098. The British pound traded at $1.9561, compared with $1.9538. The dollar changed hands at 1.2259 Swiss francs, compared with 1.2231 francs."

"Sultan Bin Nasser al-Suwaidi, UAE's central bank governor, said the bank plans to raise the share of euro holdings in its reserves to 10% from 2% over the next six to nine months. The bank also said it has started to do so in a "limited way" and will buy euros on pullbacks and sell dollars on periodic highs. UAE's reserves stand at about $25 billion."

"'This approach to reserve accumulation is consistent with that of many central banks planning to diversify their reserves without triggering rapid moves in the value of the dollar and the euro,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York."

"Currency analysts at Brown Brothers Harriman, noted that while some observers cited the UAE news as a dollar negative, 'from a different angle, it illustrates how benign the developments really are,' they said, adding that the amount of reserves involved is roughly only $2 billion. 'UAE plans on holding roughly 90% of its reserves in dollars, well above the average above the U.S. dollar share in the world economy or financial assets,' they wrote."

"A number of countries, including Sweden, Qatar, Italy and Russia, have announced plans this year to diversify their reserves away from dollars. The Russian, Swiss and New Zealand central banks also said recently that they were increasing their holdings of yen."

"The yen found some support after Japan's Jiji news agency reported that the Bank of Japan will likely discuss a proposal to raise its key overnight call rate target by 0.25 percentage point to 0.5% at its next policy meeting in January. 'The story underpinned yen strength for the session despite retail sales which missed expectations and continued to signal broadly weak consumption in Japan,' said Terri Belkas, currency analyst at FXCM."

"'Yen's gains could be temporary as the BoJ is more likely to hold off until later in the first quarter of 2007 before tightening monetary policy for the first time since July,' Belkas said."

"A weaker dollar and concerns about Iran's nuclear strategy helped gold futures to make some headway, as the market got back into full gear with the return of European traders after their extended Christmas holiday."

"Gold for February delivery closed up $3.40 at $630.30 an ounce, adding to gains made on Tuesday when the contract added nearly $5 an ounce on the New York Mercantile Exchange."

"'Conditions are set to remain thin over the next few days, which could lead to some interesting movements, particularly if the war of words between Iran and the west intensifies,' said James Moore, analyst at in London. 'Good support continues to be found ahead of $620.'"

"However, Moore noted that from a technical standpoint, gold remains vulnerable to testing its 100-day moving average at $611.75 an ounce."

"Other metals traded mixed. Silver futures rose 20 cents to $12.925 an ounce. But front-month platinum and palladium contracts closed lower."

Tuesday, December 26, 2006


BOJ Delays Boost US$

MarketWatch reports on the US dollar. "The dollar rose against other major currencies Tuesday, touching a two-month high versus the yen, as the foreign-exchange market read economic data as reducing expectations the Bank of Japan will raise rates soon. Meanwhile, traders await U.S. economic releases on housing and consumer confidence due later in the week for more clues as to the outlook for the world's largest economy and interest rates."

"'The importance of the housing figures combined with relatively thin trading could produce sharp price swings, in case of unexpectedly strong or weak data,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York. 'We expect further prolonged pressure on the euro as long as the U.S. figures on new home sales and existing home sales continue to diverge from one another on a monthly basis,' he said, in a note."

"Late in New York, the dollar was quoted at 119.11 yen, compared with 118.78 yen late Friday, after rising to 119.22 yen, the highest level since Oct. 25. The euro changed hands at $1.3098, compared with $1.3131. The British pound traded at $1.9538, compared with $1.9620. The dollar changed hands at 1.2231 Swiss francs, compared with 1.2169 francs."

"The yen fell after Japanese government reports released Tuesday showed soft price pressures and consumer spending, denting hopes that the central bank overseeing the world's second-largest economy would raise interest rates next month. Japan's nationwide consumer price index rose 0.3% on a year-on-year basis in November, down from 0.4% in October. The core rate was up 0.2% from a year ago. The readings were largely in line with expectations."

"'CPI remained tepid,' said Terri Belkas, currency analyst at FXCM. In light of what Belkas called 'the double-edged sword of broadly weak consumption and prices,' the Bank of Japan 'may find it far more prudent to hold off on monetary policy tightening until at least March 2007.'"

"Bank of Japan governor Toshihiko Fukui reiterated Monday that he has no preset idea on the timing of future interest-rate hikes and that the central bank would watch economic indicators to decide. Elsewhere, the People's Bank of China said it would keep the value of the yuan stable and would act to curb the growth of investments, according to the Associated Press."

From Bloomberg. "Gold in New York rose the most in a week after Iran rejected a United Nations resolution imposing sanctions and said the country will continue its nuclear program, boosting the appeal of the metal as a haven."

"'Gold is reacting to the Iranian sanctions,' said Frank McGhee, head metals trader at Integrated Brokerage Services Inc. in Chicago. 'It could continue to roar through here if the tension heats up.'"

"Gold futures for February delivery rose $4.60, or 0.7 percent, to $626.90 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage gain since Dec. 19."

"The prospect of heightened turmoil in the Middle East may underpin gold in 2007, said Jeffrey Christian, managing director at CPM Group, a metals research firm in New York. 'Politics could hit oil prices and lead to economic problems,' Christian said. 'If that happens, gold could go higher.'"

"Oil prices rose as high as $63.20 a barrel today before erasing gains on speculation mild U.S. weather will curb demand for heating fuel."

"An increase in the equities market may limit gold's gains in the first quarter, McGhee said. Before today, the Standard & Poor's 500 Index was up 0.7 percent in December while gold futures fell 4.2 percent, the first decline in three months. The S&P 500 is up 13 percent this year, which would be the biggest annual gain since 2003. 'If the equities rally continues, it's going to give the metals some problems,' McGhee said.

"Silver futures for March delivery climbed 9 cents, or 0.7 percent, to $12.725 an ounce on Comex. Prices have gained 43 percent this year."

Friday, December 22, 2006


US$ Gains On Bond Sell-Off

Daily FX reports on the US dollar. "The US Dollar seemed to march to the beat of its own drum today, as a sharp rally defied weaker fundamentals and left it stronger against its major counterparts. Below-consensus results in key economic releases were not enough to slow a run on stops across USD-denominated pairs, with the EURUSD dropping 90 points off of intraday highs to $1.3122 at time of writing."

"A pronounced rally in US Bond Yields was also enough to fuel dollar demand in the USDJPY, which broke to fresh two-month highs at 118.92 through the afternoon."

"Fundamental data through the morning hours was broadly worse than expected, with a large drop in Ex. Transport Durable Goods orders leading the US-bearish news. Officials reported that headline Durable Goods Orders grew at 1.9 percent through November, but the more significant Ex. Transport figure actually declined for the second consecutive month."

"Given that this is the first consecutive drop since 2002, economists feel that risks likely remain to the downside for the domestic Durable Goods sector. Not to be outdone, Personal Spending and Income data was also below consensus, with slower income growth leading to a smaller than expected gain in the spending measure. October’s Personal Income growth was revised lower to 0.3 percent (from 0.4), while the current month’s change stayed the same at 0.3 Month-on-Month."

"On a more positive note, November was the first month since June that consumption growth exceeded that of incomes—implying that consumer demand had improved through the period."

"After range trading for the entire first quarter, the British pound broke out at the beginning of April to climb to a high just above 1.90 by mid May, marking its biggest 6 month gain against the US dollar in 16 years."

"However, price had a difficult time breaking above that level until November, when the GBP/USD surged nearly 1000 pips to a 14 year high of 1.9846, leaving traders wondering if the pair would be capable of targeting the elusive 2.0000 handle."

