Wednesday, January 31, 2007


US Dollar Weaker On Dovish Fed

MarketWatch reports on the currency trading. "The dollar fell sharply against the euro and yen Wednesday after the Federal Open Market Committee held its benchmark federal funds rate unchanged at 5.25% and said that core inflation has improved modestly."

"The decision to hold rates steady was unanimous and widely expected by economists. The statement following the meeting acknowledged both firmer growth and more moderate inflation. 'Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time,' the committee noted. The Fed also said that 'some tentative signs of stabilization have appeared in the housing market.'"

"Gold futures extended their gains into the electronic session Wednesday following news that the Federal Reserved decided to keep overnight interest rates steady at 5.25%. "

"Futures prices for gold had ended the regular trading almost $8 higher -- at their highest level in two months, finding support from strength in crude and some weakness in the U.S. dollar. After regular futures trading ended, the Federal Open Market Committee on Wednesday kept its benchmark federal funds rate unchanged at 5.25% and made only modest changes to its policy statement."

"'With the Fed keep rates steady and reiterating their concerns on inflation, this combination is providing some extension of today's earlier gold rally higher,' said Peter Spina, chief investment strategist at"

"After the announcement, gold for February delivery last traded at $653 an ounce in electronic trading. The contract had climbed $7.80 in the regular session to close at $652 an ounce on the New York Mercantile Exchange."

"Prices only slightly pared gains by the close of the regular session, after trading as high as $655.50 the contract's highest intraday level since Dec. 1."

"February gold finished last month at $638 so it ended January with a gain of 2.2%. The trading volume has now moved to the April contract, which closed up 1.2%, or $7.70, at $657.90 an ounce. It's ended 2.1% above its Dec. 29 close. In electronic trading April gold last traded at $658.20 an ounce."

"'Inside the U.S., all is well and the economy is looking good, but this means that the trade deficit will not look good as a healthy U.S. means a constant and maybe bigger trade deficit, lower dollar, higher oil and a strong gold price,' said Julian Phillips, an analyst at"

"'As to the big picture, this is like the man who fell off a 50 story building and as he passed the 12th story was heard to say, 'so far, so good',' he said. 'This [Fed] news was negative to the dollar and gold positive.'"

"The market also appeared to be mostly unfazed by report released Wednesday afternoon, in which the International Monetary Fund proposed the sale of about 400 metric tons of gold to help fund its activities. The current market value of the gold amounts to $6.6 billion, it said."

"'Investment profits from its sale could yield a real return of some [$195 million] a year,' the report said. But the 'limited gold sales should ... be coordinated with current and future central-bank gold agreements so as not to add to the volume of sales from official sources,' it said."

"'The proposal is 'not a done deal,' emphasized's Jon Nadler. But the news is significant 'because 400 tonnes is about what all central banks can sell in a year (500T) -- thus it would double official sector disposals in the marketplace,' he said."

"Then again,'s Spina questioned whether such a proposal would work. 'The past attempts always came to the same argument that the IMF will never get support from the U.S. government to proceed with such an action,' he said."

"And 'people should understand this point clearly: the IMF has no gold reserves,' he said. 'All IMF gold is owned by member countries and pledged to them. That is why the U.S. Congress must approve any sales of 'IMF gold', which really is the gold of the citizens of the U.S.'"

"Against this backdrop, other metals ended the regular session mainly higher, with March palladium as the lone loser, down 70 cents to close at $340.55 an ounce. It's fallen 0.6% from the end of December. March silver closed up 19.5 cents to $13.57 an ounce, up 4.9% for the month. April platinum added $1.70 to close at $1,182.30 an ounce, gaining 3.3% for the month."

From Reuters. "George Gero, vice president at RBC Capital Markets Global Futures, said the gold market rallied because of strong buying related to the expiration of options and futures contracts."

"'It looks like we have got a very good rollover going, and the $650 call (option) is in the money, Gero said."

"Gold's rally on Wednesday coincided with the first notice day for the February contract and the recent expiration of February options. Investors needed to decide whether to roll the February futures into the April contract, creating additional buzz in the market."

"'I don't think the GDP had a major impact on gold today. There were no major surprises as far as we're concern,' Gero said."

Tuesday, January 30, 2007


"Bullish Technical Picture" For Gold: Grandich

The Associated Press reports on currencies. "The dollar slipped against the other major currencies Tuesday ahead of the Federal Reserve meeting that could offer insight on the future direction of interest rates. The Fed began a two-day meeting Tuesday to decide whether to adjust its key interest rate."

"The bank has kept rates unchanged at 5.25 percent for the past four meetings after a string of hikes that lifted the dollar. The currency has suffered at times from speculation that the next move will be a rate cut. 'Clearly there's some doubt creeping into the market as to whether or not the outlook for U.S. interest rates remains quite as robust as has been discussed of late,' said David Jones, chief markets analyst at CMC Markets in London."

"In afternoon New York trading, the euro bought $1.2961, up from $1.2956 late Monday in New York. The British pound rose to $1.9615 from $1.9595. The dollar fell against the Japanese currency, sliding to 121.62 yen from 121.94 yen. n other trading, the dollar bought 1.2518 Swiss francs, down from 1.2531 late Tuesday, and 1.1804 Canadian dollars, down from 1.1822."

From MarketWatch. "Gold futures closed higher Tuesday for the first time in four sessions, finding support from strength in oil prices and recouping much of the previous session's loss before this week's Federal Reserve decision on interest rates."

"Gold's 'resting from the over-bought condition created last week when $650 was penetrated,' said Ned Schmidt, editor of the Value View Gold Report. 'Now, as everyone knows, [the] gold market is waiting for the FOMC decision.'"

"Gold for February delivery closed up $1 at $644.20 an ounce on the New York Mercantile Exchange after touching a high of $646."

"'Consolidation should see gold spend more time in the $640-$650 area with oil prices again providing a certain degree of market direction, while technical support should be found at the $639 trendline,' said James Moore, an analyst at"

"But overall, bullion prices have been 'lacking fresh leads ... as the market beds down ahead of the' meeting of the Federal Open Market Committee, the Fed's policy panel, said economists at research firm Action Economics."

"It appears that gold has moved into 'its most advantageous technical position in quite some time with key long-term resistance of $650 now in clear sight,' said Peter Grandich, editor of the Grandich Letter. 'A close above $652 should give cause to momentum players to get along gold and a spike up to $700 is not out of the question,' he said."

"Other metals finished mainly higher on Tuesday, with the exception of March palladium, which fell by $3.70 to close at $341.25 an ounce, extending its $6 loss from the previous session. March silver climbed 12.5 cents to end at $13.375 an ounce and March copper futures closed up 1.95 cents at $2.5615 a pound. April platinum added $5.90 to close at $1,180.60 an ounce."

"'The market will also continue to monitor oil prices, as recent volatility in the crude market did spill over into other commodity markets, including gold,' according to Action Economics. Crude-oil futures rallied to a three-week high Tuesday after a report said Saudi Arabia is planning to cut production by another 158,000 barrels a day beginning Thursday, and that the kingdom has cut almost double the amount it agreed on at two recent meetings of OPEC."

The " In addition to added speculative positions, at least part of the story involved transactions by currency dealers. 'I've seen evidence that some 'carry trades' in Asia are being unwound, and that's having a spillover into the gold market,' says Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard."

"The 'carry trade' involves selling short a low-yielding currency, such as the yen, and investing the proceeds in the government securities of a higher-yielding one, like the dollar or euro. The same theory is used for gold carry trades, with unwinds leading speculators to buy back short bullion positions."

"Turning to the technical analysis perspective, at least one observer sees a setup in the charts for a strong move up. 'A very bullish technical picture has developed,' says Peter Grandich, editor of The Grandich Letter, who notes that gold prices have withstood a stronger-than-expected greenback, as well as falling energy prices."

"Crude oil prices have declined about 10% since the beginning of the year, while spot gold prices have remained steady. Some investors purchase gold as a hedge against a rising price level, and the robust performance of bullion, despite the likelihood of reduced inflation concerns, looks encouraging for the bulls, Grandich explains."

"In the official sector, the European Central Bank announced net sales of 36 million euros of gold and receivables last week, or about 2.3 tons. The transaction reflects selling by one bank in the ECB system and purchases by another, with the latter no doubt encouraging the bulls."

Monday, January 29, 2007


Carry Trade Brings "Rapid Repricing" Risk

Bloomberg reports on the Japanese yen. "The yen may extend its decline against the dollar as a report today is forecast to show Japanese household spending slowed in December. The yen touched a four-year low versus the U.S. currency yesterday when data showed Japanese retail sales fell 0.3 percent last month from a year earlier. Decelerating household spending may keep the Bank of Japan from raising interest rates at its Feb. 20 meeting."

"The yen remains vulnerable because the weaker consumption and lower inflation is making it difficult for the BOJ to increase rates, said Michael Malpede, a senior currency analyst in Chicago at Man Global Research."

"Japan's currency fell to 121.74 per dollar at 7 a.m. in Tokyo from 121.54 on Jan. 26. It touched 122.19, the weakest since 122.85 on Dec. 13, 2002. It also fell to 157.74 per euro from 156.99, approaching its record low of 158.62 set on Jan. 24."

"The yen could fall to between 123 and 124 per dollar, and 160 against the euro, 'in the next couple of weeks' as economic data continues to erode the case for raising interest rates, Malpede said."

"Japan's overall household spending is expected to fall 1.2 percent from last year while the jobless rate will hold at 4 percent, according to the median estimates in Bloomberg surveys."

