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Weak Data Hit Dollar, Aid Gold
Friday, November 17th, 2006 Posted in Gold News |
Poor housing data undermined the dollar Friday, helping gold recover from an underwater start.
Source: TheStreet
Weak Data Hit Dollar, Aid Gold
By Simon Constable
TheStreet.com Staff Reporter
11/17/2006 2:54 PM EST
Poor housing data undermined the dollar Friday, helping gold recover from an underwater start.
Gold for December delivery closed up 80 cents at $622.50 an ounce on the Comex division of the New York Mercantile Exchange, having dipped to an intraday low of $614.50. Open interest for the December contract slipped to 14.8 million ounces, from 15 million Thursday, with interest in the February contract unchanged at 9 million ounces. February-dated gold, which will takeover as the benchmark contract shortly, closed at $628.70, up 80 cents also.
The exchange-traded funds which hold the bullion, streetTracks Gold Shares (GLD - news - Cramer’s Take) and iShares Comex Gold Trust (IAU - news - Cramer’s Take), were gaining also, each up about 0.6% recently.
Sparking the rally was the Commerce Department’s report that October housing starts totaled 1.486 million, well below consensus forecasts of 1.68 million and down dramatically from a revised figure of 1.74 million in September. October saw 1.535 million building permits issued, lower than estimates of 1.625 million and down from 1.638 million in September.
The weak statistics sent the greenback, which tends to move inversely with the price of gold, skidding as currency traders factored in a more broadly weakening economy. One dollar was recently buying 117.725 yen, down from 118.22 yen late Thursday. It was also losing against the euro, which was trading at $1.2826 compared with $1.2796 previously.
“This [housing] market remains weak,” says Phillip Neuhart, an economist at Wachovia in Charlotte, although he notes that the Commerce Department statistics may be a low-water mark in terms of actual starts, but the weakness could continue through 2007. “That means we might see short-term rises [in building activity] but still be very, very weak.”
Other economic news looks more promising, however, with the weekly leading index showing a 1.2% jump for the week ending Nov. 10 compared with a 0.6% gain in the previous period. The increase marks a 22-week high in the growth rate.
“Looking forward, growth prospects remain lackluster, they are not great,” says Lakshman Achuthan, managing director at the Manhattan-based Economic Cycle Research Institute, which compiles the indicator. “But they have begun to revive a little. In itself that’s good news, because if they weren’t we’d be flirting more and more with recession risk.”
In the gold patch, shares of Randgold (GOLD - news - Cramer’s Take) were rallying 1.6% recently, while those of Agnico-Eagle Mines (AEM - news - Cramer’s Take) were gaining 1.2%.
In base metals, Comex March-dated copper contracts closed up 1.75 cents at $3.0925 pound, after recovering from an intra-day low of $3.013.
” The new data does reinforce the situation of a weak demand over the past couple of months,” says Peter Kettle, a copper analyst at CRU, a London-based specialty consulting firm, as the housing sector accounts for about 10% to 15% of U.S. end-use demand. “We certainly see a more difficult year ahead, but it could be offset by a revival in buying from China.”
Traders quickly marked down shares of diversified miners Companhia Vale do Rio Doce (RIO - news - Cramer’s Take) and Rio Tinto (RTP - news - Cramer’s Take), were falling, off 1.3% and 1%, respectively as the impact of the weak housing sector sank in.
In ferrous metals, shares of U.S. Steel (X - news - Cramer’s Take) caught fire, shooting up 7.7% recently after rumors of a possible takeover bid out of Russia.
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