Dollar Weakness Rekindles Fund Buying for Gold


". . .the arm-wrestling match to turn the market tide will (still) remain a dollar-centric issue."

Price firmness continued to be manifest in bullion as the New York session got underway this morning. Overnight, mild selling overseas brought gold to lows near $968 per ounce. However, persistent dollar weakness rekindled fund buying and values returned to above $980 as Tuesday dawned.

The trade will focus on the achievement of the four-digit mark, and as we told Bloomberg Radio yesterday, it may be a matter of hours until the third such try turns successful. Sources say that stops are in the market at $960 below and at $1010 above, but the arm-wrestling match to turn the market tide will (still) remain a dollar-centric issue.

New York spot dealings recorded an $8 advance out of the gate for gold, which was quoted at $982.60 basis spot bid, against a backdrop that saw the dollar at 78.84 on the index, but also had crude oil on the retreat, at $68.05 per barrel.

Silver gained 12 cents to rise to $15.71 an ounce, while platinum climbed $8 to $1,217 and palladium was ahead by $3 at $242 per ounce.

Well, as expected, this week's focus is sharply angled towards the Tim Geithner Show underway in Beijing. Mr. Geithner's presence is designed to bring some touchy issues to the forefront. One of those issues, of course, is the yuan. But, also as expected, the Chinese currency and its value were cleverly not tabled in this round.

The dollar, and its medium-term fate, on the other hand, were given ample airtime. And then some. Mostly dollar-positive statements emerged from various talks, press briefings, and assorted high-level mingling.

Whether the Chinese wanted to keep jumping up and down and display more overt concerns was not to be gleaned from this series of tete-a-tete sessions. And, as one analyst puts it in a Bloomberg piece this morning, why would they?

"China will be shooting themselves in the foot if they push this issue too hard," said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. "If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world."

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