"'The trend has been toward a very weak yen,' said Dennis Gartman, trader, economist and editor of the Suffolk, Virginia- based Gartman Letter. The yen will weaken 'as long as the BOJ continues to back off any attempt to raise rates. People continue to borrow in yen and invest anywhere else.'"

The Financial Times. "The yen hit a four-year low against the US dollar on Monday, intensifying fears that the rising level of currency-based 'carry trades' by hedge fund investors could jolt markets if these positions were suddenly unwound."

"Many economists and bankers suspect that carry trade activity is an important factor behind the yen’s weakness. Carry trades are deals in which investors borrow in currencies with low interest rates, such as the yen and the Swiss franc, to invest in those that pay higher rates, such as the Australian dollar."

"According to Barclays Capital, speculative carry trades have reached their highest level since the Russian crisis in 1998. It estimates that these amount to $34bn (€26bn) in net terms, calculated in constant 1998 prices for the yen, Swiss franc, sterling and Australian dollar."

"The scale of the carry trade, and its concentration in the yen, is raising fears among policymakers that a rapid unwinding of these trades could shake financial markets."

"'We have some very crowded trades in some areas [of currency markets] now ... and leverage is increasing,' Malcolm Knight, managing director of the Bank for International Settlements said in Davos at the weekend. 'Taken together, this leverage and carry trades create the prospect that we could have rapid repricing in financial markets.'"

From Reuters. "Gold turned lower by midafternoon on Monday and silver and other precious metals also fell, hurt by lower oil prices and a strengthened dollar ahead of the release of several key U.S. economic indicators later this week. Spot gold fell as low as $641.55 an ounce before recovering to $642.10/643.10 by 3:17 p.m. EST, compared with $645.00/646.00 in New York late on Friday."

"Most-active gold for February delivery on the COMEX division of the New York Mercantile Exchange settled down $1.50 at $643.20 an ounce, traded between $640.80 and $648.20 an ounce."

"'I think it's going to need some fresh bullish stimulus,' otherwise a 'near-term correction' was possible, said David Rinehimer, director of commodities research at Citigroup Global Markets. He added that the level of demand in the cash market was probably slowing with the rise in gold prices."

"Rinehimer said that the most recent U.S. Commodity Futures Trading Commission data showed noncommercial net long positions, basically speculation, in gold had a 'pretty good' build-up for the second consecutive week, though that was not surprising considered the market had moved up. Speculators in U.S. gold futures raised their net longs by 34 percent in the week to Jan. 23 as prices soared to new highs, according to the CFTC's most recent Commitment of Traders report."

"'The scale of data from the U.S. this week, as well as the Fed's rate decision, will likely keep conditions volatile,' said. 'I expect we will see gold spend a little more time consolidating in the $640-$650 area till the Fed decision and accompanying statement.'"

"In other precious metals, silver edged down to $13.14/13.21 an ounce from $13.31/13.38 at its previous close, while platinum fell to $1,163/1,168 an ounce from $1,171/1,177 in late in New York on Friday. Palladium fell $6 to $340/345 an ounce compared with its Friday's finish."

"Russia's Norilsk Nickel, the world's largest nickel and palladium miner, forecast a significant drop in precious metal production and steady nickel output in 2007 as it embarks on major reconstruction work."

"Oil fell more than a dollar to below $54 a barrel after Saudi Arabia's ambassador to the United States said current prices were good for consumers and producers and other OPEC members showed signs of hiking supplies for March."

Friday, January 26, 2007


Gold Gains On The Week, Eyes Resistance

Reuters reports on the currency markets. "The dollar advanced broadly on Friday, as generally robust data from the U.S. housing and manufacturing sectors provided further evidence the economy is more resilient than many initially thought. That should reinforce the view the Federal Reserve may hold interest rates steady at 5.25 percent this year, and not cut them as previously expected."

"The dollar rose after a government report showed that while new-home sales posted their biggest drop in 16 years in 2006, sales picked up in December. That followed a report on new orders for U.S.-made durable goods, which increased by a larger-than-expected 3.1 percent in December."

"'These have supported the dollar because they have pushed out expectations of a rate cut in the middle of the year which had been universally expected up until a month ago,' said said Carl Forcheski, vice president of corporate foreign exchange at Societe Generale in New York."

"Next week, markets are bracing for a slew of U.S. economic data and events led by the FOMC meeting, the non-farm payrolls report, and a key manufacturing survey. That should help determine where the dollar and U.S. interest rates are headed this year."

"'The Fed won't shock anyone by leaving rates unchanged ... nor will the accompanying statement, citing improved near-term growth and a continued tightening bias, sentiments that the market has already heard from Fed speakers,' said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. 'That puts the focus on fresh economic reports, with a flood of data due,' he added."

"The Canadian dollar strengthened against the U.S. dollar on Friday, taking its cue from rising oil prices, but generally sticking to well-worn ground. The currency finished at C$1.1799 to the U.S. dollar, or 84.75 U.S. cents, up from C$1.1825, or 84.57 U.S. cents, at Thursday's close."

"Crude oil continued to rebound from its earlier lows, climbing 2 percent as cold weather persisted in the U.S. Northeast and as commodity traders who had bet on further losses covered their positions. 'The oil prices probably helped to put a better tone on the Canadian dollar and gave it some support,' said Matthew Strauss, currency strategist at RBC Capital Markets."

From MarketWatch. "Gold futures closed lower Friday, retreating from the previous session's intraday move to an eight-week high, but the precious metal chalked up a gain for the week. Gold has been 'rising initially from a technical point of view, but largely because of recent de-hedging, and lower-than-needed supply to satisfy slowly growing demand from traditional sources, including India,' said Julian Phillips, an analyst at"

"'At $650, this demand should pause as the higher price levels are digested,' he said."

"Gold for February delivery closed down $3.40 at $644.70 an ounce on the New York Mercantile Exchange. Still, it finished the week 1.3%, or $8.30, higher after closing last Friday at $636.40."

"On Thursday, gold futures touched their highest level in two months, at one point breaking through a key resistance level at $650 an ounce. Still, the metal closed weaker as oil prices eased."

"'The first stab at $655 was indeed met with resistance,' said Jon Nadler, an analyst at 'Bullion has been on the mend since Jan. 8, and each stage of the rebound from $608.30 has been methodically tested,' he said. But 'the market does find itself in a close-to-overbought condition and is shedding some momentum.'"

"Also on Nymex Friday, other metals finished lower. March silver dropped 11.5 cents to close at $13.375 an ounce, but it's ended 3.5% higher for the week."

"April platinum declined $6.50 to close at $1,181.50 an ounce, with March palladium falling $4.50 to end at $350.95 an ounce. Both contracts ended higher than last Friday's close."

"U.S. gold futures ended lower on Friday, after hitting their highest level this year in the previous session, hurt by selling related to options and contract expirations and a stronger dollar."

"Paul McLeod, vice president of precious metals at Commerzbank, noted February futures finished softer, but that was not uncommon shortly before the most-active contract expired."

"'I am not really reading that as a major change, or a switch in gold's momentum or direction. It's just a characteristic of the marketplace as it switches from the February contract to April,' said McLeod. 'I think $680 (spot basis) is the next major hurdle for us to get over,' McLeod said."

"The first notice day for the February contract is next Wednesday, and investors have to decide whether to roll the February futures into the April contract, creating additional buzz in the market."

"'I think there is more potential on the upside than on the downside. The medium-term trend is looking good,' a European trader said, adding gold might rise to $655 next week and then toward a high of $670."

"In market news, the International Monetary Fund said it had still not decided on new accounting guidelines for central bank gold loans, denying a claim that it had already made up its mind on this issue."

"Central banks are the world's largest holders of gold. A number of them agreed in 1999 to limit sales to prop up the precious metal's price after it fell under $300 an ounce."

"The market ignored a strike by workers at South Africa's Modikwa platinum mine in a dispute over benefits amid allegations of racial discrimination, but mine officials said output was continuing."

Thursday, January 25, 2007


"Global Imbalances More Concentrated"

The Associated Press reports on currencies. "The euro climbed Thursday against the U.S. dollar despite surveys from Germany, Europe's largest economy, showing an unexpected dip in business confidence and consumer climate. The 13-nation euro bought US$1.2980 in morning European trading, up from US$1.2961 the night before in New York."

"The British pound rose slightly to US$1.9691 from US$1.9672 the day before, while the dollar fell to purchase 120.56 Japanese yen, from 120.95 yen in New York."

"The euro's rise came despite a report from Munich's Ifo institute, which showed its business climate index declining to 107.9 in January from 108.7 in December. Economists polled by Dow Jones Newswires had expected a slight rise to 108.8."

From Reuters. "Gold turned lower on Thursday afternoon after it rallied to a five-and-a-half month high in early session, as a technical sell-off halted the rally, while oil reversed course to trade down."

"Other precious metals tracked gold, with silver jumping to a one-month high, platinum touching its highest in two months and palladium climbing as high as $352 an ounce, the highest in more than four-and-a-half months."

"Gold hit $654 an ounce, its highest since Aug. 9, and retreated to $645.70/646.70 by 3:03 p.m. EST, against $647.20/648.20 late in New York on Wednesday."

"Scott Meyers, senior analyst at Pioneer Futures, said that gold went into a technical resistance level, which triggered some selling. 'You can see more profit taking tomorrow,' Meyers said."

"After several recent attempts, gold breached the $650 mark and analysts said that the currency and energy markets were expected to help gold to scale new highs going forward. 'Overall, we still have got a macro-economic picture that is relatively supportive for gold investors,' said Michael Widmer, metals analyst at Calyon Corporate and Investment Bank."

