Gold futures extended their recent life-of-contract highs late in Monday's session as more fund buying emerged when crude oil recovered from its early weakness and technical buying occurred, traders and analysts said.
Initially, gold had been pressured slightly by morning losses in crude, combined with weak equities and a modest uptick in the U.S. dollar, they said.
December gold rose $2.30 to $810.80 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the December contract at the Chicago Board of Trade was up $1.10 to $810.40.
Comex December silver rose 18.6 cents to $14.785. Shortly after it closed, CBOT December silver was up 15.2 cents to $14.748.
Comex December gold hit a contract high of $814.20 early in the afternoon after previously hitting a low for the day of $803.50. Much of the catalyst behind the late-day surge was December crude oil recovering from a $93.72 low to trade as high as $96.12 late in the morning. The oil contract was at $95.40 a barrel as gold closed, a loss of 53 cents for the day.
"Crude oil turned positive (for a while)," said a Comex floor trader. "And there is still some fund buying in the gold."
There were limited buy stops, particularly since there are not many traders short at the moment placing protective stops above the market, he added.
Nevertheless, some buy stops were touched off, reported Charles Nedoss, senior account manager and metals analyst with Peak Trading Group.
"You saw crude come off of its bottom and you saw the dollar pull back a little bit off from its highs," he said of the impetus that helped gold bounce. "But I think ... was crude and good technical buying coming in."
Technically, Nedoss pointed out, the pit-session low of $805 held above the overnight electronic low of $803.50.
Meanwhile, the pit session had an opening range in the $807.50 area, whereas the overnight session's opening range was around $810. 50. Thus, he said, some technical buying occurred around the $807.50 area when it appeared the pit low would remain above the overnight low.
"And once we took out $810.50, we picked up stops," he said. "I think you're seeing people add to positions and seeing people willing to buy breaks, especially with gold's inability to take out $800 (on the pullback)."
Silver largely followed gold higher, he said. December silver hit a $14.88 high that was its strongest level since Feb. 27, when it was last above $15 an ounce.
Meanwhile, January platinum rose $3.80 to $1,466.50 an ounce.
"Platinum is tracking gold right now," said one desk trader, although he described activity in the white metal as light. Some support may be continuing to come from concern about a potential strike in South Africa in response to recent fatal mining accidents, although he pointed out this has been factored into the market for a few weeks now.
January platinum inched fractionally above last week's $1,474.90 peak to a contract high of $1,475, although this is a double-top at the moment.
Meanwhile, December palladium declined $2.30 to $375.10 an ounce in a market that the trader described as largely range-bound.
Monday, November 5, 2007
US gold turns to end up on flight-to-quality bid
(Reuters) - U.S. gold futures retraced
early losses to hit a contract all-time high on Monday as
flight-to-quality demand due to credit market jitters more than
offset lower crude prices and a stronger dollar. "We have to ask ourselves if the credit problems that we
saw this summer had been remedied or not. If they haven't, we
could see more bids into gold. If the credit markets are
calming, then that will remove a bit (demand) from gold," said
James Steel, metal analyst at HSBC Plc in New York. Most-active December gold (GCZ7: Quote, Profile, Research) on the COMEX division of
the New York Mercantile Exchange settled up $2.30 at $810.80 an
ounce, after hitting a high of $814.20, a contract all-time
high. It hit a session low of $803.50 on Monday. Steel said that losses in the equity markets of late often
associated with flight-to-quality buying in gold, and that
reflected the precious metal's traditional values as a safe
haven. U.S. stocks dropped about 1 percent on Monday as Citigroup
Inc's (C.N: Quote, Profile, Research) warning of swelling loan losses fanned a sell-off
in financial services companies and investors worried about the
impact of the credit turmoil on the economy. Citigroup, the biggest U.S. bank by total assets, said it
could suffer an $11 billion write-down related to subprime
mortgage losses. Shares tumbled to 4-1/2-year lows.
[ID:nN05258480] At the same time, Steel said he noted a pick-up in gold
sales from the scrap and recycling markets as dealers took
advantage of the higher prices. However, the recent surge in gold prices could take a toll
on physical buying, Steel said. "The high prices are going to feed into the jewelry market,
and already we have seen declines in Indian and Middle Eastern
demand based on these high prices. And I think we are likely to
see that persist," Steel said. Global bullion demand is traditionally the strongest during
the fourth quarter because of the Indian and Muslim religious
festivals as well as the Christmas holiday shopping season. Meanwhile, silver also finished sharply higher. COMEX
December silver (SIZ7: Quote, Profile, Research) closed up 18.60 cents or 1.3 percent at
$14.785 an ounce, trading between $14.460 and $14.880. Stephen Briggs, metals analyst at Societe Generale in
London, told clients in a note that silver's recent sharp rally
was largely driven by investor and speculator interest and it
could not be easily sustained above $14 an ounce without
further strength in gold. Briggs added that the correlation between gold and silver
prices had been 93 percent since 2005. "There is a measure of froth in the silver market and that
if gold corrects as expected, then silver's fall, much as was
the case in July, may be much sharper than that of gold,"
Briggs said. COMEX estimated final volume at 104,952 contracts, and gold
options were estimated at 20,064 lots. Turnover in Chicago
Board of Trade electronic 100-oz gold futures was 19,697 lots
at 2:41 p.m. EST (1941 GMT) http://www.cbot.com/cbot/pub/page. Meanwhile, the Commodity Futures Trading Commission said in
its latest Commitment of Traders report that speculative net
long positions in gold futures rose to 198,606 lots in the week
up to Oct 30 compared with 186,304 in the week earlier.
