Gold edged higher Monday in thin trading as investors anticipated a softer greenback going forward.

Source: [1] TheStreet

Gold Ignores Dollar Strength

By Simon Constable
TheStreet.com Staff Reporter
11/20/2006 12:45 PM EST

Gold edged higher Monday in thin trading as investors anticipated a softer greenback going forward.

December-dated gold contracts were recently trading up $2.50 at $625 an ounce on the Comex division of the New York Mercantile Exchange. Open interest for the contract now stands at 14.3 million ounces, down from 14.8 million Friday. For the February-dated contract the open interest climbed to 9.2 million ounces, up from 9 million. Contracts for the latter were ahead by $3.30 at $632 an ounce. Open interest in the February contract will likely grow over the next few sessions as December dated positions are rolled forward.

The bullion exchange-traded funds were gaining also, with streetTracks Gold Shares (GLD - commentary - Cramer’s Take) and iShares Comex Gold Trust (IAU - commentary - Cramer’s Take), each up about 0.4%.

“Gold has again found good physical interest this morning and should continue to benefit from the recent bearish sentiment towards the dollar,” writes James Moore, an analyst at TheBullionDesk.com. Traders seemed unfazed by a bullish story on the dollar in Barron’s over the weekend and Monday’s strength in the greenback, which was recently buying 118.175 yen, up from 117.76 late Friday. The dollar was also moving up against the euro, which was recently trading at $1.2808 vs. $1.2826 previously. Gold prices tend to move inversely with changes in the value of the U.S. currency.

The big news among the miners was Freeport-McMoRan Copper & Gold’s (FCX - commentary - Cramer’s Take) announcement it would purchase copper producer Phelps Dodge (PD - commentary - Cramer’s Take) for $25.9 billion in cash and stock. Shares of Freeport were losing 0.7% lately, while those of Phelps were flying, up 28.6%.

“The combination does not vary Freeport’s commodity mix significantly, adding one new exposure (molybdenum added to gold and copper),” notes a report by Credit Sights’ analysts Chris Snow and Andrew Brady, who acknowledge the acquisition helps spread the firm geographically.

“We believe the diversity trumps the weakened cost position and the increase in leverage,” they write.

Elsewhere, the Amex Gold Bugs Index was gaining about 1.1%, lifted by the buoyant prices for the metal, while the Philadelphia Gold and Silver Index was rising 1%.

In base metals, Comex March-dated copper contracts were ahead 0.25 cents at $3.095 pound.

“We expect the market to focus once again on rising copper stocks, and a slowing U.S. macro environment,” writes Edward Meir, an analyst at Man Financial. “We still maintain that copper has lower to go, while facing technical resistance at the $7,000 level,” or $3.175 a pound.