From MarketWatch. "Gold futures closed higher Friday and even after falling over the past two sessions, prices finished the week with a gain of more than $3-an-ounce as traders showed reluctance to sell the precious metal ahead of the Christmas holiday."

"Metals trading closed early Friday on the New York Mercantile Exchange and regular trading won't resume until Tuesday."

"'We can expect prices to be jumpy until the start of 2007, with a slight upward bias during next week's abbreviated trading,' said Peter Spina, chief investment strategist at 'Dips in the metals are finding buyers and the price seems to come right back up after any minor selling,' he said."

"Gold for February delivery closed up 70 cents at $622.30 an ounce. The contract had lost $3.80 over the past two sessions, but it still finished $3.20, or 0.5%, above last week's closing level of $619.10. March silver climbed 14.5 cents to close at $12.635 an ounce but after losing 22 cents in the last two days, it ended the week with a loss of 2.7%."

"January platinum lost $2.80 to end at $1,121.50 an ounce -- down $27 from a week ago, while March palladium closed off $1.10 at $326.20 an ounce to stand around $2 higher for the week."

Thursday, December 21, 2006


Gold In "Consolidation Mode"

The Associated Press reports on the US dollar. "The dollar moved a little higher against the euro on Thursday despite a downward revision to U.S. economic growth figures. The U.S. Commerce Department said gross domestic product rose at a 2 percent annual rate in the third quarter, down from a previous estimate of 2.2 percent. Economists had expected the estimate to hold."

"The euro bought US$1.3152 in afternoon European trading, down from US$1.3178 in New York late Wednesday. The 12-nation currency had risen as high as US$1.3216 earlier in Thursday's session. The British pound declined to US$1.9580 from US$1.9644. The dollar was barely changed against the Japanese currency; it bought 118.33 yen, compared with 118.34 on Wednesday."

"Also Thursday, the Labor Department said the number of newly laid-off workers signing up for unemployment benefits rose by 9,000 to 315,000 last week, in line with economists' projections."

"Brian Dolan, head of currency research at, said of the muted response to the GDP data: 'By the final revision you don't get much reaction. It's kind of ancient history and the market is focused on here and now.'"

From MarketWatch. "Gold futures closed lower Thursday to tally a two-session loss of nearly $4. 'Gold still remains closely pegged to the movements made by the dollar and oil, but while both are likely to prove supportive in the year ahead, short-term the market is still in consolidation mode with traders winding down for the holiday period,' said James Moore, an analyst at"

"Gold for February delivery closed down $2.70 at $621.60 an ounce on the New York Mercantile Exchange. The contract closed $1.10 lower on Wednesday with traders already reporting increased volatility as volumes thinned heading into the holiday season."

"March silver gave back 15.5 cents, or 1.2%, to end at $12.49 an ounce after losing 6.5 cents on Wednesday. January platinum lost $1.70 to end at $1,124.30 an ounce and March palladium closed off 45 cents at $327.30 an ounce."

"Analysts at Goldman Sachs recently cut their gold-price estimate for 2006 to an average of $615 an ounce from $621, and for 2007, it reduced the estimate to $689 from $700. 'Our adjusted forecasts imply a later-than-previously-expected rally in gold prices, factoring forward gold-curve trends and an easing of interest rates by the Federal Reserve starting in 2007,' they said in a research note."

From Business Day. "Gold see-sawed today ahead of the release of key US data, which may offer clues as to whether the US Federal Reserve will cut interest rates next year and determine the metal’s direction. Trading was thin ahead of the year-end holidays, making gold prone to sharp fluctuations. Trading range was seen at $610 to $650 until the end of the year, according to some dealers."

"'With fund managers looking to balance their accounts, do some window dressing before the end of the year, there is the potential for a few wobbles in things like the US dollar and the oil price,' said a dealer in Sydney. 'That should be reflected in the gold price as well,' he said."

"Spot gold hit a bid high of $621,30 ounce, still down slightly from $621,70/623,20 an ounce late in New York yesterday. It had fallen to as low as $619,60 today."

"'Many analysts expect gold to continue to remain within a narrow range going into year-end with market conditions remaining illiquid,' said Investec Australia in a daily report. 'However, this should not be taken as a given, as relatively small volumes have the ability to move the market substantially during these illiquid periods,' said Investec, which pegged support around $615 an ounce."

Wednesday, December 20, 2006


Traders Ignore Inflation, Thai Crisis

The Associated Press reports on the currency markets. "The euro held steady against the U.S. dollar Wednesday amid sentiment that the European Central Bank would continue its rate hike campaign into 2007 The 12-nation euro bought US$1.3193 in afternoon European trading, up marginally from US$1.3192 in New York late Tuesday, after ECB President Jean-Claude Trichet said conditions remained in place for euro-zone economic growth in 2007 and in 2008."

"Supporting the dollar, the U.S. Labor Department reported a 2 percent increase in wholesale prices, the biggest gain in more than 30 years."

"In other trading, the British pound was unchanged at US$1.9682 from Tuesday and the dollar steady at 118.19 yen."

From MarketWatch. "Gold futures fell Wednesday to close under $625 an ounce following a more than $7 gain in the previous session, while rising supplies pushed copper prices to their lowest level in six months. 'Increased volatility due to the holiday season will keep the metal vulnerable to sharp downward movements,' said James Moore, an analyst at"

'Gold for February delivery closed down $1.10 at $624.30 an ounce on the New York Mercantile Exchange. On Tuesday, the contract closed up more than $7 an ounce, marking its first winning session in four."

"'Gold recovered well before the euro did against the dollar because of a fundamental tide of favorable factors outweighing the recent fund selling,' said Julian Phillips, an analyst at 'With some more consolidation expected before the next direction is clear, what is clear is gold's attractiveness to investment demand in this area of consolidation, whereas previously this demand was seen only when gold prices rose,' he said."

"Overall, 'traders and investors appear to be ignoring the report that wholesale prices jumped in November by the largest amount in 32 years, led by increases in energy prices and new vehicles,' said Jon Nadler, at bullion dealers 'They also seem to be paying little attention to the unfolding Thai financial crisis although there surely must be significant gold buying going on internally in that country in the wake of a 20% drop in the stock market,' he said."

"Phillips points out that last week, the metals market saw a 'much larger-than-usual amount of gold sold into the market by two of the signatories of the Central Bank Gold Agreement.'"

"The sale of 27 metric tons that week, instead of the usual 5 or so, means that 'less than 500 tonnes of gold remains to be sold by the C.B.G.A. signatories for the rest of the agreement, which has 2 years, 9 months still to run,' said Phillips."

"He notes that the annual ceiling of sales is set at 500 metric tons a year. So 'with less than 100 tonnes sold in this -- the third of the five-year agreement, if they try to reach that 'ceiling' of 500 tonnes they will have 100 tonnes of gold of the announced sales only to sell in the remaining two years of the agreement,' he said."

"'If they continue to sell at this pace, they will run out of gold to sell in this the third of the five years of the agreement,' he said."

"Elsewhere in metals trading, March silver lost 6.5 cents to settle at $12.645 an ounce, giving back part of the more than 1% gain it saw in the previous session. January platinum rose $7.50 to $1,126 an ounce while March palladium was down $1.50 at $327.75 an ounce."

Tuesday, December 19, 2006


Bargain Hunters Were Delighted With The Selloff

MarketWatch reports on the currency markets. "The dollar fell against the euro Tuesday after a key survey of Germany's business climate rose to its highest level in 16 years, boosting expectations interest rates in the eurozone would climb further next year. The decline in the dollar comes even after U.S. government reports showed producer prices soared in November, rising at the fastest pace in decades, while construction of new homes rebounded last month."