[ID:nN0215211] News of strikes in gold mines in South Africa and Peru also
supported bullion. At 2:15 p.m., spot bullion was quoted at
$808.80/809.60, compared with the Friday New York close at
$807.70/808.50. London bullion dealers fixed the afternoon spot
reference price at $804.75. COMEX December silver (SIZ7: Quote, Profile, Research) closed up 18.60 cents or 1.3
percent at $14.785 an ounce, trading between $14.460 and
$14.880. Spot silver was quoted at $14.64/14.69, higher than
Friday's late New York quote of $14.58/14.63. London silver was
fixed at $14.49. NYMEX January platinum (PLF8: Quote, Profile, Research) ended up $3.80 at $1,466.50
an ounce. Spot platinum was quoted at $1,459/1,463. December palladium (PAZ7: Quote, Profile, Research) dropped $2.30 to close at $375.10
an ounce. Spot palladium fetched $371/375.
early losses to hit a contract all-time high on Monday as
flight-to-quality demand due to credit market jitters more than
offset lower crude prices and a stronger dollar. "We have to ask ourselves if the credit problems that we
saw this summer had been remedied or not. If they haven't, we
could see more bids into gold. If the credit markets are
calming, then that will remove a bit (demand) from gold," said
James Steel, metal analyst at HSBC Plc in New York. Most-active December gold (GCZ7: Quote, Profile, Research) on the COMEX division of
the New York Mercantile Exchange settled up $2.30 at $810.80 an
ounce, after hitting a high of $814.20, a contract all-time
high. It hit a session low of $803.50 on Monday. Steel said that losses in the equity markets of late often
associated with flight-to-quality buying in gold, and that
reflected the precious metal's traditional values as a safe
haven. U.S. stocks dropped about 1 percent on Monday as Citigroup
Inc's (C.N: Quote, Profile, Research) warning of swelling loan losses fanned a sell-off
in financial services companies and investors worried about the
impact of the credit turmoil on the economy. Citigroup, the biggest U.S. bank by total assets, said it
could suffer an $11 billion write-down related to subprime
mortgage losses. Shares tumbled to 4-1/2-year lows.
[ID:nN05258480] At the same time, Steel said he noted a pick-up in gold
sales from the scrap and recycling markets as dealers took
advantage of the higher prices. However, the recent surge in gold prices could take a toll
on physical buying, Steel said. "The high prices are going to feed into the jewelry market,
and already we have seen declines in Indian and Middle Eastern
demand based on these high prices. And I think we are likely to
see that persist," Steel said. Global bullion demand is traditionally the strongest during
the fourth quarter because of the Indian and Muslim religious
festivals as well as the Christmas holiday shopping season. Meanwhile, silver also finished sharply higher. COMEX
December silver (SIZ7: Quote, Profile, Research) closed up 18.60 cents or 1.3 percent at
$14.785 an ounce, trading between $14.460 and $14.880. Stephen Briggs, metals analyst at Societe Generale in
London, told clients in a note that silver's recent sharp rally
was largely driven by investor and speculator interest and it
could not be easily sustained above $14 an ounce without
further strength in gold. Briggs added that the correlation between gold and silver
prices had been 93 percent since 2005. "There is a measure of froth in the silver market and that
if gold corrects as expected, then silver's fall, much as was
the case in July, may be much sharper than that of gold,"
Briggs said. COMEX estimated final volume at 104,952 contracts, and gold
options were estimated at 20,064 lots. Turnover in Chicago
Board of Trade electronic 100-oz gold futures was 19,697 lots
at 2:41 p.m. EST (1941 GMT) http://www.cbot.com/cbot/pub/page. Meanwhile, the Commodity Futures Trading Commission said in
its latest Commitment of Traders report that speculative net
long positions in gold futures rose to 198,606 lots in the week
up to Oct 30 compared with 186,304 in the week earlier.
[ID:nN0215211] News of strikes in gold mines in South Africa and Peru also
supported bullion. At 2:15 p.m., spot bullion
$808.80/809.60, compared with the Friday New York close at
$807.70/808.50. London bullion dealers fixed the afternoon spot
reference price at $804.75. COMEX December silver (SIZ7: Quote, Profile, Research) closed up 18.60 cents or 1.3
percent at $14.785 an ounce, trading between $14.460 and
$14.880. Spot silver
Friday's late New York quote of $14.58/14.63. London silver was
fixed at $14.49. NYMEX January platinum (PLF8: Quote, Profile, Research) ended up $3.80 at $1,466.50
an ounce. Spot platinum
an ounce. Spot palladium
ING, Citibank set to launch FIF gold fund
ING Funds (Thailand) and Citibank will launch a new foreign investment gold fund by the middle of this month.
