Friday, March 23, 2007


"Nervous Traders" Take Gold Lower

Reuters reports on currencies. "The dollar firmed against the euro on Friday as a surprise jump in U.S. existing-home sales tempered the case for lower benchmark interest rates by the middle of the year. It also recovered losses against the yen sustained overnight when data showed the first annual rise in Japanese land prices in 16 years."

"The data also helped the dollar wipe out losses suffered earlier this week when the Federal Reserve adopted a more neutral monetary policy stance at its latest meeting, suggesting to some investors that a rate cut was imminent."

"By late afternoon, the euro was trading at $1.3288, down 0.3 percent on the day. It hit a two-year high of $1.3411 on Thursday following the Fed's policy shift."

"The dollar last changed hands at 118.07 yen, unchanged from late Thursday, and ended the week up 1.5 percent against the Japanese currency. The yen got a boost overnight when Japanese Finance Minister Koji Omi told a news conference that recent rises in Japan's land prices reflected a strengthening economy."

"Against the Swiss franc, a safe-haven currency, the dollar reversed losses that were initially sparked by reports that 15 British Royal Navy sailors and marines had been seized by Iran. The dollar was last up 0.4 percent at 1.2183 Swiss francs."

"In the long run, traders said the dollar's fortunes looked gloomier since higher euro zone interest rates are expected to keep cutting into the dollar's yield advantage. 'Fundamentally, I see very little reason to buy the dollar at the moment,' said Greg Salvaggio, vice president of trading at Tempus Consulting."

"Friday's relief rally stems from the 'enormous amount of fear the subprime situation built into the system,' Schlossberg said. 'Does that mean the problems have gone away? Absolutely not, and we will see further evidence of a U.S. slowdown,' he added."

"The Canadian dollar ended lower against the U.S. currency on Friday, as the greenback rallied late in the session, offsetting a Canada-positive rise in the price of oil."

"The currency finished at C$1.1608 to the U.S. dollar, or 86.15 U.S. cents. down from C$1.1582 to the U.S. dollar, or 86.34 U.S. cents, at Thursday's close."

"'The declines today are really consistent with the fact that the U.S. dollar is gaining strength almost across the board,' said Carolyn Kwan, markets economist at Scotia Capital."

"For the week, however, the Canadian currency rose a sharp 1.2 percent, due to mid-week gains on the back of stronger than expected Canadian inflation data and U.S. Federal Reserve statements that sparked talk about possible U.S. rate cuts."

From MarketWatch. "Gold futures closed with a loss Friday as traders locked in a six-session gain of more than 3%, but prices still finished the week over $3 higher. 'Nervous and technical traders moved in to take gold lower Friday using U.S. housing data as the excuse to lock in gains and in the process hit a technical support level to sell gold off further,' said Peter Spina, chief investment strategist at 'Gold is grinding its way higher, while still consolidating from the prior correction,' he said."

"Gold for April delivery closed down $6.90 at $657.30 an ounce on the New York Mercantile Exchange after a decline to $655.50. On Thursday, the contract closed at a three-week high of $664.20. It had climbed $21.70, or 3.4%, over the course of six trading sessions."

"'Gold bullion prices quickly retreated to the $660 level after gaining nicely over several sessions during the week, said Jon Nadler, a metals analyst at 'This week's ascent, while looking promising, was not only stalling at higher levels, but was subject to some mild pull-backs soon.'"

"June palladium climbed $1.75 to close at $359.50 an ounce, up 2% for the week. Sister metal platinum saw its April contract give back $7.60 to close at $1,233.40, though it was up 1% for the week. Silver, copper, palladium and platinum all ended the week higher."

"Silver dipped to $13.17/13.22 an ounce from its Thursday close of $13.41/13.46."

"Sentiment had turned positive after gold broke $650 an ounce last week and stayed above that level, triggering buying by people who had sold the metal to cover losses after a sell-off in global equities in early March."

"'Risk markets generally seem to have recovered a long way after the recent concerns they had about the U.S. housing market,' said John Reade, head of metals strategy at UBS Investment Bank. 'And if risk markets continue to do well, then the gold price will likely go higher and we are forecasting $700 in one month and $750 in three months.'"

"'But I am concerned that if we do get another wobble coming through in equity markets etc., they could put some pressure on gold,' he added."

IMO, it is becoming more and more clear that this Gold (in US$) market will move down with a strong US economy and up with a poor economy (Fed watching).

If these guys thought the housing numbers were strong today, then they aren't very bright. Then again, they could be trading on perceptions.

I dislike Fed watching, but until creditors get tired of lending the US money, that's were we seem to be.
Gold inverse of the dollar, eh?

Gold is still staying well into the 600's, though, so it's not like anyone is convinced the worst is over.
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