Gold News

Gold slips off 4-week high despite double-whammy for US Dollar

Gold prices pulled back from a 4-week high on Wednesday despite a double-whammy of bad news for the Dollar.

Durable goods orders in the US, said Washington, rose slower than expected last month.

Then Ben Bernanke, head of the US Federal Reserve, said he's uncertain about the current direction of the US economy.

"The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," he told Congress – repeating a line he used to little effect earlier this month (click here to read why...).

"[But] the turmoil...has created financial problems for many individuals and families...Near-term prospects for the housing market remain uncertain."

Stocks in both the US and Europe fell fast on the news.

"The fact that he is talking about uncertainty adds uncertainty to the market," said one trader to Reuters.

"The US data so far this week has been dreadful," added Michael Woolfolk, senior currency strategist at The Bank of New York.

"There is no silver lining to today's durable goods report; it is weak from top to bottom."

The US Dollar fell more than 1% against the Japanese Yen on the news, matching the drop on Wall Street.

But the greenback wasn't alone in losing ground to the Yen. The Japanese currency also rose against Sterling, Euros, and the high-yielding New Zealand and Australian Dollars.

And falling just ahead of the "higher risk" carry currencies, gold slipped to $665 from a peak of $669 per ounce hit at the US open.

Versus the Pound, gold dropped back from £340 per ounce, and slipped away from €500 – the month's high it's now broken above twice in 12 hours.

In the equity markets, the FTSE Eurofirst 300 index closed nearly 0.7% lower. London's top shares fell 0.4% on average.

Oil, meantime, clung onto its sudden volatility, trading back $65 in New York after spiking above $68 late on Tuesday on rumors of a conflict between Iran and the US.

"The eyes are on the Middle East now," reckons Tom Kendall, a metals analyst at Mitsubishi.

"Oil is quite strong this week and it has been helpful with gold's rally."

Gold's rally, however, began back in Oct. The constant trend of higher highs and higher lows – mapped out here – was not disturbed by the sudden sell-off in early March.

In the physical market, meantime, Goldcorp admitted on Wednesday that operations at its Los Filos mine in Guerrero, Mexico, are being blocked by local protestors.

These landowner groups want to renegotiate purchase and rent agreements with the Canadian gold mining giant.

Goldcorp now expects the first shipment of gold from the mine sometime during the second quarter of '07.

For more on the current outlook for gold mining supplies in 2007, click here and read on...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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