The open-ended, 1.5-billion-baht ING Thai Golden Star Link fund would be open for subscription from Nov 12-22.
Maris Tarab, the managing director of ING Funds, said the new FIF would invest in structured notes with futures options linked to the Citigroup S&P Global STARS TR Index and the London Gold Market Fixing Ltd PM Fix. The weighting of the two indices is 50% each.
The structured notes would be issued by banks and their returns rely on gains of the two indices. The notes have credit rating of Aa2 or from AA-.
If the two indices fail to produce gains, investors are able to recoup their principal.
The Citigroup S&P Global STARS TR Index, developed by S&P and Citigroup, is based on investments in 25 stocks rated four and five stars by the two institutions.
Among the selected stocks, 40% each would be in US and European equities and the rest in Asia.
During the past six years, the index had seen returns of over 80%, outpacing the 68% return posted by the MSCI World index.
The London Gold Market Fixing Ltd PM Fix, created in 1944 to follow gold bullion prices, had a 12-month return of 20.69%.
''Gold is a valuable asset, which has a trend of rising prices driven by strong demand from the jewellery businesses in India, China and Middle East and those who buy gold for long-term investments,'' Mr Maris said.
According to the World Gold Council, gold demand during the first half of this year rose 11% in terms of quantity and 24% in terms of value, while new gold supply rose only 3% year-on-year.
During the past three years, Mr Maris added, the combined returns from the two indices were about 10% per year.
The ING Thai Golden Star Link fund would hedge its foreign currency exposure to reduce the risk of currency rate volatility
The open-ended, 1.5-billion-baht ING Thai Golden Star Link fund would be open for subscription from Nov 12-22.
Maris Tarab, the managing director of ING Funds, said the new FIF would invest in structured notes with futures options linked to the Citigroup S&P Global STARS TR Index and the London Gold Market Fixing Ltd PM Fix. The weighting of the two indices is 50% each.
The structured notes would be issued by banks and their returns rely on gains of the two indices. The notes have credit rating of Aa2 or from AA-.
If the two indices fail to produce gains, investors are able to recoup their principal.
The Citigroup S&P Global STARS TR Index, developed by S&P and Citigroup, is based on investments in 25 stocks rated four and five stars by the two institutions.
Among the selected stocks, 40% each would be in US and European equities and the rest in Asia.
During the past six years, the index had seen returns of over 80%, outpacing the 68% return posted by the MSCI World index.
The London Gold Market Fixing Ltd PM Fix, created in 1944 to follow gold bullion prices, had a 12-month return of 20.69%.
''Gold is a valuable asset, which has a trend of rising prices driven by strong demand from the jewellery businesses in India, China and Middle East and those who buy gold for long-term investments,'' Mr Maris said.
According to the World Gold Council, gold demand during the first half of this year rose 11% in terms of quantity and 24% in terms of value, while new gold supply rose only 3% year-on-year.
During the past three years, Mr Maris added, the combined returns from the two indices were about 10% per year.
The ING Thai Golden Star Link fund would hedge its foreign currency exposure to reduce the risk of currency rate volatility
US gold futures hit all-time high
US gold futures hit a contract all-time high on Monday, despite early losses, as flight-to-quality demand due to credit market jitters more than offset lower crude prices and a stronger dollar.
Most-active December gold on the COMEX division of the New York Mercantile Exchange settled up $US2.30 at $US810.80 an ounce, after hitting a high of $US814.20, a contract all-time high.
Meanwhile, silver also finished sharply higher.
COMEX December silver closed up US 18.60 cents or 1.3 per cent to $US14.785 an ounce, trading between $US14.460 and $US14.880.
NYMEX January platinum ended up $US3.80 to $US1,466.50 an ounce.
December palladium dropped $US2.30 to close at $US375.10 an ounce.
NYMEX
US crude oil futures were slightly lower in choppy trading Monday, after recovering from a sharp fall.
The deep decline came with revived concerns about a credit crunch that sent equity markets lower.
On the New York Mercantile Exchange, December crude was down $US1.95 to $US93.98.
LME
Copper prices tumbled to seven-week lows on Monday with fears of falling demand and rising stock supplies.
Aluminium struck a three-month high and zinc wallowed around a 19-month low.
Copper for delivery in three months on the London Metal Exchange closed down at $US7,410 a tonne compared with an earlier intraday dip to $US7,350, the lowest since September 12.
Aluminium ended at $US2,610, down from $US2,622 on Friday.
Zinc, used for galvanising stainless steel, was at $US2,725 a tonne, down from $US2,769 on Friday when it hit a 19-month low of $US2,655 a tonne.
Tin was higher at $US16,725/16,775 from $US16,500/16,600, lead closed at $US3,695 from $3,713 and nickel at $US31,600 from $32,200.
Most-active December gold on the COMEX division of the New York Mercantile Exchange settled up $US2.30 at $US810.80 an ounce, after hitting a high of $US814.20, a contract all-time high.
Meanwhile, silver also finished sharply higher.