"The PPI report 'really plays a second fiddle to the CPI data,' said Matthew Strauss, senior currency strategist at RBC Capital Markets. The consumer price index, released last Friday, show inflation at the retail level running lower than expected for November."

"'In comparison, on the Europe side, we had very good Ifo data from Germany,' Strauss said, referring to the latest gauge of business sentiment."

"In New York trading, the dollar was quoted at 117.9 yen, compared with 118.05 yen late Monday. The euro changed hands at $1.31, compared with $1.3098. The British pound traded at $1.9664, compared with $1.9482. The dollar changed hands at 1.2131 Swiss francs, compared with 1.2216 francs."

"The dollar may weaken to around $1.34 versus the euro, $1.99 against the British pound, and 115 against Japan's currency by the end of December, Strauss said."

From Bloomberg. "Inflation is a greater risk to the economy than slower growth, and the Federal Reserve may need to raise interest rates if price increases don't subside, Federal Reserve Bank of Dallas President Richard Fisher said."

"'The risk of unacceptably high inflation still outweighs the risk of substandard economic growth,' Fisher said today. With inflation 'too high,' Fisher said he would 'have no choice but to advocate tightening monetary policy further if inflation does not ratchet downward.'"

"Gold futures closed with a more than $7-an-ounce gain Tuesday, marking their first winning session in four as silver prices rebounded from a seven-week low. 'Today's surprisingly high inflation figures are spurring the metal markets higher as the U.S. dollar drops on the news,' said Peter Spina, chief investment strategist at"

"'It is not hard to get into the market which has corrected back to the low $600s; bargain hunters were delighted by the sell off,' he said. But 'gold may falter on this rise and require a short-term period of consolidation around the lower $600s before marching back up,' he said."

"Gold for February delivery rose $7.50 to close at $625.40 an ounce on the New York Mercantile Exchange after trading as high as $625.70. The contract, which closed Monday under $618 at a seven-week low, had tallied a loss of $14.50 over the past three sessions."

"March silver also climbed 18.5 cents, or 1.4%, to end at $12.71 an ounce, rebounding from a 3.5% drop in the previous trading day. March palladium gained $4.30 to end at $329.25 an ounce and January platinum rose $16.40 to close at $1,118.50 an ounce."

The Associated Press. "The Thai government said it would lift controls on foreign investment in stocks after the market plunged nearly 15 percent on Tuesday, rattling regional bourses amid worries about a repeat of the 1997 Asian financial crisis."

"Finance Minister Pridiyathorn Devakula said that the controls - announced just a day earlier, would remain on foreign investments in bonds and commercial paper as part of central bank's measures to stem the surge in the Thai baht, which had risen to a nine-year high versus the dollar on Monday."

"Investors dumped stocks in Hong Kong, India, Indonesia, Malaysia, South Korea and the Philippines amid contagion concerns that the plunge might to spread through the region and trigger the kind of slump that enveloped Asia nearly ten years ago."

"Effectively, the central bank's new rules meant that if a foreign investor allocated the equivalent of 100 million baht to the Thai bond market, the investor could only buy 70 million baht of bonds, while the remainder would be withheld by the central bank, earning no interest."

"If the investor wanted to withdraw the money in less than a year, only two-thirds of the amount withheld would be returned, an effective 10 percent tax on the initial investment amount."

"David Cohen, chief of Asian economic forecasting for Action Economics in Singapore, said the worries may be unfounded because the situation in Thailand now is fundamentally different from the events surrounding the 1997-98 Asian financial crisis."

"The big problem ten years ago was currency weakness; now, it's currency strength. 'I would emphasize the contrast to the situation in '97 and '98. The measures the Bank of Thailand felt obliged to impose were to resist the appreciation of their currency,' Cohen said."

Monday, December 18, 2006


Silver Leads Metals Down

MarketWatch reports on the metals markets. "Gold futures closed lower Monday to tally a third consecutive losing session as silver prices dropped nearly 4% to register their weakest closing level in seven weeks. 'With dollar sentiment improving and fund players still positioned long ahead of year-end, and the market set to thin out over the next two weeks over the Christmas/New Year holiday period, the market remains at most risk to further long liquidation,' said James Moore, an analyst at, in a note to clients."

"Gold for February delivery closed down $1.20 at $617.90 an ounce on the New York Mercantile Exchange, its weakest closing level since Oct. 31. The contract has tallied a three-session loss of $14.50."

"Still, the contract managed to close off its earlier low of $615.10 Monday.
'Gold is incredibly oversold on [the] Street's fascination with exchanging paper assets,' said Ned Schmidt, editor of the Value View Gold Report. 'Each time gold has got this oversold it has rallied $50+,' he said. 'Doing that this time would be a major breakout to the upside.'"

"Meanwhile, March silver dropped 45.5 cents, or 3.5%, to end at $12.525 an ounce following a low of $12.40. The contract hasn't closed or traded at levels this low since the end of October. March palladium gained 70 cents to close at $324.95 an ounce but January platinum fell $2.40 to end at $1,102.10 an ounce."

"The dollar was little changed against the euro and yen Monday, reversing early gains after a report showed U.S. home builders were a bit more pessimistic about the housing market in December. The current account deficit widened to $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported."

From Reuters. "Spot gold was quoted at $613.10/613.85 an ounce by 1549 GMT from $615.00/616.50 late in New York on Friday, when it hit $614.20, the lowest since November 8. The metal has lost more than $35 since December 1. 'It's now dipped below Friday's low on follow-on selling in New York, there's liquidation of long positions there,' a London dealer said."

"At an intra-day bottom of $612.20, gold was at its lowest since November 1. Earlier on Monday, gold hit $618 in European dealing as bargain hunters returned to the bullion market, encouraged by a softer dollar. 'There was muted physical demand,' the trader said."

"Tawhid Addullah of the Gold and Jewellery Group in the Gulf Emirates said Dubai's gold sales in the fourth quarter are expected to soar by 15 to 17 percent."

"Data from the U.S. Commodities Futures Trading Commission showed net long gold futures positions on the New York Mercantile Exchange fell 2 percent to 81,829 lots in the week to December 12 from 83,639 lots in the previous week. However, speculative long silver positions jumped 5 percent to 43,604 contracts from 41,660 the previous week."

"Analysts think it may be a while before silver sees $13 again, even if volatility does push precious metals prices up. Should a recovering dollar set off an an avalanche of silver sales, the price in the worst case would be $12.40, a research note from Germany's Heraeus said."

"But calling a move down to $12.40 might be short sighted as investors were continuing to pile into the white precious metals, Heraeus said. The silver exchange traded commodity fund (ETF) is a good example of investor interest in silver. 'In the last 24 hours alone almost 50 tons of the metal were sold to to ETF buyers, resulting in a total off-take of nearly 3,500 tonnes,' Heraeus said."

From Euro News. "Iran is further rejecting the US dollar in favour of the euro. The Iranian government said it has ordered the central bank to transform the state's dollar-denominated assets held abroad into euros and to use the European currency for foreign transactions. Tehran has begun calculating its revenues in euros including income from oil sales."

"Government spokesman Gholam-Hossein Elham told reporters: 'Until now the budget and foreign currency revenues have been calculated in dollars and our reliance was on dollars. This way of calculating is being changed.' He added this is being done - 'to limit problems .. in commercial transactions.'"

Friday, December 15, 2006


"Gold's Got This Obsession With The Dollar"

MarketWatch reports on the US dollar. "The dollar rose a one-month high versus the yen and three-week high against the euro Friday, after fresh economic reports reinforced market expectations the U.S. economy is likely headed for a soft landing."

