-- Posted Wednesday, 17 August 2005 | Digg This Article

Market Analysis from CapitalUpdates.com:

PPI rose by the most in 9 months and came in much higher than the expected 0.5% at 1.0%.  Core PPI came in higher than the expected 0.1% at 0.4%, the most since January.  The data brings back inflation fears and supports the view that the fed will continue to raise interest rates.

Tomorrow at 8:30AM EST brings Initial Jobless Claims for 8/13 expected at 310,000.  At 10AM are Leading Indicators for July expected at 0.2% and at noon is the Philadelphia Fed for August expected at 14.0.

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Oil traded slightly lower ahead of this morning’s EIA inventory report that saw crude inventories build 300,000 barrels, gasoline inventories fall 5 million barrels, and distillate inventories build 1.2 million barrels.  The enormous drop in gasoline inventories was much more than any expected, and oil quickly turned losses into gains as a result, but those gains were short-lived.  Oil soon fell back off to new lows as news came that recently troubled refineries are coming back online and figures may be starting to show that demand could finally be falling off.  Traders lost confidence in the recent rally and sold oil off for the rest of the day, resulting in a loss of $2.83 or 4.28% to $63.25 by the close.

Treasuries dropped on news of high inflation from the PPI data, erasing gains from yesterday’s rally.

The Dow, Nasdaq, and S&P rose despite high PPI, poor technicals, and mixed retail reports.  Lower oil likely helped out, though the major indices ended well off their highs.

Among the big names making news in the market today were Merck and Vioxx, Beverly and Senior Care, DaimlerChrysler, NASD, Citigroup, Merrill Lynch, HP, Microsoft, Qwest, Nortel and LG Electronics, and Nestle.

The U.S. dollar index jumped higher on this morning’s PPI data and remained near its highs into the close.

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

Gold traded slightly lower in Asia and extended its losses in London ahead of PPI data that immediately caused gold to drop in New York.  Gold soon rebounded to about $445, but then fell back off and accelerated its losses just before noon EST, falling under $439 at one point.  Gold rebounded a bit from there, but still ended lower by $6.20 to $440.00.  Silver traded slightly higher in Asia before falling off a bit in London, and then followed gold lower in New York, closing with a loss of $0.03 to $6.96.

Gold and silver equities opened about 1% lower and extended their losses throughout trade, ending near their lows of the session.

More Precious Metals Analysis:

"Gold has set an interesting pattern, with gold going up with the $, when it rises against the Euro, but holding its level against the Euro, when the Euro rises against the $.    This is a reversal of what the market expects.   With the separation of the gold price from the Euro gathering momentum, this pattern is working against a gold price fall of any significance, but could precede stronger rises in the gold price in the near future.   How long will this pattern continue is unclear, but as long as it does the real price of gold will benefit.

A similar feature is being shown on the South African Rand front.   The South African Rand moves with the Euro as South Africa's main trading partner is Europe.  Hence a similar pattern is being shown in the Rand price of gold, with it rising when the $ price of gold rises and holds when the $ falls against the Rand.   The Rand is shadowing the Euro now at R7.94.   The Rand will only fall if South African interest rates are lowered, which may happen, but only next month, IF the oil price sags substantially.   

The effect on South African Mines is good, as they benefit from the higher price in the $, and lose noting when the Euro strengthens and the $ weakens.   As long as this pattern persists, South African mines will increase profitability, whilst not suffering from a weakening $.

Please note that the gold price is still in the process of separating from the Euro, so this could become a longer term trend." – Julian Phillips, Global Watch - The Gold Forecaster

“The gold bulls have to be extremely disappointed with the action Wednesday as prices faded despite a much hotter than expected US PPI report. We suspect that a key reversal in energy prices deflected part of the inflation threat but more importantly a sharp setback in energy prices probably lowers overall flight to quality interest in the precious metals. It is also discouraging to the gold bulls to see weakness across the board in the metals. After all, soaring platinum and copper prices have contributed significantly to the psychological appeal of gold and silver over the last two months. Lastly, it would seem like the US Dollar is going too underpinned by the stronger than expected PPI reading and a soft Dollar is the main hope of the bull camp in the gold market.” - The Hightower Report, Futures Analysis and Forecasting

Gold & Silver Stock News Update from GoldReview.com:

IMA’s $7.5 million bought deal financing and silver intersection at Navidad, Buenaventura’s acquisition of Peruvian land concessions, Nevsun’s assay results from Eritrea, Banro’s drilling program, and Newmont’s acquisition of a Horseshoe Ranch were among the big stories in the gold and silver mining industry making headlines today.

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- Written by Chris Mullen

The Gold Seeker Closing Report is a free edition providing a daily wrap-up of gold & gold-related news.  For more in-depth analysis of the gold markets, subscribe to The Gold Forecaster.

All sources are given within the report and most articles can be found as they are released at http://www.capitalupdates.com/, http://www.goldseek.com/, http://www.silverseek.com/, and http://www.goldreview.com/.

© Gold Seeker 2005

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-- Posted Wednesday, 17 August 2005 | Digg This Article

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