COMEX December silver closed up US 18.60 cents or 1.3 per cent to $US14.785 an ounce, trading between $US14.460 and $US14.880.
NYMEX January platinum ended up $US3.80 to $US1,466.50 an ounce.
December palladium dropped $US2.30 to close at $US375.10 an ounce.
NYMEX
US crude oil futures were slightly lower in choppy trading Monday, after recovering from a sharp fall.
The deep decline came with revived concerns about a credit crunch that sent equity markets lower.
On the New York Mercantile Exchange, December crude was down $US1.95 to $US93.98.
LME
Copper prices tumbled to seven-week lows on Monday with fears of falling demand and rising stock supplies.
Aluminium struck a three-month high and zinc wallowed around a 19-month low.
Copper for delivery in three months on the London Metal Exchange closed down at $US7,410 a tonne compared with an earlier intraday dip to $US7,350, the lowest since September 12.
Aluminium ended at $US2,610, down from $US2,622 on Friday.
Zinc, used for galvanising stainless steel, was at $US2,725 a tonne, down from $US2,769 on Friday when it hit a 19-month low of $US2,655 a tonne.
Tin was higher at $US16,725/16,775 from $US16,500/16,600, lead closed at $US3,695 from $3,713 and nickel at $US31,600 from $32,200.
Workers go on strike at mines across Peru
Workers demanding more benefits went on strike on Monday at mines across Peru, while the government said turnout was low and urged laborers to return to their jobs in the fast-growing Andean economy.
It was the second nationwide walkout since May in Peru, the world's top silver producer, third-largest producer of copper and zinc, and fifth-largest producer of gold.
Even though the strike could curb supplies, global metals prices had a soft tone on a range of economic worries.
"The strike has started today at the big companies," said Jesus del Castillo, a director at Peru's biggest federation of mining unions.
The labor federation said 16,000 of 22,000 workers it represents walked off the job. Only 6 percent of Peru's 120,000 miners joined picket lines, the government said.
Mineral exports to Asia and the United States are crucial to Peru's bustling economy and the government discouraged the protest. The mining chamber said the industry suffered little impact from the strike, which did hit some major mines.
Workers downed tools at Yanacocha, Latin America's largest gold mine, union leader Guillermo Nina said. The mine is controlled by U.S. company Newmont Mining Corp (NEM.N: Quote, Profile, Research), and the miner said production held steady.
Laborers at the two mines and smelter of Southern Copper (SPC.LM: Quote, Profile, Research) in Peru were on strike, said Roman More, a union director. Chief Executive Oscar Gonzalez said output was firm despite the strike at Southern, a major global copper producer and unit of Grupo Mexico
It was the second nationwide walkout since May in Peru, the world's top silver producer, third-largest producer of copper and zinc, and fifth-largest producer of gold.
Even though the strike could curb supplies, global metals prices had a soft tone on a range of economic worries.
"The strike has started today at the big companies," said Jesus del Castillo, a director at Peru's biggest federation of mining unions.
The labor federation said 16,000 of 22,000 workers it represents walked off the job. Only 6 percent of Peru's 120,000 miners joined picket lines, the government said.
Mineral exports to Asia and the United States are crucial to Peru's bustling economy and the government discouraged the protest. The mining chamber said the industry suffered little impact from the strike, which did hit some major mines.
Workers downed tools at Yanacocha, Latin America's largest gold mine, union leader Guillermo Nina said. The mine is controlled by U.S. company Newmont Mining Corp (NEM.N: Quote, Profile, Research), and the miner said production held steady.
Laborers at the two mines and smelter of Southern Copper (SPC.LM: Quote, Profile, Research) in Peru were on strike, said Roman More, a union director. Chief Executive Oscar Gonzalez said output was firm despite the strike at Southern, a major global copper producer and unit of Grupo Mexico
Western banks suffer big losses
Global investors succumbed to a new bout of jitters on Thursday amid concerns that a host of important financial institutions are nursing additional problems related to the troubled US mortgage market.
Equity markets tumbled and bond prices rose in the US and Europe. US financial stocks endured their worst day in five years, with some of the worst falls suffered by large banks and smaller specialist credit insurers.
The S&P 500 index fell 2.6 per cent to 1,508.44, its worst day since August 9, dragged down by the 4.6 per cent drop in financial stocks. The London FTSE 100 index fell 135.5 points – 2 per cent – to 6,586.1, with similar falls in the German and French indices.
The signs of rising tension came as the Federal Reserve redoubled its efforts to keep the money markets functioning smoothly.
In its regular operations, the Fed added $41bn in temporary reserves to the banking system, the biggest one-day infusion since September 2001.
But the cost of interbank funds on Thursday remained above the Fed target. Analysts said the decision to cut interest rates to 4.5 per cent on Wednesday had offered little lasting comfort to investors.
Bond traders, however, priced in a greater chance of further rate cuts. The yield on the policy-sensitive two-year Treasury note fell 16 basis points to 3.77 per cent after having risen nearly as much in the immediate aftermath of the Fed’s rate cut.