"The greenback had earlier dropped sharply after a government report showed lower-than-expected U.S. retail-level inflation for November, boosting hopes the Federal Reserve will be in a position to lower interest rates early next year. It reversed course after a separate report showed U.S. industrial production rose more than forecast last month."

"'The initial reaction [to the CPI report] was dollar negative,' said Ronald Simpson, currency strategist at research firm Action Economics. 'After the original major dollar reaction, more level heads have prevailed and perhaps [were] seeing this as a good opportunity to buy dollars into the modest weakness we saw earlier.'"

"In New York trading, the dollar was quoted at 119.01 yen, compared with 117.79 yen late Thursday, after rising as high as 118.31 yen, the loftiest level since Nov. 17. The euro changed hands at $1.3081 vs. $1.3144. The euro had earlier dropped to an intraday low at $1.3071, the lowest level since Nov. 24."

"The British pound traded at $1.9519, compared with $1.9602. The dollar changed hands at 1.2211 Swiss francs, compared with 1.2141 francs."

"The dollar also found support after the Treasury Department said capital flows to the U.S. climbed back in October as official institutions like central banks snapped up U.S. Treasury bonds and notes. Foreign investors bought a net $62.2 billion in securities, up from $57.8 billion in September. The inflows were sufficient to cover the previously reported trade deficit for the month, which narrowed to $58.9 billion."

From Bloomberg. "Gold fell the lowest in five weeks as a gain in the value of the dollar reduced the appeal of the precious metal. 'Gold's got this obsession with the dollar,' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. 'The dollar's going to end the week higher. The longs in gold are liquidating.'"

"Gold futures for February delivery fell $11.80, or 1.9 percent, to $619.10 an ounce on the Comex division of the New York Mercantile Exchange, the lowest since Nov. 8. Prices have dropped 5.2 percent this month."

"Speculation that central banks and investors would buy gold to diversify out of U.S. assets helped drive prices to a four- month high of $652.90 on Nov. 30."

"'Gold has been acting like a currency,' said Paul Sutherland, chief investment officer for Financial & Investment Management Group. 'We wonder if you should be taking bets that the dollar is going to be weaker. For people to think there's easy money to be made in the dollar is silly.'"

"Sutherland, who helps manages about $600 million, including the $160 million Utopia mutual funds, has reduced holdings in gold to 2 percent from 5 percent this year. The firm plans to buy back the metal should prices dip below $600, he said."

From Reuters." In other precious metals, platinum dropped to $1,104/1,109 an ounce from $1,108/1,118 late in New York, while silver fell to $13.57/13.64 from $13.76/13.83. Palladium was down $1 at $325/330 an ounce."

"The yen headed for its biggest weekly drop against the dollar in four months as government officials pressure the Bank of Japan to refrain from raising interest rates and local investors seek higher yields abroad."

"The Japanese yen slid against all 16 major currencies this week, extending its losses today after Economic and Fiscal Policy Minister Hiroko Ota said the government wants the BOJ to support growth. A report from the Ministry of Finance yesterday showed Japanese investors bought more foreign bonds than they sold for a third week as they seek higher yields abroad."

"'The yen is underperforming relative to other currencies due to lack of action by the BoJ,' said Marios Maratheftis, a currency strategist at Standard Chartered Plc in London. 'The BoJ, despite its hawkish rhetoric, is unlikely to hike rates this year. It's unable to do so because of political pressure.'"

Thursday, December 14, 2006


Gold Range-Bound Before Holidays

Reuters reports on the metals markets. "Gold lacked impetus to move out of its current trading range and analysts said on Thursday that market participants would avoid taking risk ahead of year-end holidays. But focus remained on the currency and oil markets and any sharp move in the dollar and oil prices might stir the bullion market at a time when business was thin, they added."

"'There are clear signs that things are slowing down for Christmas, even though it's still a few days away. Gold remains tied to the dollar and the dollar has broadly stabilised compared with the big moves a couple of weeks ago,' Stephen Briggs, economist at SG Corporate and Investment Banking, said."

"Spot gold dipped to $627.70/629.20 an ounce by 1107 GMT from $628.00/629.50 late in New York on Wednesday, when it tested the key resistance of $630 for the third time this week, but failed to hold on gains."

"'You'd better go home and celebrate Christmas early. I don't see any support from oil and I guess we'll be trading in a range of $624 to $632 today,' a metals dealer in Hong Kong said."

"Gold may be prone to liquidation ahead of the year-end but the metal's long-term outlook remained bullish because of a fragile dollar, dealers said. The dollar steadied against the euro after rising in New York on solid U.S. retail sales, which eased some worries about the Federal Reserve possibly cutting interest rates in 2007."

"'We continue to expect little excitement from precious metals into the end of the year, although intraday volatility is likely to continue,' said John Reade, head of metals strategy at UBS Investment Bank. 'We do expect metal prices to trade higher in the new year and hold our one month forecast for gold at $660 and silver at $14 an ounce,' he wrote in a daily note."

"Spot silver edged up to $13.78/13.85 an ounce from $13.75/13.82 in New York. In other metals, platinum eased to $1,104/1,109 an ounce from $1,107/1,112 ate in New York and way below a record high of $1,395 in late November. Palladium was unchanged at $326/331 an ounce. 'Platinum and palladium are just dead,' Briggs said."

From MarketWatch. "It's 'no coincidence' that the earlier strength in gold prices 'coincided with a 1.9% cut in production (engineered to sustain prices) agreed upon by OPEC,' said Jon Nadler, analyst at"

"Gold prices found earlier support on concerns about rising energy prices Thursday. Crude futures rallied to a nearly one-week high after the Organization of the Petroleum Exporting Countries said it would cut production by 500,000 barrels per day, starting on Feb. 1, 2007 in an effort to balance supply and demand. But 'since the same strategy cannot be applied to the bullion market, gold's immediate price prospects continue to depend on the dollar,' said Nadler."

"'While the metal has found strong support at the $623 chart level, the lack of fresh dollar weakness is putting the breaks on the metals rally, suggesting further consolidation short-term around $625-$635,' said James Moore, an analyst at"

"Dennis Gartman, editor of The Gartman Letter, said thinning gold-market conditions as the year-end holiday season approaches have been creating volatility in gold prices. He pegged the next real support level for gold at $615 an ounce."

"'It is not at all unreasonable to expect that these latter levels of support shall be tested,' he said in his daily newsletter. 'At that point, our bullish interest shall likely be piqued once again; until then, we'll stand firmly upon the sidelines, watching. We're comfortable there for the moment at least.'"

Wednesday, December 13, 2006


Markets "Focused On US$'s Structural Risks"

Reuters reports on the US dollar. "The dollar firmed on Wednesday after U.S. consumer spending in November exceeded expectations, but sentiment on the currency remained predominantly bearish given expectations of a slowdown in 2007. A stronger-than-expected U.S. retail sales report in November spurred hefty dollar bids early in the session, although afternoon buying of the greenback was more technically driven."

"'We still seem to get some upside surprise to some of the data like the retail sales data today and the employment report last Friday,' said Steven Butler, director of foreign exchange trading at Scotia Capital in Toronto."

"'There's still some renewed optimism that things are not as bad as they seem on the outside in the U.S., so we're seeing some rally in the dollar. But overall sentiment is still negative and the rally would be hard to sustain,' he added."

"The euro was down 0.5 percent from Tuesday against the dollar at $1.3214, having hit a session low of $1.3196. But this was well off the $1.3129 trough established on Monday in the wake of last week's strong U.S. employment data for November."

