Gold Slides as the Dollar Lifts
By Simon Constable
TheStreet.com Staff Reporter
11/15/2006 11:36 AM EST
URL: http://www.thestreet.com/markets/commodities/10322388.html
Gold was sliding again Wednesday as the dollar strengthened and fund managers took profits.
Prices for December-dated contracts were slipping $7 to $618.30 an ounce on the Comex division of the Nymex, and the exchange-traded funds were moving in tandem with the futures market. Shares of streetTracks Gold Shares (GLD) and iShares Comex Gold Trust (IAU) were both losing about 0.5% in recent trading.
A strengthening dollar was putting downward pressure on bullion prices. The greenback was buying 118.1 yen up from 117.51 yen late Tuesday. It was also gaining on the euro, trading at $1.2806 vs. $1.2822 previously.
Despite the fall, some observers note that there was plenty of two-way action during the morning session.
Funds taking profits after the recent rally was being balanced by physical buying in Europe ahead of the Christmas shopping season, as well as some fabrication demand in India, says James Moore, a precious metals analyst at TheBullionDesk.com in London. "Unless we see massive move in the dollar or oil the price [of gold] should trade in the range $613 to $628 for a while," he adds.
Looking longer term, President Bush's meeting Tuesday with Detroit's automakers GM (GM), Ford Motor (F) and Daimler Chrysler (DCX) resulted in discussions of international trade and foreign exchange rates, which has some bullion dealers excited.
"Combine the chatter about forcing a yen revaluation and persuading China to revalue the yuan,... and we've got a situation shaping up that could potentially devalue the dollar in short order," notes Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard.
Elsewhere, new data shows demand for gold slipped to 816.9 tons in the third quarter, down about 3% vs. the same period a year ago, according to provisional figures from The World Gold Council. In particular, gold buying by ETFs fell 49% to 19.2 tons, while jewelry demand also dropped to 592.1 tons, off 4%.
Among the miners, the Amex Gold Bugs Index was losing about 1% in recent trading, with shares of Goldcorp (GG) off almost 3% after the company reported disappointing third-quarter earnings of 14 cents a share. The company earned 17 cents a share in the same period a year before.
Bucking the downtrend were shares of industry stalwart Newmont Mining (NEM) which were gaining about 0.1% lately.
In base metals, Comex December copper contracts were off 1.2 cents at $3.077 a pound.
Shares of diversified miners BHP (BHP) and Rio Tinto (RTP) were also losing, both lower by 1.7% lately.
In ferrous metals, Matrix Research upgraded U.S. Steel (X) to a strong buy rating from a buy.
Elsewhere chart watchers are predicting a move to $80 for U.S. Steel shares which were trading around $68 recently, up 1%.
"The stock is above its upward sloping moving averages and momentum is improving and not close to overbought," says John Roque, a technical analyst at Natexis Bleichroeder.
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