“We have gone from a Fed saying they are neutral to figuring out what further losses the financials face and wondering whether that will force the Fed’s hand,” said Rick Klingman, interest rate trader at BNP Paribas.
The biggest single reason for the decline in equities was the revival of worries that big banks in the US and Europe would unveil further credit write-offs. Another focus of concern involved a less well-known pillar of the global financial system – smaller specialist insurers that provide credit guarantees to lenders and investors.
Shares in Radian, a private mortgage insurer, fell 19 per cent, after its first quarterly loss, due to mortgage-related problems. MBIA and Ambac, the two biggest bond insurers in the US, have also experienced dramatic declines, amid fears they, too, could be nursing unseen subprime-linked problems.
MBIA and Ambac – often called “monoline” insurers – say that they are well positioned and that their exposure to subprime assets is very small. But analysts fear that a worsening of the crisis could result in their losing their top-notch credit rating.
That, in turn, could trigger a “domino effect” that would cut the value of the bonds they have insured. The companies insure both complex securities backed by mortgages and less risky municipal bonds.
These concerns triggered a sharp rise in the cost of insuring monoline debt against default. The broader cost of buying protection against default of a basket of European and US bonds also reached the highest level in several weeks.
The rate of delinquencies among US mortgage borrowers, meanwhile, has doubled from the same period of last year, according to data from RealtyTrac. The main ratings agencies slashed to junk the ratings on more than $100bn in subprime mortgage- backed bonds in the past month.
The ABX index, which tracks such bonds, has fallen sharply in recent months. The riskiest slice of the index, which tracks bonds rated BBB-, has fallen about 80 per cent this year.
Equity markets tumbled and bond prices rose in the US and Europe. US financial stocks endured their worst day in five years, with some of the worst falls suffered by large banks and smaller specialist credit insurers.
The S&P 500 index fell 2.6 per cent to 1,508.44, its worst day since August 9, dragged down by the 4.6 per cent drop in financial stocks. The London FTSE 100 index fell 135.5 points – 2 per cent – to 6,586.1, with similar falls in the German and French indices.
The signs of rising tension came as the Federal Reserve redoubled its efforts to keep the money markets functioning smoothly.
In its regular operations, the Fed added $41bn in temporary reserves to the banking system, the biggest one-day infusion since September 2001.
But the cost of interbank funds on Thursday remained above the Fed target. Analysts said the decision to cut interest rates to 4.5 per cent on Wednesday had offered little lasting comfort to investors.
Bond traders, however, priced in a greater chance of further rate cuts. The yield on the policy-sensitive two-year Treasury note fell 16 basis points to 3.77 per cent after having risen nearly as much in the immediate aftermath of the Fed’s rate cut.
“We have gone from a Fed saying they are neutral to figuring out what further losses the financials face and wondering whether that will force the Fed’s hand,” said Rick Klingman, interest rate trader at BNP Paribas.
The biggest single reason for the decline in equities was the revival of worries that big banks in the US and Europe would unveil further credit write-offs. Another focus of concern involved a less well-known pillar of the global financial system – smaller specialist insurers that provide credit guarantees to lenders and investors.
Shares in Radian, a private mortgage insurer, fell 19 per cent, after its first quarterly loss, due to mortgage-related problems. MBIA and Ambac, the two biggest bond insurers in the US, have also experienced dramatic declines, amid fears they, too, could be nursing unseen subprime-linked problems.
MBIA and Ambac – often called “monoline” insurers – say that they are well positioned and that their exposure to subprime assets is very small. But analysts fear that a worsening of the crisis could result in their losing their top-notch credit rating.
That, in turn, could trigger a “domino effect” that would cut the value of the bonds they have insured. The companies insure both complex securities backed by mortgages and less risky municipal bonds.
These concerns triggered a sharp rise in the cost of insuring monoline debt against default. The broader cost of buying protection against default of a basket of European and US bonds also reached the highest level in several weeks.
The rate of delinquencies among US mortgage borrowers, meanwhile, has doubled from the same period of last year, according to data from RealtyTrac. The main ratings agencies slashed to junk the ratings on more than $100bn in subprime mortgage- backed bonds in the past month.
The ABX index, which tracks such bonds, has fallen sharply in recent months. The riskiest slice of the index, which tracks bonds rated BBB-, has fallen about 80 per cent this year.
Oil tumbles while gold’s run continues
Oil prices fell while gold powered on in record territory on Monday amid renewed concerns about the outlook for the US economy after Citigroup warned of heavy losses related to the subprime mortgage crisis.
After hitting a record $96.24 a barrel last week, Nymex December West Texas Intermediate, the US oil benchmark, dropped more than $2 to a session low of $93.72.
After hitting a record $96.24 a barrel last week, Nymex December West Texas Intermediate, the US oil benchmark, dropped more than $2 to a session low of $93.72.
Canada Dollar Too Strong, JPMorgan, Lehman, Morgan Stanley Say
The Canadian dollar's climb to a record high this month has pushed it about 10 percent above its ``fair value,'' according to currency analysts at JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and Morgan Stanley.
