Market Analysis from CapitalUpdates.com:

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The advanced figure for 2^nd quarter GDP came in a bit less than the expected 3.5% at 3.4%, and far less than the “whisper numbers” of 4-4.5%.  Although less than 1^st quarter growth of 3.8%, the economy continues to expand at better than a 3% rate for the 9^th straight quarter.  The Chain Deflator came in less than the expected 2.6% at 2.4%.  “At the same time, inflation slowed. The government's measure of prices paid by consumers for goods and services excluding food and energy, a measure favored by Federal Reserve policy makers, increased at a 1.8 percent annual rate. That was slower than the 2.4 percent in the prior three months and the smallest gain since the third quarter.”  The Core Personal Consumption Expenditures (PCE) Index referenced above excludes food and energy prices and is closely watched by the fed as a measure of inflation.

The Employment Cost Index for the 2^nd quarter came in less than the expected 0.8% at 0.7% “as wage growth held steady while growth in benefit costs slowed.”

The revised figure for July Michigan Sentiment came in as expected at 96.5, remaining unchanged from a reading earlier in the month and slightly higher than the 96.0 reading in June.

Chicago PMI came in much higher than the expected 55.0 at 63.5, indicating strong growth in the region.  Readings over 50 indicate more businesses are reporting steady or improving conditions than are reporting worsening conditions.

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Oil climbed back above $60 as several refinery fires and an oilfield outage in the North Sea had traders on edge.  Oil traded as high as $61.05 before falling off a bit and ending higher by $0.63 to $60.57.  For the week, oil is higher by $1.92 or 3.27%.  Oil now sits just $1.53 away from the all-time high of $62.10 hit on July 7^th.

Treasuries fell as strong Chicago PMI and a GDP report near expectations raised expectations of future fed interest rate hikes and instigated selling in the bond market, sending the yield on the 10-year to over 3 month highs.  The spread between 2 and 10-year notes rebounded from the 4 and ½ year low of just 24 basis points hit Thursday.

For the week, the yield is higher by 1.49% and the bond is lower by 0.46%.

The Dow, Nasdaq, and S&P fell on concerns over higher interest rates and on end of the month profit taking, with all 3 indices finding just brief gains Friday morning before falling off for the rest of trade and ending near their lows.  The Dow fell from 4 month highs as the Nasdaq and S&P fell from 4 year highs.

Among the big names making news in the market Friday were Volkswagen, American Electric, Boeing, Chevron and Unocal, Wendy’s, Anadarko, Baker Hughes, and News Corp.

For the week, the Dow is down 0.1%, the Nasdaq is up 0.23%, and the S&P is up 0.04%.  For the month of July, the Dow is up 3.6%, its best month since last November, the Nasdaq is up 6.3%, and the S&P is up 3.6%.

The U.S. dollar index was trading higher prior to the release of Friday morning’s GDP report and immediately fell off following the report, but remained mixed and near unchanged for the remainder of trade.

For the week, the dollar is lower by 0.33%, the euro is higher by 0.44%, and the yen is lower by 1.1%.

This week’s economic reports:

Next Monday at 10AM brings Construction Spending for June expected at 0.5% and the ISM Index for July expected at 54.1.  Highlights for the rest of the week include Personal Income and Spending on Tuesday, ISM Services on Wednesday, and Nonfarm Payrolls on Friday.

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

COT Gold Report - July 29, 2005

COT Silver Report - July 29, 2005

Gold traded mixed but mostly higher in choppy trade in Asia and London before trading nicely higher in New York.  Gold spiked upward about $2 following Friday morning’s GDP report and then spiked again to as high as $430.80 in late morning trade before dropping back below $430 and remaining at the $429 level from there, closing higher by $2.70 to $429.50, its highest close since June 30^th.

Silver traded mixed in Asia before dropping in London, but it then rebounded in New York and ended near its highs of the session, gaining $0.06 to $7.22, a new one month high.

For the week, gold is higher by $5.10 or 1.2% and silver is higher by $0.17 or 2.41%.

Gold and silver equities traded around 1% higher for most of trade Friday before falling off in the last hour of trade and ending with minor losses.

For the week, the XAU is lower by 2.6%, the HUI is lower by 2.55%, and the GDM is lower by 2.69%.  Poor earnings continue to hold shares of mining companies down, as rising energy costs hurt profits.  A good example of this is from Newmont which “said Friday that rising oil prices will increase its costs by as much as US$30 million (euro24.8 million) at their massive copper and gold mine in Indonesia.”  This is just one example of the trend that is hurting most, if not all, mining companies.

More Precious Metals Analysis:

“Gold and silver continued to receive fresh buying interest off what we suspect is a failure to rally on the part of the US Dollar. In fact, with much stronger than expected US economic readings and the Dollar showing almost no reaction it is possible that some gold and silver bulls have seen their fears of pressure toward the precious metals complex. With the US Treasury Secretary expecting more appreciation in the yuan we can understand buyers coming back to gold and silver again off the Chinese currency situation. It is also possible that soaring energy prices conspired to give the gold a new sense of flight to quality interest.” - The Hightower Report, Futures Analysis and Forecasting

Gold & Silver Stock News Update from GoldReview.com:

Northgate’s earning’s, Cardero’s corporate update, Crystallex’s filed preliminary base shelf prospectus, and Newmont’s comments about oil prices hurting profits were among the big stories in the gold and silver mining industry making headlines Friday.

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- Written by Chris Mullen

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