"It has gained seven percent from its low in early January, but is still about 11 percent down from a 26-year high of $730 in May last year. 'A holistic picture of the market hints of a major rally in gold,' Pradeep Unni, analyst at Dubai-based Vision Commodities Services, said, adding the metal was getting support from oil."

"Oil prices fell below $55 a barrel, as profit taking and ample U.S. inventories countered cold weather in in top consuming regions."

"In other metals, silver rose to 13.54 before easing to $13.32/13.39 an ounce, against $13.18/13.25, its previous close in New York, while platinum was at $1,171/1,176 after rising to $1,180, against $1,164/1,169 in New York late Wednesday."

"'While resistance ahead of $1,180 has proved strong, the metal remains within its short-term uptrend and should garner strength from further gains in gold and silver,' James Moore, precious metals analyst at, said."

"Palladium was last quoted at $350/354 an ounce, compared with $344/349 at its previous finish in the U.S. market."

From MarketWatch. "Gold futures touched their highest level in eight weeks Thursday after breaking through what analysts called a key price-resistance level of $650, but prices closed slightly lower to reflect weakness in oil prices."

"'The key now is to climb the resistance around $675, which would then accelerate this advance even further with the highs from 2006 then the next target,' said Peter Spina, chief investment strategist at"

"'The gold market is showing tremendous strength,' said Spina. 'Yes, oil and the U.S. dollar have been factors giving direction to this market, but now there is growing independence in gold's moves of late. There is strong investor interest again and...we could be in the midst of the next leg higher, but let the market confirm this to us,' he said."

"'The "$675 area is the key from a technical perspective and we may need to consolidate around the $650 mark first before climbing the next wall, he said."

"Indeed, 'investors and traders are showing a marked degree of caution in assembling the building blocks of this rally,' said Jon Nadler, at bullion dealers 'If a sufficiently solid foundation can be established here, perhaps hedge funds or other trigger-finger happy speculators will reconsider early bailouts at higher levels,' he warned."

The Telegraph. "The vast imbalances in the global system were growing worse by the day and might be setting the stage for a financial crisis, experts warned. Zhu Min, the Bank of China's executive vice-president, said the explosive growth in derivatives to $370 trillion had flooded the global system and made it too easy to acquire credit."

"Predicting that the storm would break next year, he said: 'There is money everywhere. You can get liquidity from the market every second for anything. Derivatives are eight times global GDP and much of the money is flowing to Asia, where people have no idea what risks they are taking.'"

"Mr Zhu said the money supply in the US had doubled from 25pc to 50pc of GDP in 20 years, and risen to 75pc of GDP in Japan. The effect of so much easy credit had been to reduce yields on risky bonds to wafer-thin margins, and blind investors to risk."

"'The global imbalances are becoming more concentrated, not less,' he said. While China is adding to its colossal reserves at a rate of $200bn (£102bn) a year, five countries, led by the US and Britain, now account for 84pc of the $1,000bn of trade deficits in the global system."

"Montek Ahluwalia, deputy chief of India's planning commission, said the derivatives revolution had allowed banks to 'park risk elsewhere,' disguising the danger."

"However, Jacob Frenkel, vice-chairman of AIG international, said the 'perma-bears' had been silenced last year, and much the same would happen in 2007. 'The dire predictions haven't come to pass. The dollar hasn't collapsed; the yen hasn't appreciated dramatically; oil has not reached $100. We see a lot of ugly bears growing horns and becoming bulls,' he said."

"Everything looks perfect, and that in a nutshell is what worries the bears. As Lawrence Summers, the former US Treasury secretary, warned this week, ultra-optimism usually precedes a fall. 'It's worth remembering that markets were very upbeat in the early summer of 1914,' he said."

Wednesday, January 24, 2007


Gold Price Moves "Creating Believers"

The Associated Press reports on the curency trading. "The dollar climbed sharply against the pound Wednesday amid doubts over the prospect of further British interest rate hikes. The U.S. currency traded mixed against the euro and yen. The pound dropped to $1.9672 in afternoon New York trading, down from $1.9825 in New York late Tuesday. On Tuesday, it had traded as high as $1.9917, reaching its highest level since September 1992, when Britain left the European Exchange Rate Mechanism."

"The pound, which appeared headed for the $2 mark near the end of last year but then retreated, has been helped recently by a surprise Bank of England interest rate increase this month. However, minutes of its meeting released Wednesday showed that the Bank's Monetary Policy Committee voted for the raise only by a 5-4 margin. That balance reduced expectations of further rate hikes from the bank."

"Meanwhile, the 13-nation euro slipped to $1.2961 from $1.3021 late Tuesday. The euro has been supported by perceptions that the European Central Bank will continue raising interest rates while the Federal Reserve keeps its rates on hold, as it has over recent months."

"In other trading, the dollar bought 1.2487 Swiss francs, up from 1.2414 late Tuesday, and 1.1790 Canadian dollars, down from 1.1800."

From Bloomberg. "The yen gained the most in two weeks against the euro, rebounding from a record low, as a German official said the Japanese currency's decline may be a topic of discussion during next month's Group of Seven meeting."

"The currency's 'lasting weakness is a cause for concern,' Bernd Pfaffenbach, a deputy German Economy Minister, said in an interview today in Davos, Switzerland. Traders started driving the yen higher in New York earlier today after Reuters reported that European governments want the G-7 to strengthen its criticism of the yen's decline."

"'Europe would like to see a stronger message on the yen and people have started to bail out' of wagers on euro gains versus the yen, said C.J. Gavsie, managing director for currency trading at BMO Capital Markets in Toronto."

"'I assume we will address the yen's weakness again on the sidelines of the G-7 meeting' in Essen, Germany, said Pfaffenbach, who is German Chancellor Angela Merkel's chief adviser on the Group of Eight industrialized nations."

"Gold in New York climbed to the highest in seven weeks as rebounding oil prices boosted the appeal of precious metals as a hedge against inflation. Oil prices have more than doubled from five years ago. Gold reached a 26-year high in May as oil reached a record in July."

"'Gold will tend to run with crude oil,' said Matthew Zeman, a precious metals trader at LaSalle Futures Group in Chicago. 'If you get a nice reversal in crude, gold is going to follow suit. Crude oil has taken a beating and the gold market held up pretty well,' said Zeman. 'That's a sign of strength in the market.'"

"Gold has gained 6.8 percent since Jan. 5 on speculation the U.S. dollar will weaken and oil prices will rebound. Positive technical price charts are spurring buying, said Ron Goodis, retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. 'You start creating believers once you start crossing certain levels,' said Goodis, who bought gold when it was trading in the low $630s on Jan. 22, after being bearish on the metal for the past month. 'This market is under-accumulated. If the market pulls higher, you have to change your views.'"

"'I'm very bullish on gold,' said Frank Holmes, chief executive officer of U.S. Global Investors Inc. in San Antonio, which manages the $876 million World Precious Minerals Fund. 'It's in a long, secular bull market. It's quite amazing to see that the gold ETFs are now bigger than all the gold-equity funds combined.'"

From MarketWatch. "Gold futures moved higher Wednesday, finding support just under $640 an ounce to mark their highest closing level since early December, with investors eyeing mixed trading in the U.S. dollar and a partial recovery in oil prices. Gold had gained nearly $12 in the previous session."

"'While profit-taking has been seen and the market remains vulnerable to movements in the dollar and energy market, gold for the time being does seem well supported,' said James Moore, an analyst at"

"Gold for February delivery closed up $2.30 at $648.20 an ounce on the New York Mercantile Exchange, having recovered from an intraday low of $639 to finish at a level it hasn't seen in seven weeks."

"'With the dollar running into pressure and oil prices stabilizing above $50 a barrel, the outlook for gold remains positive,' said Moore. He pegged gold's next target as a 'band of resistance" from $648 to $656 an ounce.'"

"'The oil markets may have gotten the relief that eluded them during the past few weeks,' said Jon Nadler, at bullion dealers 'This does not imply that gold itself can bank on support near $650 ... but it certainly gives a bit of a heads-up indicator to the folks who have their eyes fixed on the inflation radar.'"

"Other metals were mixed in Nymex action. March silver closed 1.3 cents higher at $13.273 an ounce, to extend Tuesday's 2% rise. April platinum dropped $10.10 to end at $1,173.10 an ounce, with March palladium closing down $1.20 to $349.15 an ounce."

Tuesday, January 23, 2007


Gold Climbs On Fund Buying

The Associated Press reports on currencies. "The euro rose and the British pound climbed to its highest level against the U.S. dollar in more than 14 years on Tuesday following positive economic data from Europe. The 13-nation euro rose as high as US$1.3044 in afternoon European trading, up from US$1.2954 in New York late Monday. It settled back later to US$1.3023."

"The pound rose as high as US$1.9917 from its level Monday of US$1.9764 — reaching its highest level since the week before the so-called 'Black Wednesday' in September 1992, when Britain crashed out of the European Exchange Rate Mechanism."

"The euro rose, pulling the pound with it, after new data showed that euro-zone factory orders rose by 1.4 percent on the month in November, beating economists' expectations of a 1 percent increase. The pound, which appeared headed for the US$2 mark near the end of last year but then retreated, has been helped recently by a surprise Bank of England interest rate increase this month."

"'Given the surprise rate hike, it is hard to imagine anything other than a hawkish stance from policymakers,' analysts at Credit Suisse First Boston said in a note to clients. 'Recent data seem to support this, making sterling continue to look tactically solid, despite the fact that it is already in rich territory.'"

"The euro has been supported by perceptions that the European Central Bank will continue raising interest rates while the U.S. Federal Reserve keeps its rates on hold — as it has over recent months — or even cuts them."