The Canadian currency rose to an all-time high of $1.0747 yesterday as investors bet demand for the nation's commodity exports will keep the economy expanding. Its 25 percent gain this year is the most among the 16 most-actively traded currencies.
``This trend is extremely overextended,'' Jim McCormick, London-based head of currency strategy at Lehman, said in an interview on Nov. 2. ``If you look at terms of trade, performance of interest-rate spreads, and risk appetite, nothing justifies this trend. Fair value should be 10 percent lower.''
Canada's dollar traded at $1.0708 at 6:46 a.m. in Tokyo, after reaching the highest yesterday since the government first allowed the currency to float in 1950. One U.S. dollar buys 93.39 Canadian cents. The Canadian dollar reached parity with the U.S. dollar on Sept. 20 for the first time since 1976.
Canada, the world's eighth-biggest economy, has benefited from rising demand for copper, gold, wheat and oil from the U.S. and emerging economies such as India and China. The country is the world's largest producer of uranium, the second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada is also the world's second-largest exporter of wheat.
`Overvalued' Currency
The currency will decline to C$1.05 per U.S. dollar by year- end, and to C$1.07 by the end of March as the Bank of Canada cuts borrowing costs next quarter to help the economy weather the U.S. slowdown, Morgan Stanley predicts. Canada sends more than 75 percent of its exports to the U.S.
``Most models would say the Canadian dollar is overvalued,'' Sophia Drossos, a currency strategist at the firm in New York and a former Federal Reserve economist, said in an interview on Nov. 5. ``There are a lot of links between the U.S. and Canada, and there are going to be some knock-on effects on Canada which we're not seeing yet.''
The Bank of Canada will cut its benchmark rate a quarter- percentage point to 4.25 percent, probably next quarter, Morgan Stanley forecasts. The Bank of Canada has left its key rate unchanged since lifting it to the current level in July.
With the Fed's Oct. 31 move to cut its target rate a quarter-percentage to 4.5 percent, the two nations' overnight rates are even for the first time since 2005. The Fed lowered its benchmark in September for the first time since 2003.
Futures Bets
At 4.29 percent, Canada's 10-year government bond is about 5 basis points, or 0.05 percentage point, below the U.S. 10-year Treasury.
Ted Carmichael, chief Canadian economist at J.P. Morgan Securities in Toronto, wrote in a note published Nov. 1 that the currency's fair value is C$1.05, when taking into account the price of the nation's commodity exports. Carmichael and Rebecca Patterson, a New York-based currency strategist at JPMorgan, didn't return calls.
Futures show hedge funds and other large speculators have reduced bets the Canadian dollar will advance. Net long bets have declined three straight weeks, to 68,831 contracts in the week to Oct. 30, from a record 83,001 contracts reached last month on the Chicago Mercantile Exchange, according to the Washington-based Commodity Futures Trading Commission. A long bet is a wager a currency will rise.
99 Canadian Cents
Canada's currency will decline to 99 Canadian cents per U.S. dollar by year-end, according to the median forecast of 39 analysts surveyed by Bloomberg.
Bank of Canada Governor David Dodge said on Oct. 22 that the currency's climb has been ``abnormally quick,'' and it will slow the Canadian economy in 2008.
``People are trading this currency as a crude oil proxy,'' said Drossos. ``It's not only crude oil that drives the Canadian economy. There is too much focus on the energy complex. There just seems to be a lot of speculative interest in the Canadian dollar.''
Crude oil for December delivery fell 2 percent yesterday to settle at $93.98 barrel at 2:51 p.m. on the New York Mercantile Exchange. Futures climbed to $96.24 on Nov. 1, the highest intraday price since trading began in 1983.
The Canadian currency rose to an all-time high of $1.0747 yesterday as investors bet demand for the nation's commodity exports will keep the economy expanding. Its 25 percent gain this year is the most among the 16 most-actively traded currencies.
``This trend is extremely overextended,'' Jim McCormick, London-based head of currency strategy at Lehman, said in an interview on Nov. 2. ``If you look at terms of trade, performance of interest-rate spreads, and risk appetite, nothing justifies this trend. Fair value should be 10 percent lower.''
Canada's dollar traded at $1.0708 at 6:46 a.m. in Tokyo, after reaching the highest yesterday since the government first allowed the currency to float in 1950. One U.S. dollar buys 93.39 Canadian cents. The Canadian dollar reached parity with the U.S. dollar on Sept. 20 for the first time since 1976.
Canada, the world's eighth-biggest economy, has benefited from rising demand for copper, gold, wheat and oil from the U.S. and emerging economies such as India and China. The country is the world's largest producer of uranium, the second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada is also the world's second-largest exporter of wheat.
`Overvalued' Currency
The currency will decline to C$1.05 per U.S. dollar by year- end, and to C$1.07 by the end of March as the Bank of Canada cuts borrowing costs next quarter to help the economy weather the U.S. slowdown, Morgan Stanley predicts. Canada sends more than 75 percent of its exports to the U.S.
``Most models would say the Canadian dollar is overvalued,'' Sophia Drossos, a currency strategist at the firm in New York and a former Federal Reserve economist, said in an interview on Nov. 5. ``There are a lot of links between the U.S. and Canada, and there are going to be some knock-on effects on Canada which we're not seeing yet.''
