Oil fell $0.89 to $57.13 as blasts in London were seen as dampening demand and robust stockpiles in the US took drew attention away from any storms in the Gulf of Mexico.

Treasuries fell on news of Chinese revaluation and bombs in London, with the yield climbing to new 3 month highs.

The Dow, Nasdaq, and S&P traded lower this morning before rebounding to near unchanged in early afternoon trade, but all three indices then fell back off to near their lows of the day by the end of trade.

The yen climbed to 3 and ½ week highs as it was finally announced that China will revalue its currency.  The initial move is small, but more are expected to come.

More from Peter Spina:

With news out of London dominating headlines, the big story was out of China.  Today it announced it has cut its exclusive currency link to the U.S. Dollar and replaced it with a basket of foreign currencies, with the exact composition yet to be disclosed. The Chinese government also took action and increased the set exchange rate by about 2%, giving Chinese purchasing power a boost by making foreign assets cheaper to buy, but also making exports more expensive. Although cutting the exclusive tie to the U.S. Dollar and opting for a basket of currencies, no hint if gold is to be included, there is still debate as to what this will do to the future value of the Chinese currency.  What commentators on GoldSeek.com have been mentioning today is the negative consequences this will bring to the U.S. Dollar.

“July 21, 2005 will be another date likely to live in infamy.  This time the aggressor is China not Japan, and the bombs are purely economic.  Though there will be no immediate loss of life, and no American retaliation, the financial damages will be devastating.  History will remember this date as the beginning of Chinese independence, and the beginning of the end of America’s ability to depend on China.” - Peter Schiff, Who Says No One Rings a Bell?

“The most important implication of this move is that it reduces the need for China to purchase US Treasuries in the amounts accumulated in the past,” noted Jim Sinclair in an e-mail commentary. “I conclude that the move by China is therefore presently neutral for the dollar but in a short time it will be recognized as negative. Prior to this important event, the spin had many convinced everything was dollar positive.”

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

Gold and silver traded nicely higher in Asia and London before adding to their gains in New York, with gold gaining $3.70 to $425.00 and silver gaining $0.07 to $7.09.

Gold and silver equities jumped about 2% higher at the open, and then added to their gains in afternoon trade, ending near their highs of the day.

More Precious Metals Analysis:

The gold market was lifted by a series of surprise events on Thursday. First of all the market was in the process of short covering in the wake of a failed effort to push prices down in the wake of the first leg of the Greenspan testimony. The overnight short covering interest was extended by a surprise "re-peg" of the Chinese currency, which then gave way to flight to quality buying off the London bombings. In short, both the gold and silver markets benefit from the potential for increased Chinese purchasing power and from flight to quality concerns.” - The Hightower Report, Futures Analysis and Forecasting

Gold & Silver Stock News Update from GoldReview.com:

Pacific Rim’s extension payment received, Aurizon Mines’ update on its activities on its Casa Berardi Project, and Vista Gold’s amendments to an agreement to sell Amayapampa were among the big stories in the gold and silver mining industry making headlines today.

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-- Posted Thursday, 21 July 2005 | Digg This Article