Gold News

Gold Ends Weds Unchanged, Oil Soars, Treasury Bonds Face Weak Demand as Deficit Leaps

From Chris Mullen at GoldSeek.com...

Gold gained $11.85 to reach as high as $965.30 in London on Wednesday, before it fell in early New York trade to see a loss at $947.20 an ounce.

Gold Prices then rallied in the last couple of hours of trade and ended as good as unchanged vs. the Dollar. The Gold Price in Euros climbed to €682.

Platinum gained $16.50 to $1265.50, and copper remained at about $2.36, while silver climbed as high as $15.48 in London before it dropped to $15.03 in late morning New York trade.

Silver then also rallied back higher into the close and was able to end with a gain of 0.1%. Gold Mining and silver equities rose over 1% at the open, but they then fell back off for most of the rest of trade and ended with almost 1% losses on the day.

Crude oil meantime rose to a new high for 2009 above $71 as US stockpile inventories fell more than expected. Crude inventories fell 4.4 million barrels, gasoline inventories fell 1.6 million barrels, and distillates dropped 300,000 barrels.

The US Dollar index fell in early trade as China expressed fears over the soaring US budget deficit and Russia pledged to cut its holdings of US Treasury bonds, but the Dollar then climbed back higher in late trade and ended with decent gains after it became evident that any move by Russia would be gradual and some time out into the future.

Worries over bonds and another round of financial deleveraging also seemed to encourage some cash raising. Treasuries fell after an 10-year note auction required a higher than expected yield and exacerbated worries over the government’s ability to sell debt.

The yield on the 10-year even climbed above 4.00% at one point to make for the highest since last October. Thursday's 30-year note auction will be closely watched.

The Dow, Nasdaq, and S&P fell on oil’s continued rise and on concerns over the need for higher yields in order to draw in buyers for government debt.

On the economic front, both the US trade and fiscal deficits for April exceeded analyst forecasts, rising to $29.2bn and $189.7bn respectively.

The Federal Reserve's Beige Book of analysis showed that “US economic conditions were weak or got worse" in May, but some regions saw signs the contraction is moderating.

The Treasury budget deficit, already approaching $1 trillion for 2009 to date, grew as the recession hit tax revenues and spending grew.

The excess of spending over revenue climbed to $189.7 billion, a record for April, as spending rose 5.8% and revenues fell by the same mount.

Thursday at 13:30 GMT brings Initial US Jobless Claims for last week, expected at 625,000, and then Retail Sales for May expected up 0.5%.

Excluding autos, US sales are expected better by 0.2%. At 15:00 GMT comes the Business Inventories report for April expected down 1.0%.

Chris Mullen is chief content manager of the GoldSeek family of websites, a leading source of gold news, comment and mining-stock data for private and institutional investors.

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