-- Posted Thursday, 9 June 2005 | Digg This Article

Market Analysis from CapitalUpdates.com:

In his testimony before a joint economic committee of congress today, Greenspan did not use the baseball analogy in reference to interest rate rises in his remarks, but did repeat the “measured pace” stance, saying the economy is on a “reasonably firm footing.”  He mentioned the spring slowdown in the economy is not “presaging” a more-serious slowdown in future economic activity.  Underlying inflation remains modest, and the fed will remain vigilant in order to combat it.  When asked what the ideal fed rate is, also knows as where the fed will stop, the chairman said it’s hard to know were the neutral rate is, but that we will know it when we are there.  The fed is data dependent heading into the future.

Greenspan talked about how long term interest rate yields have fallen despite the fed raising short term rates 2% so far, and that this is unprecedented.  This is unusual, but not limited to the U.S., and is evident in other world markets as well.  There are a number of theories behind the reasons for this flattening of the yield curve, but there is ultimately no clear reason as to why this is, and it remains a “conundrum.”

The unprecedented drop in long term rates despite the short term interest rate rise has contributed to a very strong housing market.  He said there was “froth” in local markets and that it may have spilled over into the mortgage market, though believes there does not appear to be a national housing bubble.

Ron Paul questioned the chairman about the nation’s enormous debt and false prosperity created by that debt.  Greenspan said that the debt has to be serviced, but that a reasonable amount of debt does lead to strong growth.  Greenspan was then questioned about his support of education and other programs, but that his support of tax cuts in order to cut deficits results in cutting funding to many of these programs.  The chairman then mentioned his support of pay-go to pay for these programs and said that the cutting of deficits is very important.

Greenspan also defended the fed’s loose monetary policy adopted following the stock bubble collapse.  Other topics mentioned were job quality, the importance of education, the savings rate in relation to social security and private accounts, and pensions.

Overall, the chairman was evenhanded when dealing with policy discussions and basically reiterated past comments on economics.  The fed will remain with their “measured pace,” the flattening yield curve remains a “conundrum,” inflation remains contained, and there is froth some local housing markets, but not a national housing bubble.  Bottom line, we didn’t hear anything new, despite the hype of the press once again erroneously expecting something. 

Initial jobless Claims for 6/04 came in a bit less than the expected 335,000 at 330,000, which is 21,000 less than last weeks slightly upwardly revised mark.

Tomorrow brings a busy end to the economic week beginning at 8:30AM EST with Import and Export Prices for May.  Also at 8:30 is the Trade Balance for April expected at -$58.0 billion.  At 2PM is the Treasury budget for May expected at -$45.0 billion.

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Oil traded higher throughout the day as a tropical storm in the Gulf of Mexico has forced some evacuations which could limit refining output.  OPEC’s meeting next week in which they will be discussing possible output increases also had some impact on the market today.  Oil gained $1.74 to $54.28.

The 10-Year Treasury note yield traded higher throughout the day, but remained under 4%.  The yield managed a gain of 0.025 points to 3.965% as the June 2005 US Treasury bond lost 8/32 to 118 1/32.

The Dow, Nasdaq, and S&P traded mixed but mostly lower this morning before turning higher in afternoon trade and ending the day with modest gains.  The Dow gained 0.25% to 10503.02, the Nasdaq gained 0.81% to 2076.91, and the S&P gained 0.52% to 1200.93.

Among the big names making news in the market today were Toll Brothers, Intel, Sihpol and Spitzer, Morgan Stanley, Delphi, Harrah’s and Caesars, Research in Motion, Navistar, Molson Coors, Google, Chevron and Unocal, H&R Block, and Hank Greenberg and AIG.

The U.S. dollar index traded as high as 88.31 early in Greenspan’s testimony, but fell off from there to end with a small gain of 0.13 points to 88.08.  The euro index made a new intraday 8 month low at 121.90, but rebounded from there to end with a gain on the day of 0.06 points to 122.24.  The yen lost 0.18 points to 93.00.

Gold & Silver Report from GoldSeek.com & SilverSeek.com: 

Gold Warehouse Stocks:	6,006,435	-
Silver Warehouse Stocks:	103,781,584	-

Gold and silver traded slightly lower overnight before notable drops at the New York open.  Gold rebounded to near unchanged, but still ended slightly lower while silver made new lows and ended with a notable loss.  Gold lost $0.60 to $423.40 and silver lost $0.18 to $7.25.

Gold and silver equities fell almost 2% lower in midmorning trade, but rebounded to near unchanged by the afternoon and remained near those levels to end with small gains as the new gold ETF’s followed a similar pattern, but traded in a much tighter range and ended slightly lower.

Note:  Unless we get feedback telling us otherwise, we will soon be dropping coverage of the gold ETF’s; GLD and IAU.  Their movements mirror the gold price and IAU especially trades on very low volume.  Also, our Gold/Silver commentary will soon be expanding to include other respectable author commentary.  As always, email Chris Mullen at cm@goldseek.com with comments.

Gold & Silver Stock News Update from GoldReview.com:

Teck Cominco’s unlikeliness to buy a stake in Ivanhoe’s Mongolia property, Golden Star’s permits for Bogoso expansion, Newmont’s Pierre Lassonde seeing a gold price of $525 by January, Cardero’s acquisition of the Peruvian iron sands project, a class action lawsuit filed against Newmont, Canyon Resources’ update on their reward project, Ivanhoe’s closed C$158 million financing, and Miramar’s results from the Madrid deposit were among the big stories in the gold and silver mining industry making headlines today.

WINNERS

LOSERS

Note:  Although Winners & Losers will no longer track stocks under $1, there are two notables today.  Miramar gained 18.29% to $0.97 and Canyon Resources lost 11.39% to $0.70 on their news released both today and last night.

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Do you have questions, comments, or suggestions about this report?  Email Chris Mullen at cm@goldseek.com.

- Written by Chris Mullen

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© Gold Seeker 2005

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-- Posted Thursday, 9 June 2005 | Digg This Article

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