"Yields on benchmark 10-year notes, which rose to 4.57 percent from 4.49 percent late on Tuesday after the strong retail sales data, also lifted the dollar, some analysts said. 'The rally in bond yields in the wake of the retail sales suggest the bond market is undergoing a sea-change in expectations and this is going to spill over into the dollar eventually,' said Brian Dolan, director of FX research at"

"'Looking through all the noise, it's notable that the dollar hasn't been able to strengthen more,' said Daniel Katzive, foreign exchange strategist at UBS Securities. 'This suggests people still remain focused on the dollar's structural risks,' he said."

"Against the yen, the dollar rose to a three-week high at 117.65 yen, according to electronic trading platform EBS. The pair last traded at 117.51, up 0.6 percent. Sterling was down 0.3 percent at $1.9660, well off a session high at $1.9729 hit after robust UK employment data."

"The worst performer of the day against the dollar was the Norwegian crown, which shed 0.7 percent of its value a day after the Norges Bank raised interest rates but suggested subsequent increases would be only gradual. The crown was last quoted at 6.1697 to the dollar."

From MarketWatch. "Gold futures gained Wednesday, finishing above $630 an ounce, as strength in the U.S. dollar following upbeat retail-sales data was offset by higher prices for crude oil, which raised concerns over higher energy prices and fueled some investment demand for gold."

"Cuts in oil production that may materialize from Thursday's meeting of the Organization of the Petroleum Exporting Countries would be 'gold-positive,' said Julian Phillips, an analyst at Members of the oil cartel are preparing to meet in Nigeria."

"Gold for February delivery closed up 70 cents at $632.40 an ounce on the New York Mercantile Exchange, recovering from a low of $627.50."

"There are 'two camps of investors,' said Ned Schmidt, editor of the Value View Gold Report. One large camp outside the U.S. is bearish on the dollar, while a small camp in New York is bullish on the dollar and 'buys [Federal Reserve Chief Ben] Bernanke's blarney,' he said."

"Small sell-offs similar to the one seen earlier Wednesday should be used to buy gold, he said, adding that 'gold should be bought at today's prices' because it's 'oversold.'"

"Overall, 'thin market conditions are aggregating moves both on the up and downside and can even increase in the last two weeks of the year,' said Peter Grandich, editor of the Grandich Letter. 'Gold's fundamentals remain strongly bullish,' he said, forecasting that 'a run to $700 appears in the cards for early 2007.'"

"Other metals ended lower, but they traded off the day's weakest levels.
March silver futures closed down 6.5 cents, or 0.5%, at $13.915 an ounce, after a low of $13.725. January platinum fell $7.20 to end at $1,107.80, while March palladium closed down $1.20 at $329.70 an ounce."

Tuesday, December 12, 2006


Fed Will "Wait And See"

MarketWatch reports on the FOMC. "The Federal Reserve Bank held overnight interest rates steady at 5.25% for the fourth straight meeting on Tuesday and kept the door open for further rate increases, saying inflation risks remain elevated despite a substantial cooling in the housing market. 'This statement suggests a wait-and-see approach on the part of the Fed as the downturn in housing plays out,' said economists at Lehman Brothers in a research note."

"'The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information,' the Fed statement said. In one of two subtle changes, the committee said growth had slowed, 'partly reflecting a substantial cooling of the housing market.' The word 'substantial' is new to the statement."

"Gold futures extended their losses from Tuesday's regular session into electronic trading, but pared declines after the U.S. Federal Reserve decided to leave overnight interest rates unchanged at 5.25%. 'Gold's reaction was slightly positive as it gives investors a reason to want to hold long positions,' said John Person, president of National Futures Advisory Service."

"'The economy is still at risk to inflation, the Fed did not raise rates and thus it can foster the opportunity to fall behind the inflation fighting campaign, especially if the inventory of homes decreases and if energy prices escalate,' he explained.
'Gold should be a buying opportunity based on today's announcement,' he said."

"Prices of the precious metal continued lower, but off their lows in after-hours trading after the Fed decision. The decision came 45 minutes after the official close of regular-session metals trading in New York."

"The February contract for gold futures last traded at $634.30 an ounce, down 50 cents in electronic trading after reaching a low of $630.90 earlier."

"The dollar spent much of Tuesday trading higher against the yen after the Commerce Department said the U.S. trade deficit narrowed by 8.4% in October to $58.9 billion, its lowest level since Aug. 2005. But by late Tuesday, the dollar traded nearly flat against most of its rivals."

"Other metals ended the regular session lower, with the exception of platinum, which saw its January contract add on $5.80 to close at $1,115 an ounce.
March silver futures closed down 4.5 cents at $13.98 an ounce, March palladium dipped $2.85 to end at $330.90 an ounce."

From Bloomberg. "The dollar approached a two-week high against the yen as a government report showed the U.S. trade deficit narrowed in October by more than economists forecast."

"A reduced shortfall indicates fewer dollars need to be converted to foreign currencies to pay for imports, increasing the value of the dollar. The currency's advance was limited as the Federal Reserve is meeting today to set interest rates."

"The smaller deficit 'is definitely supporting the dollar bulls' argument,' said Boris Schlossberg, senior currency strategist at Forex Capital Markets LLC in New York. 'The U.S. is less vulnerable to foreign capital flows. The market is waiting to see what the Fed is going to say about inflation and the economy.'"

"The U.S. currency traded at 117.15 yen at 12:41 p.m. in New York from 116.99 yesterday. It reached 117.25 yen yesterday, the highest since Nov. 22. The dollar traded at $1.3238 per euro from $1.3237 yesterday."

"'The pessimism on the U.S. dollar is overdone,' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. She expected Bernanke 'to reinforce their focus on inflation and that should give the dollar some support.'"

From Reuters. "The Canadian dollar hit an eight month low against the U.S. currency for the third time in four trading days on Tuesday, with the move accentuated by stop levels being triggered around C$1.1510 level."

"The Canadian dollar had been hurt by the weakness in the oil price and by concerns that a slowdown in U.S. economic growth could dent demand for Canadian goods."

"'The trade surplus has now peaked and is likely to fall back quite rapidly. If that support is now falling away, along with other supports that we've seen like M&A flows, then we do think it's the start of a prolonged uptrend in dollar/CAD,' said Adam Cole, currency strategist at RBC Capital Markets."

Monday, December 11, 2006


"A Few Years Of Dollar Weakness": Greenspan

Reuters reports on what's moving currencies. "The dollar weakened against European currencies and trimmed gains versus the yen on Monday after former Federal Reserve Chairman Alan Greenspan warned investors to expect 'a few years of dollar weakness.'"

"The remarks from Greenspan accelerated the dollar's slide against the euro. Investors bought euros after his remarks, unwinding short positions built on Friday when new U.S. jobs data proved robust enough to trigger a dollar rally. 'Mr. Greenspan's comments on the dollar definitely had an effect,' said Brian Dolan, director of FX research at"

"'But the effect was one of triggering short-term stop orders. The fact is Mr. G is a very learned ex-Fed president. The onus is on the word 'ex-,' he added."

"The euro hit a session high of $1.3263, according to EBS data, after Greenspan's comments, and was last up 0.4 percent at $1.3250, having broken a three-day losing streak against the dollar."

"Greenspan added that he believed it was 'imprudent to hold everything in one currency,' a nod to the trend of central bank reserve diversification into other currencies and which traders took as a clear sell signal."

"Earlier in the session, the greenback had gained as investors prepared for another warning on inflation from the Federal Reserve, which meets on Tuesday for its last policy meeting of the year."

From Irwin Stelzer. "'YANKEE, STAY HOME' is what the world's currency markets are trying to tell us, as the dollar sinks to a level where it takes $2 to buy one British pound, and over $1.30 to buy a euro. And if you're thinking about a major purchase of a made-somewhere-other-than-the-U.S. product, think again."