The Bank of Canada will cut its benchmark rate a quarter- percentage point to 4.25 percent, probably next quarter, Morgan Stanley forecasts. The Bank of Canada has left its key rate unchanged since lifting it to the current level in July.
With the Fed's Oct. 31 move to cut its target rate a quarter-percentage to 4.5 percent, the two nations' overnight rates are even for the first time since 2005. The Fed lowered its benchmark in September for the first time since 2003.
Futures Bets
At 4.29 percent, Canada's 10-year government bond is about 5 basis points, or 0.05 percentage point, below the U.S. 10-year Treasury.
Ted Carmichael, chief Canadian economist at J.P. Morgan Securities in Toronto, wrote in a note published Nov. 1 that the currency's fair value is C$1.05, when taking into account the price of the nation's commodity exports. Carmichael and Rebecca Patterson, a New York-based currency strategist at JPMorgan, didn't return calls.
Futures show hedge funds and other large speculators have reduced bets the Canadian dollar will advance. Net long bets have declined three straight weeks, to 68,831 contracts in the week to Oct. 30, from a record 83,001 contracts reached last month on the Chicago Mercantile Exchange, according to the Washington-based Commodity Futures Trading Commission. A long bet is a wager a currency will rise.
99 Canadian Cents
Canada's currency will decline to 99 Canadian cents per U.S. dollar by year-end, according to the median forecast of 39 analysts surveyed by Bloomberg.
Bank of Canada Governor David Dodge said on Oct. 22 that the currency's climb has been ``abnormally quick,'' and it will slow the Canadian economy in 2008.
``People are trading this currency as a crude oil proxy,'' said Drossos. ``It's not only crude oil that drives the Canadian economy. There is too much focus on the energy complex. There just seems to be a lot of speculative interest in the Canadian dollar.''
Crude oil for December delivery fell 2 percent yesterday to settle at $93.98 barrel at 2:51 p.m. on the New York Mercantile Exchange. Futures climbed to $96.24 on Nov. 1, the highest intraday price since trading began in 1983.
Merrill's Rosenberg Says Dollar Decline Not Armageddon Calamity
(Bloomberg) -- The falling dollar isn't cause for alarm and part of a ``global rebalancing process,'' according to David Rosenberg, chief North American economist at Merrill Lynch & Co.
The dollar, which has dropped 31 percent against the euro over the past five years, reflects a correction of the U.S. currency's overvaluation from 1997 to 2002, said Rosenberg in a research note dated Nov. 2. The dollar, measured by the Federal Reserve's trade-weighted index, was little changed yesterday compared with its worth a decade ago, he said.
``The dollar is no lower today than it was in 1997 -- we don't remember that being a particular Armageddon-type time period,'' Rosenberg said. ``Far from being a disturbing development, the dollar's decline is part and parcel of the global rebalancing process.''
The dollar gained 0.2 percent to $1.4469 per euro at 5:15 p.m. yesterday in New York after Citigroup Inc. said it may write down subprime-related assets by as much as $11 billion, prompting investors to shun risk and seek safety in U.S. government debt.
The U.S. currency dropped to a record low of $1.4528 on Nov. 2. The Fed's broad trade-weighted dollar index fell to 98.25 on Nov. 2, the lowest since November 1996.
The index reached 130.07 in February 2002, its highest since January 1995, when Bloomberg began collecting the data. The dollar benefited from the slump of Asian currencies after the 1997 financial crisis, a sell-off in commodities-linked currencies, euro softness and a Japanese recession, Rosenberg said.
The dollar index showed an ``unwinding in an orderly fashion the multiyear period of overvaluation of the past decade,'' Rosenberg said.
The dollar, which has dropped 31 percent against the euro over the past five years, reflects a correction of the U.S. currency's overvaluation from 1997 to 2002, said Rosenberg in a research note dated Nov. 2. The dollar, measured by the Federal Reserve's trade-weighted index, was little changed yesterday compared with its worth a decade ago, he said.
``The dollar is no lower today than it was in 1997 -- we don't remember that being a particular Armageddon-type time period,'' Rosenberg said. ``Far from being a disturbing development, the dollar's decline is part and parcel of the global rebalancing process.''
The dollar gained 0.2 percent to $1.4469 per euro at 5:15 p.m. yesterday in New York after Citigroup Inc. said it may write down subprime-related assets by as much as $11 billion, prompting investors to shun risk and seek safety in U.S. government debt.
The U.S. currency dropped to a record low of $1.4528 on Nov. 2. The Fed's broad trade-weighted dollar index fell to 98.25 on Nov. 2, the lowest since November 1996.
The index reached 130.07 in February 2002, its highest since January 1995, when Bloomberg began collecting the data. The dollar benefited from the slump of Asian currencies after the 1997 financial crisis, a sell-off in commodities-linked currencies, euro softness and a Japanese recession, Rosenberg said.
The dollar index showed an ``unwinding in an orderly fashion the multiyear period of overvaluation of the past decade,'' Rosenberg said.