"The dollar also fell against the Japanese currency on Tuesday, slipping to 121.42 yen from 121.61 yen."

The Daily FX. "After consolidating for close to two weeks, the Euro finally broke out to the upside against the US dollar. ECB talk is spurring the currency’s extension as it confirms the central bank’s plans to raise interest rates plans again in March."

"In probably the most direct comment that we have heard from the ECB thus far, monetary policy committee member Bini-Smaghi said today that not raising interest rates would mean 'feeding excess liquidity growth,' which the ECB does not want."

From Reuters. "Gold jumped more than 2 percent to a seven-week high on Tuesday as a sharp decline in the dollar and firmer oil prices triggered speculative fund buying, dealers said. Gold was quoted at $647.10/648.10 by 3:11 p.m. EST, up from $632.60/633.60 in New York late on Monday."

"Other precious metals tracked gold higher, with spot palladium hitting a 4-1/2-month peak, platinum rising to a seven-week high and silver reaching its highest level in more than a month."

"Most-active gold for February delivery on the COMEX metals trading division of the New York Mercantile Exchange settled up $11.80, or 1.9 percent, at $645.90 an ounce. It was trading in a $15-range between $632.30 and $647.00 an ounce -- its highest level since Jan. 3.

"'The buying we have seen this morning has been predominantly funds. The gold market is going to encounter quite a bit of chart resistance, but if we break above $648 an ounce, the market will go to $676,' said Peter Hillyard, head of metals sales at ANZ Investment Bank."

"'We've got a lot of buy-stops going off. It looks to me like we're back to where we were. The funds were looking at the old fundamentals,' said George Gero, vice president at RBC Capital Markets Global Futures."

"Gero said there were a host of positive factors supporting gold, including geopolitical concerns related to President George W. Bush's upcoming State of the Union speech, good physical demand in the Far East, future ETFs in India, a weak stock market, the low dollar and higher crude."

"'And then of course, the saber-rattling that's coming from a new area, where the Bolivian president is talking about nationalizing the mining business,' Gero added."

"In other precious metals, palladium touched $348 an ounce, the highest since early September. It was last quoted at $347/352, compared with $341/346 in New York late Monday. Silver was last quoted at $13.23/13.30, versus $13.01/13.08 at its previous close."

"Platinum hit $1,173 an ounce, the highest since Dec. 4, before slipping to $1,170/1,175, against $1,156/1,162 in New York."

"Crude oil surged more than $2 a barrel and triggered a rally among energy producers. Investors regained their optimism about corporate profits after a series of positive earnings reports."

"Energy prices spiked after the Energy Secretary Samuel Bodman said the U.S. will double the size of the nation's Strategic Petroleum Reserve. Prices were already rising as a cold snap in the northeast United States was seen increasing demand for heating fuel in the region."

Monday, January 22, 2007


80's Currency Bubble "Deja Vu" In Japan

Bloomberg reports on the Japanese yen. "There has been another delay in the great yen rally that investors have been waiting for, and Bank of Japan policies are to blame. By leaving its benchmark interest rate at 0.25 percent last week, the Japanese central bank appeased politicians arguing the economy is too fragile to withstand higher borrowing costs. It also mollified investors who have borrowed cheaply in yen and parked those funds in higher yielding assets overseas."

"The upshot is that the Bank of Japan may have provoked a new wave of the yen carry trades that will add to distortions in the Japanese economy, as well as the global one."

"In a recent report to clients, analysts at Bridgewater Associates, a money management firm in Connecticut, said they were 'getting queasy about the amount of money that's going into carry trades, driving down spreads and making these positions more risky. Low yields and credit spreads have also created much lower expected returns and much higher price risk, further increasing the markets' riskiness,' Bridgewater argued."

"'This is deja vu from the late 1980s. The carry trade is creating a currency bubble this time,' says Masaaki Kanno, chief economist at JPMorgan Securities Japan."

The Financial Times. "The yen hit a nine-year low against sterling and a near four-year trough against the dollar on Monday amid continued investor appetite for carry trades. Indeed, figures showed that speculative short yen positions on the Chicago Mercantile Exchange hit record levels in the week to January 16."

"However, Adam Cole, strategist at RBC Capital Markets, said he believed that market positioning against the yen was still not overstretched. 'Carry trades should continue to perform,' he said. 'So dollar/yen should grind higher.'"

"By mid-afternoon in New York, the yen had fallen 0.3 per cent to Y121.60 against the dollar and 0.5 per cent to Y240.40 against the pound. The low-yielding Swiss franc, itself widely used as a carry trade funding vehicle, also lost ground, easing 0.1 per cent to SFr1.2490 against the dollar and 0.1 per cent to SFr1.6190 against the euro."

"Hidenao Nakagawa, secretary-general of Japan's ruling Liberal Democratic Party, called for the establishment of a framework that would allow the BoJ to align its policy goals with those of the Japanese government ahead of policy decisions. 'What he envisages is not exactly clear, although it will not help to soften fears of political interference in the monetary policy process and this is not good for the world's second largest economy,' said Ian Gunner, currencies strategist at Mellon Financial."

From MarketWatch. "Gold futures fell from a high of more than $640 an ounce Monday to close lower for the session, reflecting oil's price retreat and finding further pressure from gains in the U.S. dollar. 'The movements of the energy market will remain influential to gold in the coming sessions,' said James Moore, an analyst at London-based 'The metal may garner some support as oil prices to appear to be forming a base above $50.'"

"For now, 'gold looks positive on the charts' but needs to clear what Moore called a 'congestion area' that he pegged at $642 to $648 an ounce. If it breaks through, this would 'enable gold to reach $676,' he told clients."

"Other metals climbed along with gold to start the week, with the exception of platinum, which saw its April contract fall by $3.40 to end at $1,165.10 an ounce. The March contract for sister metal palladium closed up $1.80 at $346.70 an ounce.
March silver futures closed 8 cents at $13 an ounce, after touching $13.21, a nearly three-week high."

"OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble, sending bond yields higher."

"Exporters including Indonesia, Saudi Arabia and Venezuela, sold 9.4 percent, or $10.1 billion, of their U.S. government debt securities in the three months ended in November, according to Treasury Department data. Members of the Organization of Petroleum Exporting Countries last sold Treasuries for three straight months in June 2003."

"Oil producers have surpassed Asian central banks as the largest pool of global savings, accumulating an estimated $500 billion in 2006 alone, according to research by Pacific Investment Management Co. The sales during those three months mark a reversal because OPEC countries have boosted their holdings of U.S. government bonds by 70 percent to $97 billion in the past 17 months, Treasury data show."

"'There will be a significant sell-off,' Joseph Stiglitz, a Nobel laureate and economics professor at Columbia University in New York, said in an interview. 'Medium-term and long-term yields will go up.'"

Friday, January 19, 2007


Oil Prices "Recalibrate The Equation"

MarketWatch reports on the US dollar. "The dramatic 17% decline in oil prices at the start of the new year may have spelled trouble for commodity traders, but it's proved a blessing for the dollar. Crude-oil futures slumped to a 20-month low of $49.90 a barrel on Thursday, pressured by sluggish demand as a result of the mild weather and buoyant crude supplies. Oil prices have fallen a full 36% from their peak levels reached last summer."

"In contrast, the U.S. dollar has rebounded nicely since the beginning of the year, climbing over 2% against both the euro and yen, leading some analysts to rethink their previous forecasts for a downward trend. The greenback rallied to a four-year peak against the yen on Thursday and a seven-week high against the euro last week."

"The sharp reversal in oil prices 'has recalibrated the [foreign-exchange] equation in so far as bolstering expectations of a U.S. consumer-led stability to act as a stabilizer to housing's downside risks,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York."

"The dollar has also rebounded as a more optimistic outlook for the U.S. economy 'has considerably diminished chances of' an interest rate cut by the Federal Reserve by March, he said."

"Indeed, back in late 2006 when the dollar appeared to be starting a precipitous slide amid fears of a sharp U.S. slowdown, central bank reserve diversification, and a lack of liquidity around the Thanksgiving holiday, some currency watchers were forecasting that the greenback would retain a soft tone in the early months of this year."

"'Each $10 drop in [the oil] price adds 0.5% to GDP,' said Kathy Lien, chief strategist at FXCM. 'The lower the price of oil, the more stimulative it is for the U.S. economy.'"

"A study released early this year by the Federal Reserve Bank of New York estimated that oil-exporting countries received oil-export revenues of about $970 billion in 2006, up from just $300 billion in 2002. The study found that the U.S. has been the single biggest recipient of investment from oil-exporting countries in recent years, suggesting that the petrodollar windfall ultimately found its way back into the U.S."

"'Although it is difficult to determine where the funds are first invested, the evidence suggests that the bulk are ending up, directly or indirectly, in the United States,' the study concluded. 'The recycling of petrodollars into the U.S. financial markets has supported activity here by allowing for higher consumption and investment spending than otherwise would have occurred.'"

"Gold futures climbed more than 1% Friday, prompting the benchmark contract to score a gain of more than $9 an ounce for the week as the precious metal took its cue from higher energy prices. Gold for February delivery closed up $8.30 at $636.40 an ounce on the New York Mercantile Exchange. It closed at $626.90 a week ago, so it ended the latest week up $9.50, or 1.5%."

"'The gold price is rallying higher with energy,' said Peter Spina, chief investment strategist at Also, Federal Reserve Chairman Ben Bernanke 'brought some focus back to the deficit problems the United States is facing, and this is giving investors some renewed interest in the metal,' he said."