"The flip side of that bad news is that America's exporters are cheering, while countries that have been counting on the United States to be the world's consumer of last resort are no longer so sure that they want us to cut our trade deficit. And Europeans with their newly powerful pounds and euros are finding that shopping here is so cheap that they can fly over, do their Christmas shopping in New York, and more than cover the cost of their airplane tickets."

The "Gold drifted higher in thin trade Monday. The limited action centered on investors locking in profits ahead of the holidays. Contracts for February delivery of bullion were recently gaining $3 at $634 an ounce on the Comex division of the New York Mercantile Exchange."

"A dearth of liquidity looks set to be a market fixture from now through year-end. As a result, investors should be prepared for choppy conditions. 'A lot of people with 20%-plus returns are quite happy to call it a day and fix their gains for the year right now,' says Jon Nadler, an analyst at Kitco. 'Book-squaring among traders is much the feature of the day's session.'"

"Next year, investor demand will be needed in conjunction with a continuing weak dollar before the price for the yellow metal can be expected to breach major resistance at around $680 an ounce, Nadler explains."

"The greenback, which has provided much of the stimulus for the recent rally in bullion prices, was mixed in early trading. One dollar was buying 116.77 yen, up from 116.35 yen, late Friday."

Saturday, December 09, 2006


US Dollar Takes A "Beating" In Europe

The Washington Post reports on the currency changes. "It didn't take long for sticker shock to hit Allan and Christine Britton. Twenty minutes after arriving in Paris for a brief layover between the United States and South Africa, they were standing at the foot of the Eiffel Tower, checking out the menu at the Jules Verne Restaurant: sea bass, $78; filet of beef, $77; lobster, $106; dessert, $25."

"'Everything I see here is expensive, even the train in from the airport was expensive,, said Allan Britton."

"The tanking dollar, which recently hit a 20-month low against the euro and a 14-year low against the British pound, has Americans who live or travel in Europe gulping harder, digging deeper and shelling out painful amounts of money. The $9 soda, the $5 espresso and the $30 taxi ride are commonplace. Dinner for four at a pizza joint for $100 is starting to leave a bad taste in Yankee mouths."

"'The poor dollar,' moaned George Bernauer, a retired school teacher from the Boston area and regular visitor to Europe, as he headed into the Louvre museum. 'Five euros' that would be $6.65, 'for a can of Coke; it's outrageous.'"

"The greenback is taking one of its worst beatings ever in Europe, with high U.S. trade and budget deficits, low personal savings, the burst of the U.S. housing bubble and threats of a recession driving down the value of the dollar overseas, particularly in Europe, where economic growth is picking up."

"On Friday, it took $1.32 to buy one euro, a fall in value of about 13 percent on the year and approaching the record of $1.36 in December 2004."

"'Our bank is bearish about the currency. In our latest report, we expect the dollar will be at $1.40 against the euro at the end of the first quarter next year,' said Philippe d'Arvisenet, chief economist at BNP Paribas in Paris."

"Others are much more pessimistic, d'Arvisenet said, with some warning that the dollar's value against the euro could fall as far as $1.90 if Asian governments and developing countries get spooked by continuing declines and decide to sell off their huge dollar reserves."

"'If they abandon the dollar, it could cause a global recession, and the dollar could go through the floor,' d'Arvisenet said. 'It would be counterproductive for everyone. So we rule this out. But maybe we're wrong.'"

"The dollar is doing even worse against the pound, down about 15 percent this year. On Friday, it took $1.95 to buy one pound, a 14-year-low that approached the psychological 2-to-1 exchange rate barrier."

For practical purposes, that rate is already here, said Krystal Dunn, an economics student from Battle Creek, Mich., who is studying for the year at the University of Edinburgh in Scotland. 'Every time I go to the grocery store, I simply multiply by two,' said Dunn. She recently wanted to buy a paperback book and was astounded at the price: 13 pounds, or about $25.60."

Friday, December 08, 2006


"Aggressive Sellers" Take Gold To Weekly Loss

From MarketWatch. "Gold futures closed lower Friday, with the February contract ending near its weakest level in three weeks, as the U.S. dollar climbed to one-week highs against the euro and yen, dulling investment demand for the precious metal. The dollar rallied sharply Friday after U.S. Treasury Secretary Henry Paulson described Friday's nonfarm payrolls report as 'very, very good news' for the economy."

"The dollar also gained against the yen on press reports that the Bank of Japan will not hike interest rates in December."

"Gold for February delivery fell $6 to close at $631 an ounce on the New York Mercantile Exchange. It's finished 3%, or $19.60, below last week's close of $650.60.
The contract gained $1.10 on Thursday, but tallied a loss of $15 in the two sessions before that."

"'Book-squaring is one factor (as usual before holiday periods), but the aggressive sellers have the upper hand at the moment,' said Jon Nadler, analyst at bullion dealers 'We need bargain hunter investors to step up to the plate,' he said."

"A U.S. government report Friday on employment was mixed, with something to bolster nearly every theory about where the economy is heading, from boom to bust. The dollar also saw pressure earlier after a report from U.S. consumer sentiment eroded in December."

"In a research note Friday, Merrill Lynch cut its 2006 gold-price forecast to $603.35 from $625, but left its 2007 forecast unchanged at $675. Merrill Lynch also upped its 2008-2010 gold forecasts. The brokerage attributed the higher year-over-year gold price forecast in 2007 to 'a rebound in fabrication demand for bullion, lower central bank sales and continued growth in investment demand,' according to analyst Michael Jalonen."

"March silver fell by 14 cents to end at $13.895 an ounce, after trading as high as $14.16, and was down 2.1% from a week ago. March palladium climbed $2.95 to close at $333.95, up 0.4% from last week's close. January platinum ended down $17.10 at $1,107.80 an ounce, down 4% from a week ago."

From Reuters. "An exchange-traded fund designed to reflect moves in the U.S. dollar against the euro has grown to about $1 billion in assets in the year since its launch by Rydex Investments."

Steve Sachs, director of trading fo Rydex, attributes the investor interest to the dollar's decline over the last few months."

From Bloomberg. "Goldman Sachs Group Inc.'s $10 billion flagship hedge fund dropped 11.6 percent this year through the end of November, extending earlier losses as its managers misjudged the direction of global stock and currency markets, according to two investors."

"Goldman's Global Alpha Fund lost money partly on wrong-way bets that equities in Japan would rise, stocks in the rest of Asia and the U.S. would fall and the dollar would strengthen, the investors said."

"Global Alpha uses computer-driven quantitative models to help make investment decisions."

Thursday, December 07, 2006


"Gold To Take Its Cue From The Dollar"

The Associated Press reports on currencies. "The dollar rose against most major currencies Thursday after a government report showed the largest decline in weekly jobless claims in six months. The Labor Department reported Thursday that the number of newly laid off workers filing claims for unemployment benefits fell to 324,000, a drop-off of 34,000 from the previous week."

"In afternoon New York trading, the 12-nation euro bought $1.3280, down from $1.3285 late Wednesday in New York. The British pound also slid to $1.9620 from $1.9658. The dollar strengthened against the Japanese currency, edging up to 115.29 yen from 115.26 yen late Wednesday."

"Earlier on Thursday, the European Central Bank raised its key interest rate a quarter of a point to 3.5 percent as widely expected. While ECB President Jean-Claude Trichet said that the bank will continue to monitor inflation, he failed to use the term 'strongly vigilant,' a phrase that has often hinted at a future rate hike."

