Gold Ends Friday Unchanged as Fed Denies It Will Cut Rates to Please Bond Market

From Chris Mullen at GoldSeek...

Gold Prices traded modestly higher in Asia and London on Friday and surged to find a nearly $10 gain at $797.50 by midmorning in New York before the Gold Market fell back and ended with a loss of 0.04% for the session.

Silver dropped to $14.347 by late trade in Asia before it rose in London and New York to find over 2% gains at as high as $14.717 by midmorning, but it also fell back off into the close and ended with a gain of just 0.07%.

Gold Priced in Euros fell to about €536, platinum gained $18 to $1446, palladium lost $5 to $365, and copper rose over 4 cents to about $3.15.

Gold and silver mining equities traded mostly modestly higher and closed near their highs of the session with over 1.5% gains.

On the data front, Net Foreign Purchases of US assets were negative again! Though the decline was not as bad as in August, it was still a decline in capital flows coming into the US that are needed in order to cover the nation's trade deficit. More on this from Dan Norcini at JSMineSet.com:

"It is amusing to read the various analysts being quoted by the wire service commentary writers this morning in regards to the Treasury International Capital Flows data for the month of September. Some were spinning the report as being a 'positive' since it showed a net inflow.

"The problem for the spinmeisters who are doing nothing but talking their book anyway, is that while the long term flows were indeed positive, they were still insufficient to fund the negative trade balance for the second consecutive month (please see the first chart in the set provided). If one takes the even broader measure that Treasury releases which includes the short term securities as well as the long term ones, the capital flows data showed a NET OUTFLOW for the second month in a row. That is hardly 'positive' as some of these mad dreamers are spouting.

"The truth is that even after the debacle in August which was when we saw the first signs of the fallout from the subslime contagion, foreign appetite for US securities is not exactly on a screaming rebound. Given the meager performance of the US stock markets this month (November), I suspect we will soon see net foreign selling of US stocks before long in these reports (which by the way are extremely dated being two months old). Keep in mind that foreigners are observing the dollar falling through the floor and are not going to be in any huge haste to send their money over here as a result.

"Next month's data had better show numbers sufficient to cover the trade imbalance or the dollar is going to get whacked with an ugly stick."

"It is also interesting to note in a memo that the Treasury published Friday morning that out of the -$14.7 billion in net capital outflows (this is the number we get when using the broader measure which includes short term securities), net foreign private flows were negative $27.8 billion, and net foreign official flows were positive $13.1 billion. In other words, it was only official sector buying which kept the number from being far worse."

Also making economic news today was the US Fed's Kroszner who stated in a speech to international bankers in New York that "the current stance of monetary policy should help the economy get through the rough patch during the next year, with growth then likely to return to its longer-run sustainable rate."

This was taken by many to mean that the Fed may not cut interest rates further as the bond market is calling for.

In the commodities market, oil rose on cold weather forecasts in the Northeast and closed above $95 after dropping to as low as $90 earlier in the week on Tuesday. Attention now turns to the OPEC heads of state meeting this weekend, but the topic of conversation is scheduled to be climate change and not a possible output increase.

The US Dollar index fell and treasuries found small gains as the yield on the 2-year flirted with its lowest reading since February 2005 and the yield on the 10-year tested its lowest level since September 2005. These moves came despite the hawkish remarks from Kroszner as poor economic data and worries over the subprime mess dominated overall market sentiment.

The Dow, Nasdaq, and S&P traded mixed in volatile trade before finally ending decently higher as traders debated ongoing credit concerns and whether or not the American consumer is finally slowing down spending due to high energy costs, a tighter credit market, and a continuously falling Dollar.

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