Merrill's Rosenberg Says Dollar Decline Not Armageddon Calamity
Bloomberg) -- The falling dollar isn't cause for alarm and part of a ``global rebalancing process,'' according to David Rosenberg, chief North American economist at Merrill Lynch & Co.
The dollar, which has dropped 31 percent against the euro over the past five years, reflects a correction of the U.S. currency's overvaluation from 1997 to 2002, said Rosenberg in a research note dated Nov. 2. The dollar, measured by the Federal Reserve's trade-weighted index, was little changed yesterday compared with its worth a decade ago, he said.
``The dollar is no lower today than it was in 1997 -- we don't remember that being a particular Armageddon-type time period,'' Rosenberg said. ``Far from being a disturbing development, the dollar's decline is part and parcel of the global rebalancing process.''
The dollar gained 0.2 percent to $1.4469 per euro at 5:15 p.m. yesterday in New York after Citigroup Inc. said it may write down subprime-related assets by as much as $11 billion, prompting investors to shun risk and seek safety in U.S. government debt.
The U.S. currency dropped to a record low of $1.4528 on Nov. 2. The Fed's broad trade-weighted dollar index fell to 98.25 on Nov. 2, the lowest since November 1996.
The index reached 130.07 in February 2002, its highest since January 1995, when Bloomberg began collecting the data. The dollar benefited from the slump of Asian currencies after the 1997 financial crisis, a sell-off in commodities-linked currencies, euro softness and a Japanese recession, Rosenberg said.
The dollar index showed an ``unwinding in an orderly fashion the multiyear period of overvaluation of the past decade,'' Rosenberg said.
The dollar, which has dropped 31 percent against the euro over the past five years, reflects a correction of the U.S. currency's overvaluation from 1997 to 2002, said Rosenberg in a research note dated Nov. 2. The dollar, measured by the Federal Reserve's trade-weighted index, was little changed yesterday compared with its worth a decade ago, he said.
``The dollar is no lower today than it was in 1997 -- we don't remember that being a particular Armageddon-type time period,'' Rosenberg said. ``Far from being a disturbing development, the dollar's decline is part and parcel of the global rebalancing process.''
The dollar gained 0.2 percent to $1.4469 per euro at 5:15 p.m. yesterday in New York after Citigroup Inc. said it may write down subprime-related assets by as much as $11 billion, prompting investors to shun risk and seek safety in U.S. government debt.
The U.S. currency dropped to a record low of $1.4528 on Nov. 2. The Fed's broad trade-weighted dollar index fell to 98.25 on Nov. 2, the lowest since November 1996.
The index reached 130.07 in February 2002, its highest since January 1995, when Bloomberg began collecting the data. The dollar benefited from the slump of Asian currencies after the 1997 financial crisis, a sell-off in commodities-linked currencies, euro softness and a Japanese recession, Rosenberg said.
The dollar index showed an ``unwinding in an orderly fashion the multiyear period of overvaluation of the past decade,'' Rosenberg said.
Gold Falls From 27-Year High as Dollar Rebounds; Silver Drops
(Bloomberg) -- Gold fell from the highest prices since 1980 after a gain in the value of the dollar against the euro reduced the appeal of the precious metal as an alternative investment. Silver also dropped.
Gold generally moves in the opposite direction of the dollar, which rose from last week's record against the euro. Before today, gold gained 27 percent in 2007, reaching $811 an ounce on Nov. 2, as a weak dollar and record energy costs sparked demand for an inflation hedge.
``The dollar has been having a big effect on gold prices,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``There'll be some selling today because gold's had a strong rally, and the euro and crude are off their highs.''
Gold futures for December delivery fell $1.70, or 0.2 percent, to $806.80 an ounce at 8:59 a.m. on the Comex division of the New York Mercantile Exchange. The price reached $873 an ounce Jan. 21, 1980, the highest ever.
Silver futures for December delivery declined 3.4 cents, or 0.2 percent, to $14.565 an ounce. Before today, the metal climbed 13 percent this year.
The dollar rebounded from a record $1.4528 against the euro. Crude-oil futures traded as low as $94 a barrel after reaching $96.24 on Nov. 1, the highest ever.
Gold generally moves in the opposite direction of the dollar, which rose from last week's record against the euro. Before today, gold gained 27 percent in 2007, reaching $811 an ounce on Nov. 2, as a weak dollar and record energy costs sparked demand for an inflation hedge.
``The dollar has been having a big effect on gold prices,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``There'll be some selling today because gold's had a strong rally, and the euro and crude are off their highs.''
Gold futures for December delivery fell $1.70, or 0.2 percent, to $806.80 an ounce at 8:59 a.m. on the Comex division of the New York Mercantile Exchange. The price reached $873 an ounce Jan. 21, 1980, the highest ever.
Silver futures for December delivery declined 3.4 cents, or 0.2 percent, to $14.565 an ounce. Before today, the metal climbed 13 percent this year.
The dollar rebounded from a record $1.4528 against the euro. Crude-oil futures traded as low as $94 a barrel after reaching $96.24 on Nov. 1, the highest ever.
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