"Meanwhile, the Bank of England held its key interest rate steady at 5 percent Thursday, which was also expected after increases in August and November took rates to the current five-year high."

From Bloomberg. "The Australian dollar traded near a 20- month high on speculation investors will be attracted to the higher returns available on the nation's government bonds."

"The yield premium investors earn by holding Australian 10-year debt instead of like-dated U.S. Treasuries is close to a 17-month high on bets the interest rate gap between the nations will widen. The yield gap increased yesterday after a government report showed employment rose three times as much as economists forecast in November, bolstering demand for the currency."

"'The Australian dollar will open stronger,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. 'The labor market remains strong and supports our view that the Reserve Bank of Australia will hold its tightening bias.'"

"Gold rebounded in New York as the lowest prices in two weeks attracted investors seeking an alternative investment to a weaker U.S. currency. Gold dropped 1.9 percent yesterday, the most in six weeks, after the dollar halted its decline against the euro."

"'There's some support' for gold, said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. 'You have a comeback from yesterday. It was overdone on the downside.'"

"Gold futures for February delivery rose $1.10, or 0.2 percent, to $637 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier touched $629.20, the lowest since Nov. 21."

"ECB rates are at the highest since October 2001. Fed officials are expected to announce a decision on rates on Dec. 12. 'I'm looking for the market to climb,' said Carlos Perez- Santalla, a precious-metals trader and president of Hudson River Futures in New York. 'Gold is going to take its cue from the dollar.'"

"Some analysts say the Fed is more likely to keep rates unchanged or raise them next year, limiting gold's gains. 'I don't believe the dollar's collapsing yet,' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. 'The Fed holds steady, and gold goes lower from here.'"

"A government report tomorrow may show that employers added 100,000 jobs in November, compared with 92,000 the prior month, according to a Bloomberg survey of economists. A gain would support a Fed decision to keep rates unchanged."

Wednesday, December 06, 2006


Markets Focused On Central Banks, Rates

The Associated Press reports on currencies. "The euro slipped briefly below US$1.33 on Wednesday, before rising again to hover near a 20-month high. In late afternoon European trading, the 12-nation currency stood at US$1.3313, down from US$1.3328 in New York late Tuesday, but above the US$1.3265 it fell to earlier in the day."

"The dollar edged upward after the Institute for Supply Management said Tuesday that its index of activity in the U.S. service sector had risen to 58.9 in November from 57.1 in Octobe, better than analysts had expected."

"The British pound slipped, and on Wednesday traded at US$1.9701, down from US$1.9743 on Tuesday. The dollar rose to 114.94 Japanese yen from 114.81 yen."

"Markets are looking ahead to policy meetings at the Bank of England and the European Central Bank on Thursday. The ECB is expected to raise interest rates, while the Bank of England is expected to hold rates, but to follow that with a statement that would signal higher borrowing costs in the future."

The International Herald Tribune. "When European Central Bank policy makers meet Thursday, the central bank's president, Jean- Claude Trichet, will face a most delicate task: making a convincing case that it will act decisively to head off higher inflation without roiling currency markets."

"More than ever, the intentions of central banks in the United States and Europe have become the chief driver of expectations in currency markets that have driven the euro above $1.33, a 20- month high against the dollar."

"The ECB has already given clear signals that it will lift borrowing costs Thursday by a quarter percentage point to 3.5 percent, its sixth such step since it abandoned a historically loose monetary policy one year ago in favor of higher rates."

"'The ECB has to become much clearer that its options for the next year are open,' said Jörg Krämer, chief economist at Commerzbank in Frankfurt. 'But it has to leave its basic bias to raise rates in place.'"

From MarketWatch. "Gold futures fell Wednesday, extending their losing streak to two sessions as the February contract closed at its weakest level in nearly two weeks, pressured by strength in the U.S. dollar. 'The fatigue we alluded to on Monday turned into a trip and fall,' said Jon Nadler, at bullion dealers And 'gold prices ran into further problems in...Wednesday trading, as a temporarily stronger dollar discouraged would-be buyers,' he said."

"Gold for February delivery fell $12 to close at $635.90 an ounce on the New York Mercantile Exchange, after falling to a low of $635.50, a level it hasn't seen since Nov. 24. The contract closed down $3 on Tuesday."

"Most of the trading volume has moved to the February contract, but the December contract remained as the official benchmark for gold futures trading. That contract closed down $11.80 at $630.50 an ounce."

"'Any shocks in tomorrow's ECB [European Central Bank] decision/speech or Friday jobs data could generate a greater move, potentially clearing $650 on the upside while leaving the downside vulnerable to a re-test of $600-$604,' said James Moore, an analyst at"

"silver followed gold prices lower. March silver shed 23 cents to close at a one-week low of $13.795 an ounce. It lost 1.5% in the previous session. March palladium fell $6.30 to end at $330.10 while January platinum shed $8 to close at $1,125.70 an ounce."

Tuesday, December 05, 2006


The US$ And Oil "Continue To Dominate"

MarketWatch reports on the currency markets. "The dollar traded little changed against the euro Tuesday, as traders weighed mixed data on the health of the U.S. economy and inflation and await a key employment report due later in the week. The greenback rebounded from session lows after the Institute for Supply Management said its service index rose to 58.9% in November from 57.1% in October. It is at the highest level since May. Economists had expected the index to fall to 55.8%."

"The ISM services data suggested 'that the broader economy remains quite robust and is in fact improving over the most recent months, suggesting a stabilization at the minimum and perhaps the much awaited rebound from [third-quarter] weakness,' said Brian Dolan, director of research at The dollar is 'getting some legs here after a delayed reaction.'"

"Late in New York, the dollar was quoted at 114.83 yen, compared with 115.33 yen late Monday, after dropping to 114.41, the lowest level since Aug. 7. The euro changed hands at $1.3323, from $1.3325. The British pound traded at $1.9735, compared with $1.9796. The dollar changed hands at 1.1912 Swiss francs, compared with 1.1941 francs."

"The yen gained across the board, touching a four-month high against the dollar, after comments made by Bank of Japan officials reignited hopes the Japanese central bank would raise interest rates this month."

"Bank of Japan policy-board member Atsushi Mizuno said the central bank may raise interest rates despite weaker economic indicators. 'Some recent economic indicators have been unfavorable. But it's not like we can't raise our policy rate unless all economic indicators prove to be strong,' Mizuno was quoted by Dow Jones Newswires as saying in a speech."

"Comments from Japan overnight 'radically altered market's perception of the likelihood of a December rate hike by the BoJ and put a solid bid underneath the yen,' said Boris Schlossberg, senior currency strategist at FXCM."

"Elsewhere, the Bank of Canada on Tuesday left its benchmark overnight rate unchanged at 4.25%, as widely expected. The Canadian dollar, also known as the loonie, last traded flat at C$1.1405 versus the greenback."

"Gold futures fell Tuesday, prompting the February contract to close under $650 an ounce for the first time in four sessions as the U.S. dollar regained some lost ground and helped dull investment demand for the precious metal."

"'The move against the dollar has been too strong and too fast,' said Ned Schmidt, editor of the Value View Gold Report, noting that some strength in the dollar and some weakness in gold and silver could develop."

"Against this backdrop, gold for February delivery closed down $3 at $647.90 an ounce on the New York Mercantile Exchange. The contract has been closing above the $650 level since the last day of November."

"Overall, gold's latest move is 'just a symptom of thin conditions,' said Jon Nadler, an analyst at bullion dealers 'Dollar and oil continue to dominate.'"

"On Tuesday, crude futures climbed above $63 a barrel, fell to a low under $62, then closed nearly unchanged as traders continued to gauge the likelihood of an output cut from key oil producers."