"'A range has developed here and it will take a breakdown in oil below $50 to bring gold back down to the low $600s or another rally in the U.S. dollar to keep gold from moving back to $650, where it faces some stiff resistance,' he said."

"Gold 'could still be subject to a number of brief sell-offs in the near future,' said Jon Nadler, an analyst at 'Support remains quite decent just under $620 for the moment.'"

"One long-term positive for gold is the tone with which Bernanke spoke Thursday of the potential impact of the massive twin deficits on the U.S. economy in the coming years, said Nadler. Bernanke urged the U.S. Congress to take 'early and meaningful' action to put the budget on a sustainable path."

"'It appears that the very debacle that gold's advocates have been pointing to for quite some time now is looming on the immediate horizon -- and it is not a mirage,' said Nadler."

"Other metals rose Friday, with March silver leading the gains, up 23.5 cents to close at $12.92 an ounce, up just 4 cents from the level it closed at last week.
March copper added 2.5 cents to end the day at $2.517 a pound. But after falling on Thursday to its weakest level since April, the contract was 3.3% lower for the week."

"April platinum closed unchanged at $1,168.50 an ounce while March palladium added $1.50 to finish $344.90 an ounce. Both contracts ended above their week-ago closing levels."

Thursday, January 18, 2007


Oil Pulls Gold Lower

Reuters reports on the currency markets. "The dollar rose to nearly a four-year peak against the yen on Thursday, buoyed by a raft of generally strong U.S. economic data and a decision by the Bank of Japan to keep interest rates steady. The dollar, however, turned lower against the euro and sterling in late trading on some technical selling, despite positive U.S. numbers, traders said."

"'We're seeing the dollar give up some of its gains against the euro, but I wouldn't read anything into that. That's just position adjustment,' said Joe Francomano, vice president of foreign exchange at Erste Bank in New York. He noted that the U.S. economic data were all supportive of the dollar and overall the currency did quite well, posting the sharpest gains against the yen."

"By late afternoon trading, the dollar came off highs to trade at 121.20, still up 0.5 percent on the day."

"Thursday's U.S. data bolstered expectations the Federal Reserve won't have to cut U.S. rates any time soon. A stronger-than-expected U.S. Mid-Atlantic manufacturing survey for January, a broadly in-line consumer price index in December, and a rise in the pace of U.S. home construction in the same month enhanced the market's bullish dollar sentiment."

"The euro initially fell on the robust U.S. data, but recovered late in the day to $1.2958, up 0.2 percent from late on Wednesday. Sterling, meanwhile, was up 0.2 percent at $1.9737. Naomi Fink, senior currency strategist at BNP Paribas in New York, said gains in the euro against the dollar were helped by buying interest in the single currency versus the yen."

"'The dollar's limited ability to capitalize on good data versus the euro shows euro/yen bullishness is keeping euro/dollar dips limited,' Fink said."

From MarketWatch. "Gold futures closed more than $5 lower Thursday, retreating from their highest prices in more than two weeks as pressure from a steep drop in crude oil offset support tied to prospects that there will be higher investment and physical demand for the precious metal. Gold for February delivery closed down $5.20 at $628.10 an ounce on the New York Mercantile Exchange. Earlier, the contract reached a high of $637.20, its strongest intraday level since Jan. 3."

"'On one side of the equation, you have the strong fundamentals underpinning the gold market supported by renewed nuclear concerns from North Korea and Iran,' said Peter Spina, chief investment strategist at 'On the other side of the equation, we have another sizable drop in oil as it searches for its bottom ... combined with positive U.S. economic data supporting a firm U.S. dollar,' said Spina."

"On Thursday, in reaction to a U.S. military buildup in the Gulf, Iranian President Mahmoud Ahmadinejad said his country was prepared for any possible standoff with the West over its nuclear activities, the Associated Press reported."

"'In the end, gold is fighting to move higher, but the sellers appear to have the upper hand,' he said. From here, 'look for some difficulty to extend gains under these circumstances,' but overall, it appears that 'a strong base [is] being built from which gold will propel higher ... once the right time arrives,' he said."

"On Nymex, March silver futures shed 20.5 cents to end at $12.685 an ounce, reversing after earlier climbing to $12.99. April platinum rose $13.90, or 1.2%, to close at $1,168.50 an ounce and March palladium climbed 45 cents to finish at $343.40 an ounce."

From Bloomberg. "Ecuador's economy minister told a group of investors who visited his office yesterday that the government may repay only 40 percent of its foreign debt as part of an effort to free up funds for health care and education."

"Ricardo Patino, who took office with President Rafael Correa on Jan. 15, told the investors that a debt reduction of that much or more is among the possibilities the government is considering, an Economy Ministry spokeswoman said."

"Patino's debt reduction estimate is the first indication the South American country has given on the amount of money it's looking to shave off its debt servicing. Correa has been saying for months that he planned a restructuring of the country's $11 billion foreign debt, without providing specifics."

"Ecuador's 10 percent dollar bonds due in 2030, the government's benchmark foreign securities, tumbled today, driving the yield up 110 basis points, or 1.1 percentage points, to 14.32 percent."

"'At this point, one has to assume that there will be some sort of default,' said Adam Weiner, who manages emerging-market debt at New York-based OppenheimerFunds Inc., which has $250 billion under management. 'This is a willingness to pay issue, not an ability to pay issue.'"

"Patino told the investors that much of the debt is 'illegitimate' and 'a burden on Ecuador that inhibits growth' and takes away from social spending, according to Citigroup Inc., which arranged the meeting in Quito."

"'He argued that for the first time in many years investors will be dealing with a finance minister determined to defend and prioritize social spending over external or domestic debt servicing,' Citigroup analysts Don Hanna and Jose Wynne wrote in a report to clients."

Wednesday, January 17, 2007


BOJ: Back On Hold

Bloomberg reports on currencies. "The yen may set a 13-month low against the dollar on speculation the Bank of Japan will refrain from lifting interest rates at a policy meeting ending today. Japan's currency may extend its slide, after touching the weakest since December 2005 yesterday, as local media including the Nikkei newspaper reported the central bank is likely to hold its benchmark rate at 0.25 percent. A report yesterday showed Japanese consumer confidence fell last month."

"'The economy is yet to be on a solid footing and there is no rush to raise interest rates,' said Michael Woolfolk, senior currency strategist at the Bank of New York in New York. 'The yen has further scope to decline.'"

"The yen traded at 120.65 per dollar at 6:53 a.m. in Tokyo. It touched 120.88 yen yesterday, the weakest since 121.06 yen on Dec. 12, 2005. The Japanese currency traded at 156.12 per euro. It touched a record low of 158.06 per euro Jan. 3. The dollar traded at $1.2939, after declining yesterday on government data showing record buying of foreign stocks by U.S. investors."

"The Bank of Japan is 'leaning toward' delaying a boost, the Nikkei reported, without saying where it got the information. Kyodo News reported two days ago that the central bank is 'unlikely' to lift rates this week, because it wants to monitor prices and consumption further."

"Canada's dollar rose from near a 13- month low as crude oil and gold advanced, enhancing the currency's appeal. Commodities account for about 54 percent of Canada's exports. The Canadian dollar yesterday fell the most in more than two months as crude oil dropped to a 19-month low."

"The currency is getting some relief from the stabilizing prices of crude and gold,' said Maria Jones, a currency strategist at TD Securities Inc. in Toronto. 'Canada is also benefiting from a general weakness in the U.S. dollar.'"

"The Canadian currency rose to 85.25 U.S. cents at 3:58 p.m. in Toronto from 85.03 U.S. cents yesterday. One U.S. dollar buys C$1.1730. Last week the Canadian currency touched 84.72 U.S. cents, the lowest since Nov. 22, 2005."

From Reuters. "Gold jumped about 1 percent on Wednesday, hitting its loftiest level since its recent sell-off, buoyed by robust demand from speculators and physical buyers as oil prices rebounded and the dollar turned lower. Traders and analysts said the move was aided by currency moves and technical buying."

"Spot gold rose to $632.00/633.00 an ounce by 3:33 p.m EST, up from $625.20/626.20 in New York late on Tuesday. Most-active gold for February delivery on the COMEX metals trading division of the New York Mercantile Exchange settled up $7.40, or 1.20 percent, at $633.30 an ounce and traded in a range between $620.60 and $634.80 an ounce."

"'Overall it appears as if the recent range-trading pattern continues. Gold should continue to track major oil price moves,'said Alexander Zumpfe, trader at Germany's Heraeus."

"Gold has mostly held up in the face of oil's losses. It is currently down by about 1 percent since the start of the year, and even at its low point earlier in the month it was down only about 5 percent. Oil, by contrast, has fallen 18 percent."

"'The crude market has calmed down considerably. This should bring attention back into the metal markets,' said George Nickas at FC Stone. 'At some point, gold is going to divorce itself from the heaviness of the crude market. And then gold should move into a higher ground,' he said."

"John Reade, metals analyst at UBS, said in his daily note that the sharp January sell-off in gold and silver had triggered profit-taking in exchange-traded investment products. Reade wrote that six gold exchange-traded funds (ETFs) had seen redemptions and outflows of just more than 250,000 ounces of gold after the yellow metal tumbled about 3 percent on Jan. 5."

"Reade noted that he did not view those recent reductions as a change in behavior, and he expected metal in trust in the gold and silver ETFs to grow again soon."

"Silver followed gold's firmer tone, gaining to $12.770/12.840 an ounce from $12.550/12.620. Platinum rose to $1,143/1,149 an ounce from $1,135/1,141. Palladium was unchanged at $326/329."

