Money and Metals

A Pause

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

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

A Story Of General Dollar Weakness

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold Shows Stamina

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Subprime Day For Gold

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

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

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

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

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

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

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

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

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

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

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

Sterling Pushes To 26 Year High

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

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

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

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

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

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

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

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

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

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

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

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

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

It's Been One-Way Traffic For US$

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Weak US$ Works In Golds' Favor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

US$ Hits "Fresh Lows" Versus Euro

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Little Solace For Dollar Bulls

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

US$ Hits Record Low Versus Euro

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Precious Metals Start Week On Positive Note

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

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

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

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

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

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

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

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

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

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

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

Gold Is Tracking The Dollar

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

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

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

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

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

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

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

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

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

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

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

US$ Up Despite UK Rate Hike

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

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

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

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

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

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

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

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

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

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

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

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

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

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

US$ Range-Bound Ahead Of Data, Holidays

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The US$ Bear Re-emerges

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold Will Remain Vulnerable

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

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

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

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

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

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

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

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

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

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

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

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

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

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

US$ Stronger On FOMC Meeting

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold In "Summer Doldrums"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold Falls On Hawkish Rate Talk

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

US$ May Need Adjustment Process

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Dollar And Bond Yield Vigil

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold "Hanging In Limbo"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"A New Correlation" For Gold, Yields

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold, Currencies Tracking Interest Rates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dollar/Yen Remains A One-Way Ticket

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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