"Meanwhile, silver followed gold prices lower. March silver shed 22 cents, or 1.5%, to close at $14.025 an ounce, after a $14.37 high. And after ending higher on Monday, March palladium fell 5 cents to end at $336.45."

From Bloomberg."The U.S. Labor Department will release the November jobs report, an indicator of the U.S. economy, on Dec. 8. Employers probably added 100,000 jobs last month, up from 92,000 in October, a Bloomberg survey showed."

"'Gold's going to be locked in a narrow range of $640 to $648 until that figure comes out,' Peter Tse, chief precious-metals dealer at ScotiaMocatta, the bullion arm of Bank of Nova Scotia, said in Hong Kong."

"Gold will average $620 an ounce this quarter, down from $621 in the third, Barclays Capital in London said in a report yesterday."

From Reuters. "Platinum prices declined about three percent to a one-month low at $1,120 an ounce in late European trade on Tuesday, as a recovery in the dollar prompted investors to sell, dealers said."

Monday, December 04, 2006


A "Pause" For The US Dollar

Reuters reports on currencies. "The dollar edged up against most major currencies on Monday as investors took profits following a dollar decline that has shaved some 3 percent off its value in less than two weeks. Coming into the week, the dollar had tumbled to a 20-month low versus the euro and a 14-year trough against sterling as weak data fanned fears U.S. interest rates could soon fall even as euro zone and U.K. rates were headed higher."

"But the dollar's decline was so swift, that analysts started calling the sell-off overdone, sparking a round of profit-taking that began in European trade. 'The market is cutting some of the bleeding on the dollar,' said Brian Taylor, chief currency trader at Manufacturers and Traders Bank. 'We are far from seeing real demand for the buck, but maybe we went too far too fast and now we needed a pause.'"

"By midafternoon in New York, the euro traded down 0.15 percent to $1.3317, off an earlier 20-month low of $1.3367. The euro hit a record high above 154.10 yen before falling back to 153.70. The dollar was steady at 115.42 yen after hitting a four-month low below 115 on Friday."

"The U.S. economic calendar was light on Monday, with only a report showing pending U.S. home sales down 1.7 percent in October, though still above the low hit in July. That left investors looking ahead to interest rate decisions from the European Central Bank and Bank of England on Thursday and the U.S. November jobs report on Friday."

"Matt Kassel, director of foreign exchange at ING Capital Markets, said 'the bulk of the profit-taking' will take place in the coming days ahead of the ECB decision. 'It will have nothing to do with any news or data that's dollar-bullish,' he said, calling it instead position-squaring ahead of an expected ECB rate hike to 3.50 percent."

"The ECB is expected to lift rates to 3.5 percent on Thursday. Some predict the ECB will further tighten monetary policy in early 2007, though the recent surge in the euro has slightly dampened this view."

From Bloomberg. "Gold prices, little changed in New York, may gain as some investors stock up on the precious metal as an alternative investment to the dollar. Investment in the StreetTracks Gold Trust, an exchange-traded fund based on the price of gold, jumped 11 percent last month as some funds purchased the metal to shift out of the dollar."

"'We've seen a big jump in the holding of gold ETF in the past month,' said Daniel Vaught, a commodity analyst at A.G. Edwards and Sons Inc. 'It's indicative of the larger-scale investment buying. Investment demand has been a major factor for the gold rally.'"

"Gold futures for February delivery closed at $650.90 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $653.90."

"'The dollar is under attack because central banks of the world find their positions remain unbalanced in favor of the dollar,' said Dennis Gartman, trader, economist and editor of the Gartman Letter. 'Gold's position as a reservable asset is quietly being taken up by reserve banks around the world.'"

From marketWatch. "Other metals traded mainly lower Monday, with the exception of January platinum, which climbed $5.50 to $1,160 an ounce set to recoup part of Friday's loss of over $22."

"March silver was down 2 cents at $14.17 an ounce after closing out last week with a more than 7% gain. March copper was at $3.1665 a pound, down 0.55 cent following a 1% gain last week and March palladium shed 25 cents to trade at $332.50."

"'Dollar diversification will continue to be the main theme of the market with recent gains in ETF [exchanged-traded fund] holdings showing investors are keen to hold the yellow metal,' said James Moore, an analyst at"

The Globe & Mail. "The Chinese yuan rose to a fresh high against the U.S. dollar Monday as reports cited officials urging diversified investments of the country's $1-trillion in foreign exchange reserves."

"The central bank's official 'parity' rate for the yuan was set at 7.824 per dollar Monday morning, compared with an official rate of 7.8331 on Friday. The yuan has gained about 3.5 per cent against the dollar since the current foreign exchange system was set up in July 2005."

"China tightly controls trading in the yuan, limiting its daily movements to 0.3 per cent above or below the parity rate. But in recent weeks the yuan has gained steadily against the dollar as the U.S. currency has faltered in global foreign exchange markets."

"The yuan's advance comes as China and the U.S. prepare to hold bilateral economic talks Dec. 14-15 in Beijing, where U.S. Treasury Secretary Henry Paulson and other U.S. officials are expected to push for further loosening of controls on the Chinese currency."

"Meanwhile, China's state-controlled media have carried reports noting the potential risks from the dollar's overall decline to the country's $1-trillion foreign exchange reserves, which are thought to be weighted toward U.S.-dollar denominated Treasuries and other investments."

"Those reports have helped fan market speculation that a sell-off of dollar assets by China might drive the dollar's value still lower. Economist, Xia Bin, suggested that the Ministry of Finance issue yuan-denominated bonds to buy foreign reserves and then use the funds to invest overseas."

Friday, December 01, 2006


More Bad Economic News For The US$

The Associated Press reports on the US dollar. "The dollar fell against other major currencies Friday after disappointing economic news, capping off a week of sharp declines against the euro and pound. The euro bought $1.3335 in afternoon New York trading, up from $1.3250 late Thursday in New York. Earlier in trading, the 12-nation currency hit another 20-month high of $1.3348 this week and is moving closer to its all-time high of $1.3667, set in December 2004."

"The British pound rose to its highest level against the dollar since September 1992. It hit $1.9805 in New York trading, up from $1.9661. The dollar also weakened against the Japanese currency, falling 115.35 yen from 115.75 the day before."

"The Commerce Department dealt the first blow against the dollar when it reported that construction activity in October dropped 1 percent, the largest amount since the recession in 2001. Home building fell for a record seventh consecutive month."

"In other trading, the dollar bought 1.1928 Swiss francs, down from 1.1982 late Thursday, and 1.1451 Canadian dollars, up from 1.1420."

From MarketWatch. "Gold futures fell Friday, but prices still ended the week nearly 3% higher as weak U.S. economic figures implied a slowdown in the growth of the economy. 'The fact that the yellow metal is inaugurating December at current levels (overbought or not) is in itself an accomplishment that was not looking likely back in August,' said Jon Nadler, analyst at bullion dealers"

"'That such a climb was almost entirely dollar-induced remains fairly clear, and we still wish we had seen added bullishness on the part of jewelry buyers and private investors as a component of this rally,' he added."

"Gold for February delivery closed down $2.30 at $650.60 an ounce on the New York Mercantile Exchange. The contract finished $16.20, or 2.5%, above last Friday's closing level of $635.40."

"Most other metals declined, with the exception of silver, whose March contract climbed 7.5 cents to close at $14.19 after briefly touching a low of $14.03. It's closed 7.2% above last week's close."

"January platinum ended down $22.20 at $1,154.50 an ounce and March palladium lost $1.60 to finish at $332.75 an ounce, with both scoring slight gains from last Friday's close."

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