Tuesday, January 16, 2007


Gold In "Economic Tug-Of_war"

The Associated Press reports on currencies. "The dollar fell against the euro and pound Tuesday after a disappointing U.S manufacturing report and economic data out of Europe weighed against the U.S. currency. The 13-nation euro bought $1.2923 in afternoon New York trading, up from $1.2915 late Friday in New York. U.S. financial markets were closed for Martin Luther King Jr. Day. The British pound also rose to $1.9626 from $1.9581."

From Bloomberg. "The yen dropped to a 13-month low against the dollar yesterday and may decline further before a government report that is forecast to show Japanese consumer confidence fell last month."

"Investors sold the yen yesterday after Kyodo News reported that the Bank of Japan is 'unlikely' to lift interest rates this week. The Japanese central bank has concluded it is necessary to continue monitoring consumer prices and consumption before raising rates, Kyodo reported, citing unnamed sources familiar with the matter."

"'The market isn't convinced' about a BOJ rate increase this week, said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. 'You are going to see the yen stay very soft this quarter.'"

"The yen traded at 120.64 per dollar at 6:41 a.m. in Tokyo. It touched 120.77 yesterday, the weakest since 121.06 yen on Dec. 12, 2005. The Japanese currency also traded at 155.85 per euro. It touched a record low of 158.06 per euro Jan. 3."

The Financial Times. "The Chinese ministry responsible for promoting exports has backed a further appreciation of the renminbi, removing one of the last remaining institutional lobbies in Beijing against a stronger currency."

"A think-tank attached to the commerce ministry said that an 'appropriate or modest' appreciation of the renminbi would benefit China’s economy and trade 'in the long run.'"

"In the near term, a 3 per cent appreciation of the renminbi every year will not have an obvious or apparent influence on the overall increase of China’s trade,' said the report, which was posted on the ministry’s website."

"New Zealand's dollar dropped after figures showed inflation was less than expected in the fourth quarter, reducing the need for the central bank to raise interest rates as soon as next week. Consumer prices fell 0.2 percent in the three months ended Dec. 31 for an annual increase of 2.6 percent, Statistics New Zealand said in Wellington today."

"The New Zealand dollar bought 69.08 U.S. cents at 10:52 a.m. in Wellington from 69.56 immediately before the report and from 69.63 cents in late Asian trading yesterday. The currency has gained 12 percent in the past six months on optimism Reserve Bank Governor Alan Bollard will raise the official cash rate from a record high 7.25 percent as soon as this month."

"'Data to hand suggests some near-term relief for Reserve Bank inflation concerns,' Daniel Wills, treasury economist at ASB Bank Ltd. in Auckland, said before the report was released."

The "Gold was caught in an economic tug-of-war Tuesday, with traders weighing a dipping oil price against higher inflation figures out of the U.K., leading to a choppy session. February-dated contracts lost a dollar to close at $625.90 an ounce on the Comex division of the New York Mercantile Exchange."

"Saudi oil chief Ali Naimi indicated production cuts by OPEC might not be necessary, thus leading to a softer price for crude. Oil dropped $1.78 to $51.21 a barrel. That news provided support for the bear case."

"At the same time, even though reduced energy costs may mean lower inflation going forward, prices were rising their fastest in more than a decade in Britain, with the consumer price index hitting 3% growth in December. Because the advance was well above the Bank of England's target rate of 2%, it was making a bullish case for gold."

"'The recent 3% level recorded in Britain means that it takes only about a decade to melt away a third of one's wealth,' writes Jon Nadler, an analyst at Montreal-based bullion dealer Kitco."

"Turning to the official sector, the European Central Bank said it sold 28 million euros of gold and receivables, or about 1.9 tons, last week."

"In the precious metals patch, CIBC World Markets dinged silver producer Coeur d'Alene Mines down to a rating of sector-perform from sector outperform. Silver closed at $12.68 an ounce, down 26 cents, while Coeur was losing 2.7% recently."

"Meanwhile, the U.S. Mint says that full-year sales of its 24 karat (99.99% pure) one-ounce buffalo coins outstripped those of the more established 22 karat (91.7% pure) eagles for 2006. Dealers snapped up 323,000 buffalos, which only went on sale at the end of June, compared to 261,000 ounces of gold eagles. But the tide may be turning for the eagle. By mid-January the Mint says it sold 9,000 buffalos and 24,000 ounces of eagles."

Monday, January 15, 2007


"The World Is Awash With US Dollars"

The Daily FX reports on currency markets. "With the US markets closed for Martin Luther King Jr. Day, it not surprising to see currency trading grind to a halt after the London close. Even though there was no US economic data released today, it does not undermine the fact that this will be a busy data week."

"The main focus here in the US as well as globally is inflation. Both consumer and producer prices are due for release this week in addition to the Treasury International Capital flow report, the Empire State manufacturing index, the Philadelphia Fed index and the Beige Book report. On balance, the reports are expected to be positive for the dollar, but after such an extensive rally last week, the question is whether there are actually any actually buyers left in the market."

"Whether your pockets are oozing with money or not, if you are an investor or homeowner you probably have been feasting on cash during the last few years. The world has been flush with it."

"Massive flows of cash have been fueling a world economic boom, pushing stock markets globally to new heights, boosting the prices of everything from real estate to commodities, prompting record mergers and acquisitions and sending private equity firms on a buyout rampage."

"But some refer to current conditions as 'excessive liquidity' — or an unusual abundance of easy cash. And investors are watching for signs that the spigot might be turned down, perhaps cooling off stocks and other assets in the process."

"Liquidity is like fuel or lubrication for the economy, says Wells Capital Management strategist James Paulsen. 'Without proper lubrication, the economic engine grinds to a halt.' So when central banks, such as the Bank of England, raise rates as the institution did last week, and others in Europe and Asia consider similar moves to fight inflation, investors get jittery."

"'The world is awash with U.S. dollars,' said Paulsen. 'Ultimately this prolonged period of excess liquidity will result in higher inflation [destroying the purchasing power of cash] and a lower value of the U.S. dollar [damaging the international purchasing power of cash].'"

The St Petersburg Times. "Russians are increasingly losing confidence in the U.S. dollar, experts from the Public Opinion Foundation said last week as it published its report, 'The Dollar in Russia.' 'In recent years the dollar in Russia has lost significantly more in prestige than in real exchange value,' POF’s Grigory Kertman said."

"In 2002, a poll showed that 35 percent of Russians trusted the dollar more than the ruble and the euro while 37 percent said they preferred the ruble. About 11 percent of respondents preferred euros. 'Since then the situation has changed dramatically. Today almost two-thirds of respondents (63 percent) say they trust the ruble most of all, while only 5 percent trust the dollar and 15 percent the euro,' Kertman said."

Friday, January 12, 2007


Gold Holds Ground With Strong US$, Lower Oil

Bloomberg reports on the currency markets. "The dollar dropped from a seven-week high against the euro as traders said central banks were buying the 13-nation European currency. The U.S. currency initially gained after the government said U.S. retail sales rose in December by the most since July, cooling speculation the Federal Reserve will cut interest rates this quarter. Central banks then bought euros as it fell to its 100-day average versus the dollar, said some traders and analysts."

"'It's a technical move, liquidity is extremely bad,' said Rafael Martorell, chief dealer of spot foreign exchange at BNP Paribas in New York. 'When you have two or three names buying after big numbers everybody gets nervous. The dollar is to remain strong.'"

"The U.S. currency fell to $1.2916 per euro at 4:06 p.m. in New York from $1.2893 yesterday, after earlier touching $1.2868, the strongest since Nov. 22. The dollar slid to 120.35 yen from 120.49 yen, after yesterday exceeding 120 yen for the first time since December 2005. The euro's 100-day moving average is $1.2876 today, according to data compiled by Bloomberg."

"'There is no follow-through to buy the dollar,' said Steven Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. 'The euro has support at the 100-day moving average here,' adding that there is 'sovereign' buying of euros at about that level."

"The dollar still gained 1.4 percent this week versus the yen and 0.7 percent against the euro. 'The dollar has had an extensive gain this week,' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. 'The market is getting a bit exhausted.'"

The "Gold prices in New York rose Friday, with geopolitical tensions and short-covering providing the catalysts. February-dated bullion contracts rallied $13 to close at $626.90 an ounce on the Comex."

"'People didn't want to be short over the forthcoming long weekend,' says Jeff Christian, managing director at CPM Group. The Nymex floor session will be closed Monday in observance of the Martin Luther King holiday."

"Investors selling gold contracts or any other security short hope to buy them back at lower prices. When they close out their positions, a rally can ensue. 'Precious metals have been off, and those surveying the political situation don't see gold going much lower any time soon,' adds Christian."

"Chart watchers say the current action remains part of a broader sideways move. 'Gold is still in a long-term uptrend, but it's consolidating,' says Adolfo Rueda, a technical analyst Natexis Bleichroeder in New York. He sees support at $550 and resistance at $650."

From MarketWatch. "Gold futures climbed Friday to close at their loftiest level in seven sessions, ending the week more than 3% higher. 'What we are witnessing, with the strong advance today in gold, is similar to what we have seen each time the U.S. market is closing: two world views on gold,' said Ned Schmidt, editor of the Value View Gold Report. 'U.S. traders are in 'la-la land' and are bearish on gold and bullish on paper,' he said."

"By contrast, the 'rest of the world, which is bigger than U.S., is bullish on gold and bearish on the U.S. dollar,' he said, adding that 'the entire world knows that the dollar is going down in value, oil is long-term short [in] supply and that gold should rise in value.'"

"'Gold's resilience to hold above $600 in the face of a rising U.S. dollar and plummeting oil and copper prices is a testament to its internal strength and suggests much higher prices in the offing,' said Peter Grandich, editor of the Grandich Letter."

