AI
Thursday, December 09, 2004 11:01:49 AM
Gold prices tumble as dollar rebounds
Other metals plunge as speculation eases
BLOOMBERG NEWS and ASSOCIATED PRESS
December 9, 2004
The price of gold and other metals plunged yesterday as a rebound in the dollar eroded the appeal of the commodities as an alternative to U.S. stocks and bonds.
Gold for February delivery fell $15, or 3.3 percent, to $438.70 an ounce, its biggest decline in seven months, on the Comex division of the New York Mercantile Exchange. Silver fell 74 cents, or 9.4 percent, to $7.145 an ounce in its biggest decline since April 21. Platinum and palladium declined, and copper dropped to a five-week low.
Speculator buying, fueled by concern the dollar might continue to slide because of the U.S. trade and budget deficits, had helped boost gold prices as much as 22 percent since mid-May.
"The dollar is a major factor in determining the price for these dollar-denominated commodities," said Scott Morrison, who manages $70 million at SAM Capital LLC in New York. "When everyone decides to head for the exit door, there's not enough room for everybody to get through."
The dollar's strength yesterday came amid concerns about possible currency intervention by Japanese financial authorities after the government there released weak economic growth data.
Adopting a new method of calculating output, the government revised third-quarter growth to an annual 0.2 percent from a previous 0.3 percent. The new method is intended to eliminate distortions caused by rapidly falling prices of high-technology items, like cell phones and computers.
Using the new calculation, the government also said the economy shrank in the second quarter, declining an annual 0.6 percent instead of rising 1.1 percent as previously reported.
The revised figures were weaker than economists expected and well off the 6 percent pace of the first quarter. The data sent the yen sharply lower, hitting a low of 104.99, from 102.97 on Tuesday. But later in New York, the yen appeared to have recovered, trading at 102.89.
The revised numbers were consistent with a string of recent economic figures showing Japan's recovery has lost momentum, dogged by slowing export growth and weak consumption.
"We haven't seen any evidence of things turning around yet," said Peter Morgan, an economist at HSBC Securities (Japan) Ltd.
The dollar also strengthened yesterday against the euro, which on Tuesday hit an all-time high of $1.3470. In late trading in New York, the euro traded at $1.3335, down from $1.3432 late Tuesday but above its intraday low of $1.3193.
Traders are squaring up on short dollar positions as they weigh the possibility of a coordinated intervention by Japanese and European officials, said Michael Woolfolk, senior currency strategist at Bank of New York. A short dollar position represents a bet the currency will fall.
Currency markets have also been mollified a bit by the recent decline in oil prices, which have eased off record highs due to rising inventories, particularly heating oil.
Yesterday's dollar rally is likely just a brief correction in a larger weakening trend, Woolfolk said.
"This is the market realizing it's gotten a little ahead of itself," he said, noting that he expects the euro to rise to $1.45 by the end of next year, with the potential of climbing as high as $1.60.
Gold's drop was the biggest since April 28. Prices have fallen 4.4 percent since reaching a high of $458.70 on Dec. 2.
Gold's decline accelerated as prices fell below $452 and $450, triggering selling by speculators who follow charts and graphs, said William O'Neill, a partner at Logic Advisors LLC, a commodity consulting company in Upper Saddle River, N.J.
"When the dollar came in with a strong move up today, that was enough to kick off technical selling," O'Neill said. "Gold was looking a bit shaky technically in recent sessions."
Although the pullback was sharp, a London-based hedge fund manager said the sell-off was probably a short-term move.
"One day's price action will not have a long-term impact on the funds' positions. . . . We don't change from long to short overnight."
The New York Times News Service and Reuters contributed to this report.
http://www.signonsandiego.com/uniontrib/20041209/news_1b9metals.html
Other metals plunge as speculation eases
BLOOMBERG NEWS and ASSOCIATED PRESS
December 9, 2004
The price of gold and other metals plunged yesterday as a rebound in the dollar eroded the appeal of the commodities as an alternative to U.S. stocks and bonds.
Gold for February delivery fell $15, or 3.3 percent, to $438.70 an ounce, its biggest decline in seven months, on the Comex division of the New York Mercantile Exchange. Silver fell 74 cents, or 9.4 percent, to $7.145 an ounce in its biggest decline since April 21. Platinum and palladium declined, and copper dropped to a five-week low.
Speculator buying, fueled by concern the dollar might continue to slide because of the U.S. trade and budget deficits, had helped boost gold prices as much as 22 percent since mid-May.
"The dollar is a major factor in determining the price for these dollar-denominated commodities," said Scott Morrison, who manages $70 million at SAM Capital LLC in New York. "When everyone decides to head for the exit door, there's not enough room for everybody to get through."
The dollar's strength yesterday came amid concerns about possible currency intervention by Japanese financial authorities after the government there released weak economic growth data.
Adopting a new method of calculating output, the government revised third-quarter growth to an annual 0.2 percent from a previous 0.3 percent. The new method is intended to eliminate distortions caused by rapidly falling prices of high-technology items, like cell phones and computers.
Using the new calculation, the government also said the economy shrank in the second quarter, declining an annual 0.6 percent instead of rising 1.1 percent as previously reported.
The revised figures were weaker than economists expected and well off the 6 percent pace of the first quarter. The data sent the yen sharply lower, hitting a low of 104.99, from 102.97 on Tuesday. But later in New York, the yen appeared to have recovered, trading at 102.89.
The revised numbers were consistent with a string of recent economic figures showing Japan's recovery has lost momentum, dogged by slowing export growth and weak consumption.
"We haven't seen any evidence of things turning around yet," said Peter Morgan, an economist at HSBC Securities (Japan) Ltd.
The dollar also strengthened yesterday against the euro, which on Tuesday hit an all-time high of $1.3470. In late trading in New York, the euro traded at $1.3335, down from $1.3432 late Tuesday but above its intraday low of $1.3193.
Traders are squaring up on short dollar positions as they weigh the possibility of a coordinated intervention by Japanese and European officials, said Michael Woolfolk, senior currency strategist at Bank of New York. A short dollar position represents a bet the currency will fall.
Currency markets have also been mollified a bit by the recent decline in oil prices, which have eased off record highs due to rising inventories, particularly heating oil.
Yesterday's dollar rally is likely just a brief correction in a larger weakening trend, Woolfolk said.
"This is the market realizing it's gotten a little ahead of itself," he said, noting that he expects the euro to rise to $1.45 by the end of next year, with the potential of climbing as high as $1.60.
Gold's drop was the biggest since April 28. Prices have fallen 4.4 percent since reaching a high of $458.70 on Dec. 2.
Gold's decline accelerated as prices fell below $452 and $450, triggering selling by speculators who follow charts and graphs, said William O'Neill, a partner at Logic Advisors LLC, a commodity consulting company in Upper Saddle River, N.J.
"When the dollar came in with a strong move up today, that was enough to kick off technical selling," O'Neill said. "Gold was looking a bit shaky technically in recent sessions."
Although the pullback was sharp, a London-based hedge fund manager said the sell-off was probably a short-term move.
"One day's price action will not have a long-term impact on the funds' positions. . . . We don't change from long to short overnight."
The New York Times News Service and Reuters contributed to this report.
http://www.signonsandiego.com/uniontrib/20041209/news_1b9metals.html
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