Friday, June 29, 2007


Gold Will Remain Vulnerable

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, June 28, 2007


US$ Stronger On FOMC Meeting

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wednesday, June 27, 2007


Gold In "Summer Doldrums"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, June 26, 2007


Gold Falls On Hawkish Rate Talk

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Monday, June 25, 2007


US$ May Need Adjustment Process

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Friday, June 22, 2007


A Dollar And Bond Yield Vigil

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, June 21, 2007


Gold "Hanging In Limbo"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wednesday, June 20, 2007


"A New Correlation" For Gold, Yields

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, June 19, 2007


Gold, Currencies Tracking Interest Rates

Reuters reports on currencies. "The dollar slipped against the major currencies on Tuesday as U.S. bond yields continued to fall from five-year highs hit last week, eroding their appeal to foreign investors. At the same time, the euro retreated from a record peak against the yen and treaded water against the dollar after a surprise decline in German business confidence in June."

"In recent weeks, the dollar has closely tracked Treasury yields, hitching a ride higher as strong U.S. economic data boosted the benchmark 10-year note's yield to 5.33 percent and sent the euro to nearly a three-month low against the greenback."

"But with little major U.S. economic data on tap this week to guide traders, a bond market retracement has curbed the dollar's gains and weakened the case for the Federal Reserve to boost interest rates in 2007. 'We have a light calendar this week and there's no real catalyst providing a fresh reason to buy dollars,' said Bank of New York strategist Michael Woolfolk. That leaves 'significant gyrations in bond prices' to lead some price action, he said."

"But since closing at 5.29 percent a week ago, 10-year yields have slipped nearly 20 basis points over the past five sessions, the bond market's best five-day stretch in more than three months."

From MarketWatch. "Gold futures climbed Tuesday to close at their highest level in almost two weeks, scoring a gain of $12 an ounce in four sessions, as the dollar weakened in the wake of a report showing that the U.S. housing market remained soft, though starts of new homes fell less than expected and building permits climbed."

"'The weakness in housing continues to concern a number of analysts and has worked itself into the Fed's jawboning vocabulary quite firmly since this spring,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'Few are ignoring it anymore, save perhaps for the starry-eyed camp of ever-optimistic Realtors.'"

"The figures were slightly stronger than expected, according to a survey of economists by MarketWatch, but underscored the weakness in housing that's plagued the world's largest economy."

"With that in the backdrop, gold for August delivery closed $4.80 higher at $664.70 an ounce on the New York Mercantile Exchange, recovering from an earlier low of $657.30. It's gained a total of 1.8% in a winning streak that's spanned four, consecutive trading sessions, and the contract marked its highest closing level since June 7. On Monday, the contract added $1.20 an ounce."

"Also on Tuesday, crude-oil futures recovered from earlier declines to touch a fresh nine-month high as traders focused on developments related to Nigerian production."

"Silver prices followed gold futures higher. July silver tacked on 9 cents to close at $13.325 an ounce, recouping its losses after a dip to $13.14. September palladium closed at $376.50 an ounce, up $1.50 for the session, but July platinum slipped $1 to close at $1,298.50 an ounce."

"'Platinum and palladium were down very marginally but continuing unrest in South Africa may lead to higher prices,' said Mark O'Byrne, a director at Gold & Silver Investments Ltd. 'Some 75% to 80% of global platinum supplies comes from South Africa,' he said in a research note. And 'Russia supplies some 10% and thus South Africa and Russia account for nearly 90% of global platinum supply.'"

"'Given the geopolitical situation in Russia and industrial unrest in South Africa, it is likely that platinum will re-challenge its high of $1,390 in November 2006 in the coming months,' O'Byrne said."

"South Africa's Anglo Platinum Ltd. announced Monday that it plans to suspend production at its Rustenburg mine for about seven days following the deaths of five workers in the past two weeks."

Monday, June 18, 2007


Dollar/Yen Remains A One-Way Ticket

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Friday, June 15, 2007


The Attack On $700

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, June 14, 2007


Inflation Picture Murky

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

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

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

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

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

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

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

Wednesday, June 13, 2007


Pressure Remains To The Downside For Gold

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, June 12, 2007


An Onslaught Of Bearishness For Gold

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Monday, June 11, 2007


US$ Gains Again

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Friday, June 08, 2007


An Ugly Day For Precious Metals

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

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

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

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

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

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

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

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

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

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

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

Thursday, June 07, 2007


A Panic Regurgitation Of Paper

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wednesday, June 06, 2007


Gold Is Drifting

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, June 05, 2007


US Dollar-Negative Sentiment Coming Back

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Monday, June 04, 2007


US$ Stumbles On Economic Data

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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