"Against this backdrop, March silver futures closed up 42 cents at $12.88 an ounce on Nymex and ended the week with a gain of 5.3%. April platinum added $7.30 to close at $1,152.10 an ounce, trading more than $40 above last Friday's close, while March palladium closed up $2.10 at $334.95 an ounce, a few cents lower for the week."

Thursday, January 11, 2007


Lowest Oil Price Since May 2005

The Associated Press reports on the currency markets. "The dollar rose against the euro and yen after the government said Thursday that jobless claims dropped last week to the lowest level in nearly six months. However, the dollar slipped against the British pound, which was boosted by an unexpected interest rate hike from the Bank of England."

"In afternoon New York trading, the euro bought $1.2889, down from $1.2936 late Wednesday in New York. The dollar also rose to 120.44 yen from 119.60 yen."

"The European Central Bank also met Thursday, but kept its key interest rate unchanged at 3.5 percent. However, ECB President Jean-Claude Trichet said the bank would engage in "very close monitoring" of inflation risks, a hint that a quarter-point increase could come in March."

"The markets are looking ahead to the Commerce Departments report on December retail sales on Friday."

The Financial Times. "The renminbi's long march against the US dollar reached a symbolic milestone on Thursday, breaking through the Rmb7.8 barrier as it continued to bear down on the Hong Kong dollar. It was the first time the renminbi had overtaken the Hong Kong dollar for 13 years."

"The Hong Kong dollar is pegged to its US counterpart at HK$7.80, but trades in a wider band set at HK$7.75-$HK7.85."

"But China's currency, which was pegged at Rmb8.3 to the dollar for 12 years until its revaluation in June 2005, has been on an inexorable rise as the Chinese government seeks to defuse political tensions arising from the country's huge trade surplus with the US."

"Oil plunged below $52 a barrel Thursday to its lowest price since May 2005, extending a sharp decline that has been led by dampened heating oil demand, but which could save consumers money on a more widely used fuel: gasoline."

"Crude oil has tumbled by 15 percent so far this year in a huge sell-off that was kicked off by investment funds last year, and then stoked by a historically warm U.S. winter that has left supplies of heating fuel barely touched."

"'The impact of the weather should not be overstated. Heating demand is a comparatively small part of global consumption,' said Antoine Halff, an energy analyst at Fimat. 'There's potential for a rebound.'"

From MarketWatch. "Gold futures closed modestly higher Thursday, but were still around 4% lower for the year so far as traders eyed mixed trading in the dollar and a steep oil-market decline in an effort to gauge the precious metal's next move. Gold for February delivery closed up 50 cents at $613.90 an ounce on the New York Mercantile Exchange."

"'Gold remains vulnerable on the downside as one inflation threat after another keeps being knocked down by the commodities complex,' said Jon Nadler, analyst at 'Indeed, it would take several sessions of prices higher than $615-$621 to restore some confidence on the bullion trading floors.'"

"One factor providing background support to gold is the continued turmoil in the Middle East, said Nadler. 'The U.S. appears all but set to continue spending vast sums of money (and lives) in its efforts to bring order (whatever that may be) to Iraq, force compliance by Iran, and defeat the Taliban in Afghanistan,' he said. 'Half a trillion dollars later, one is not surprised by the many exclamation marks contained in the various newsletters of America's deficit watchers.'"

"Rounding out the metals action Thursday, March silver futures closed up 1.5 cents at $12.46 an ounce, April platinum closed down $12 at $1,144.80 and March palladium rose $1.95 to end at $332.85."

Wednesday, January 10, 2007


US Housing To Dim Global Economy

The Associated Press reports on the US dollar and world economy. "An expected dampening of the world economy in 2007 after three years of healthy growth has the weakening U.S. housing market primarily to blame, a U.N. flagship economic report released Wednesday said. The World Economic Situation and Prospects 2007 predicts a reduction of world economic growth to 3.2 percent this year, from the all-time high of 4 percent in 2005 and an estimated 3.8 percent in 2006."

"The waning U.S. housing market is a 'major factor' in the slackening economic prospects, the report said. The end of the housing boom is expected to depress U.S. consumer demand, slowing the growth of the country's economy to 2.2 percent this year, it said. 'The economic recovery in Japan and Europe is not strong enough to replace the U.S. as the engine for growth of the world economy,' the report said."

"A continued widening of the U.S. deficit could erode 'confidence in the dollar as the world's main reserve currency,' the report warned."

"The U.N. report also warned that if the U.S. housing market falls at a dramatic rate, the global economy could become unhinged, 'enhancing the risk of a major upheaval in financial markets.'"

From Bloomberg. "New Zealand's dollar may fall as investors bet an unexpected narrowing of the U.S. trade deficit might decrease demand for the nation's exports. The U.S. trade gap, the amount by which imports exceed exports, shrunk in November to its lowest since July 2005. It is New Zealand's second-largest export market after Australia."

"'A firmer U.S. dollar weighs on the kiwi,' Marc Chandler, chief currency strategist at Brown Brothers Harriman and Co. in New York, said. 'The U.S. dollar has experienced a very strong rally, helped by a smaller than expected trade deficit.'"

"The U.S. dollar rose to its highest in three months against the yen and its strongest in six months against the euro as investors bought the currency as the trade deficit narrowed to $58.2 billion in November from $58.8 billion in October. A smaller trade gap indicates fewer dollars must be converted to foreign currencies to pay for imports."

"Still, Chandler said that plans to increase the number of U.S. troops in Iraq could weigh on the U.S. dollar and provide support to New Zealand's currency. 'By committing more troops to Iraq it will increase spending and the U.S. budget deficit, and that will be dollar negative,' Chandler said. 'The U.S. dollar's rally is over for now and market participants are likely to turn their attention back to high-yielding currencies like the kiwi.'"

From MarketWatch. "Gold futures closed lower Wednesday, reflecting weakness in crude prices and trading inversely with strength in the U.S. dollar as traders gauged investment demand for the precious metal. 'Gold's ability to hold above $600 over the past couple of days has improved the metals technical outlook, with the metal now in the process of establishing a base at $605,' said James Moore, an analyst at"

"Gold for February delivery closed down $1.60 at $613.40 an ounce on the New York Mercantile Exchange -- a partial recovery from the day's low of $607."

"The metal came under renewed pressure Wednesday on the heels of a fourth-weekly rise in U.S. distillate and gasoline inventories. Oil has lost more than % of its value since the beginning of the year, pressuring the broader commodity markets. Despite the weakness in gold Wednesday, 'gold looks safer today than it has looked for the past several days,' Dennis Gartman said in his Gartman Letter."

"The fact that spot prices fell to $605 on Tuesday but then held firm and rallied back to the $616 level made it look 'as if the selling was done and had perhaps been overdone.' 'If spot gold can hold at or near the $610-$612 level for several more hours...even perhaps for a day or two...we'll be far more certain that the lows have been seen; that the liquidation has run its course and that the worst is behind us,' he said."

"But Jon Nadler, an analyst at bullion dealers said the technical picture for the yellow metal has not improved at this time. 'Reports suggest good buying from physical consumers, [but] the trading pattern remains nervous and disappointing,' he said."

"Other metals prices were mixed. March silver futures fell by 15 cents to close at $12.445 an ounce, and March palladium fell by 65 cents to finish at $330.90 an ounce, while April platinum added $23.10 to close at $1,156.80 an ounce."

Tuesday, January 09, 2007


Gold Up On "Bargain Hunting"

The Associated reports on the currency markets. "The dollar rose against the euro and yen Tuesday, as speculation about an interest rate cut in the U.S. dissipated. The euro dropped below $1.30 for the first time since late Nov. 24. In afternoon New York trading, the euro bought $1.2999, down from $1.3019 late Monday in New York."

"The decline came after Federal Reserve Bank Vice Chairman Donald Kohn said Monday that the U.S. economy was poised for moderate growth in 2007 along with lower inflation. But Kohn said there was no guarantee that core inflation would continue to ease, a comment analysts took to mean that the Fed was in no hurry to trim interest rates."

"In Europe, the European Central Bank is unlikely to lift its key rate of 3.5 percent when it meets Thursday. Most analysts predict such a move in February or March."

"The dollar bought 119.36 Japanese yen, up from 118.74 yen. The British pound rose to $1.9398 from $1.9378 on Monday, buoyed a reported gain in sales by retailers. The dollar bought 1.2419 Swiss francs, up from 1.2365 late Monday, and 1.1759 Canadian dollars, up from 1.1756."

"The markets are looking ahead to the Commerce Department's report on international trade on Wednesday and retail sales on Friday."

From MarketWatch. "Gold futures climbed almost $6 an ounce Tuesday, bouncing off earlier weakness suffered from a firmer dollar and a decline in crude-oil prices as traders pulled the precious metal's prices higher for a second session to take advantage of last week's 5% drop. Gold for February delivery closed up $5.60 at $615 an ounce, recovering from a low of $607.20."

"'The gold market took a hammering last week, primarily on U.S. fund selling, which appeared after the Asian and European hours of business on Friday,' said Julian Phillips, an analyst at 'But in Asian and European hours the gold price started to bob back like a cork released under water,' he said."

"'But a winter without cold and a dollar facing diversification and a massive persistent trade deficit point to a dollar trending lower, and OPEC holding prices up,' he said, referring to the group of some of the world's key oil producers, the Organization of the Petroleum Exporting Countries."

"'There is now little doubt that gold has hit a pretty bad pothole early out of the gate in 2007,' said Jon Nadler, an analyst at bullion dealers 'We continue to lay the blame squarely at parts of the previously overheated commodity complex, in which piling on long positions with reckless abandon was the name of the game in 2006.'"

"Investors have been waiting for 'what they perceive to be bargain-basement levels in value' for gold before getting into the market to make fresh purchases, he said, noting that some thought 'such levels will not be achieved until gold dips to the $570-$580 area, in a repeat of last fall's slide.'"

"James Moore, analyst at, said 'bargain hunters and physical players will continue to underpin gold in the coming sessions, although given the current climate there remains the risk of further speculative-led liquidation.' Gold is finding some support from safe-haven demand triggered by U.S. air strikes in Somalia, said Moore."

"Other metals closed higher along with gold, with the exception of March palladium, which saw its contract lose 55 cents to close at $331.55 an ounce. March silver futures closed up 23.5 cents at $12.595 an ounce, and April platinum rose $6.80 to end at $1,133.70 an ounce."

Monday, January 08, 2007


Strong Dollar A "Nice Slogan"

Reuters reports on currency trading. "The dollar fell from six-week highs against the euro on Monday amid speculation last week's rally on the back of robust U.S. employment data was overdone. The dollar also fell against the yen as dealers awaited a possible Bank of Japan rate rise next week. The U.S. currency also came under pressure earlier after news of an apparent gas leak that permeated large parts of Manhattan, prompting the evacuation of a number of buildings."

"The euro was last up 0.1 percent at $1.3021, up marginally from Friday's closing levels and off a fresh six-week low of $1.2973 earlier in the day, according to Reuters data."

"Against the yen, the dollar was down slightly at 118.68. The Swiss franc pared losses, leaving the dollar down 0.1 percent at 1.2361 francs, down from a session high of 1.2412, while sterling was up 0.4 percent at $1.9379. Against the Canadian dollar the U.S. dollar was up nearly 0.3 percent at C$1.1759."

From Bloomberg. "Gold in New York rose as some investors bet last week's 4.9 percent tumble in prices, the most in three months, was overdone. The seven-day relative strength index for gold futures on Jan. 5 reached 29, a signal that prices are poised to climb."

"'Gold's going to rebound,' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. 'There's going to be a correction in the metals because of the sell-off last week. We traded down to $603, so we need to bounce back.'"

"Gold futures for February delivery rose $2.50, or 0.4 percent, to $609.40 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $611.10. The metal plunged $31.30 last week, the biggest percentage drop since September."

"'The price of gold will continue to go up and probably very substantially,' Marc Faber said. 'In the long run, it's very clear that central banks are basically increasing the supply of money and the supply of gold is obviously very limited.'"

"Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a 'severe correction.'"

"Gold's gains may be limited after crude-oil prices fell, erasing earlier gains. 'Once crude gave way, support for gold and silver vanished,' said Tom Hartmann, a commodity broker. Gold gained 11 percent in the past 12 months, while oil has dropped 12 percent."

"Silver futures for March delivery rose 13 cents, or 1.1 percent, to $12.36 an ounce. The metal has dropped 4.5 percent this year after surging 46 percent in 2006."

From MarketWatch. "'While gold is hovering very much near critical support, there are no guarantees that the almost 3% fall recorded in the last session has been halted,' said Jon Nadler, analyst at bullion dealers 'Gold cannot be immune to a commodity bubble cave-in, at least in the initial phases thereof,' he said, adding that 'there is collateral damage to be incurred by gold simply by virtue of its proximity to other commodity metals.'"

"Crude futures lost nearly 8% last week, and the February contract fell under $56 Monday as warmer-than-usual weather continued in the Northeast for now and some market estimates called for the Energy Department to report on Wednesday a rise in petroleum supplies."

"'Eventually, we expect gold to de-couple from this 'guilt by association' syndrome and march ahead on its own strengths, most notably its monetary attributes,' said Nadler. 'Invariably, investors always return to the ever-dependable safe haven (be it from other assets and currencies, be it from geopolitics) characteristics of gold and positive trends are reestablished,' he said."

"Wachovia Corp. has said that most metals prices were likely to fall with economic growth in 2007. Indeed, 'growth is slowing all over the world,' said Wachovia Economist Jason Schenker, adding that he expects growth to slow further so prices for most metals 'face downside-price risks.'"

"Even so, gold prices are 'likely to rise moderately as foreign central banks increase their gold reserves and the [dollar] depreciates gradually against most major currencies,' he said."

The Business Times. "A misunderstanding by financial markets of the so-called 'strong dollar' mantra preached by US officials is helping keep the US currency overpriced and contributing to bloated external deficits, Harvard University economist Martin Feldstein said. Mr Feldstein outlined several factors that are holding the dollar at an overly high, and unsustainable, level."

"Repeated statements by US officials in support of a strong dollar 'are a nice slogan, but that's all it is', said Mr Feldstein, who is also head of the private National Bureau of Economic Research."

"Mr Feldstein said a correct interpretation is that 'we would like to have a strong US dollar at home (helped by low inflation rates) and a competitive dollar in the world.'"

"Financial markets are 'misled' if they think there would be government intervention or a shift in the Federal Reserve's monetary policy to protect the dollar's value, he said. 'The Treasury should not advocate a decline in the dollar, but it should not mislead the markets to think there is some hidden support there for the currency,' he said."

"Mr Feldstein said the sense that foreign investment will keep flowing to the United States because it is still the healthiest economy is another 'error of understanding.'"

"Most of the money now coming into the country is for debt purchases by foreign governments, not from equity investors attracted by fundamental strength in the US economy, as was more the case in the 1990s, he said."

"Speaking on the same panel, Michael Mussa, senior fellow at a leading think-tank, said the dollar will need to depreciate substantially, in real effective terms, probably by at least another 20 per cent over the next decade to help cut the US current account deficit in half."

"The dollar has fallen in the past five years by about 15 per cent on a trade-weighted basis against an index of major trading partners. Nonetheless, Mr Feldstein and others say it is still overvalued. The current account is the net flow of transactions, including goods, services and interest payments, between countries."

"The US deficit most recently was running at about US$900 billion a year, almost 7 per cent of US gross domestic product or roughly double the peak deficit of a share of GDP reached in the 1980s. Many economists regard that level as unsustainable, but the timing, trajectory and impact of any adjustment process remains subject to vigorous debate."

"Slashing the deficit with a weaker currency 'will not be completely smooth' but the risk of a disruptive dollar crash is not particularly great, Mr Mussa said."

Friday, January 05, 2007


Metals Dive On US Jobs Report

The Associated Press has th ecurrency numbers. "The U.S. dollar traded mixed against other major currencies in European trading Friday. The euro traded at $1.2995, down from $1.3086 late Thursday in New York. Later, in midday trading in New York, the euro fetched $1.3007."

"Other dollar rates in Europe, compared with late Thursday, included 118.79 Japanese yen, down from 119.08; 1.2368 Swiss francs, up from 1.2329; and 1.1755 Canadian dollars, down from 1.1775. The British pound traded at $1.9291, down from $1.9443."

"In midday New York trading, the dollar bought 118.77 yen and 1.2364 Swiss francs, while the pound was worth $1.9310."

From Bloomberg. "Gold in New York fell the most in three months after a report showed U.S. job growth was stronger than economists expected, boosting the dollar and eroding the appeal of the precious metal as an alternative investment."

"Gold declined after the government said U.S. companies added 167,000 jobs in December, more than the 100,000 expected in a Bloomberg News survey. The dollar jumped to a six-week high against the euro and Treasury 10-year notes fell the most in a month."

"'You're getting liquidation on the back of the strengthening dollar,' said Michael Guido, director of hedge- fund marketing at Societe Generale SA in New York. 'Obviously this number is a big surprise.'"

"A growing economy may force the Federal Reserve to raise rates from 5.25 percent, helping to support the dollar, Guido said. Interest rates have remained unchanged since June after two consecutive years of increases, and some analysts had speculated the Fed would make cuts this year if the economy slowed. 'This job report is implying a much tighter Fed policy,' Guido said."

"A decline in energy prices and other commodities also reduced the appeal of the precious metal as a hedge against inflation, said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. Crude oil is headed for its biggest weekly decline since April 2005 in New York as mild U.S. weather curbed demand from the world's largest energy consumer and fuel stockpiles jumped."

"'Commodities, including oil and metals, are moving lower and that doesn't help gold,' McNeill said."

From MarketWatch. "Gold futures tumbled 3% Friday, prompting the benchmark February contract to tally a loss of more than $31 for the week and close at its lowest level in more than two months as the dollar picked up ground following a surprise increase in U.S. job creation in December."

"Gold for February delivery closed $31.10, or 4.9%, below last week's closing level of $638 an ounce. The contract finished at $606.90 an ounce Friday, down $19.30, or 3.1%, for the New York Mercantile Exchange session after touching $603, the contract's lowest level since late October."

"Ned Schmidt, editor of the Value View Gold Report, pointed out that the higher employment means that the FOMC will not likely lower interest rates any time soon, and 'in the Street's mind, that means the dollar will remains strong.'"

"But 'that thinking ignores the real fundamentals: trade deficit, dollar over-owned, central banks diversifying away from the dollar,' he said. 'That all means this sell off is way over done,' he said, adding: 'do not panic when the Street is panicking.'"

"Other metals were broadly lower. March silver futures touched a more than two-month low of $12.12 an ounce before closing down 60.5 cents, or 4.7%, $12.23. It lost 5.5% for the short trading week. Nymex was closed on Monday and Tuesday. January platinum lost $23.50 to end at $1,109 an ounce, losing 2.7% for the week, and March palladium shed $10.45 to close at $335.10 an ounce, down 1% from last Friday."

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