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-- Posted Friday, 29 August 2008 | Digg This Article | Source: GoldSeek.com

Please Note: US and Canadian markets are closed on Monday in observance of Labor Day.

The Metals:

Gold and silver rose to $838.60 and $13.91 in Asia and London before they fell back off in choppy New York trade and ended near their late session lows of $828.95 and $13.56 with losses of 0.29% each.

Euro gold stayed at about €566, platinum gained $4 to $1477.5, and copper remained at about $3.43.

Gold and silver equities fell roughly 1% by late morning and lingered at about that level for the rest of the day.

The Economy:

“The report's price gauge tied to spending patterns jumped 4.5 percent from July 2007, the biggest 12-month gain since 1991.

The Federal Reserve's preferred gauge of prices, which excludes food and fuel, climbed 0.3 percent for a second month. The so-called core price measure was up 2.4 percent from a year before, the most since February 2007.”

All of this week’s economic reports:

Next week’s economic highlights include Construction Spending and the ISM Index on Tuesday, Factory Orders and the fed’s Beige Book on Wednesday, ADP Employment, Initial Jobless Claims, Productivity, and ISM Services on Thursday, and August’s jobs data on Friday.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil rose in early trade as Gustav strengthened heading towards the Gulf of Mexico and inspired traders to cut any short positions heading into the long weekend, but gains pared in late trade and turned to a small loss at the close after forecasts began to call for the storm to head further north and cause less damage than previously thought.

The U.S. dollar index fell in early trade, but it rose to find a slight gain by the close after oil erased its gains.

Treasuries fell as interest rates rose on better than expected readings from Chicago PMI and Michigan Sentiment.

The Dow, Nasdaq, and S&P fell about 1% on disappointing Personal Income data, worrisome comments from Dell, and worries over Gustav.

Among the big names making news in the market Friday were Nintendo, Microsoft and ciao.com, Delphi, Dell, and Boeing.

The Commentary:

“Dear Friends,

If anyone wants to know why bonds have been busy going nearly straight since the middle of July, just look at the charts linked below.

The first is Federal Agency Debt holdings in the New York Federal Reserve's Custodial Accounts. The second chart is US Treasuries holdings in those same accounts. The third is total holdings in the Custodial Accounts.

Foreign Central Bank holdings of US Federal Agency debt holdings hit a high water mark of $986 billion reported on July 17 of this year. This week's data shows that those same Foreign Central Banks are now down to $968 billion. In five weeks time, foreign central banks have sold $18 billion worth of US Federal Agency debt.

Over that same time period, they have increased their holdings of US Treasury debt from $1.363 trillion to $1.441 trillion, an increase of $77.33 billion!

For the entire 5 week period beginning July 17, 2008 to the present week, total custodial holdings have increased $59.71 billion.

Foreign Central Banks have been quite busy unloading US Federal Agency Debt and acquiring US Treasuries in its place and then some. One would easily get the idea that they do not feel comfortable with it any more. Even a cursory glance at the Agency Debt Holdings chart shows that the last five weeks have seen the largest drop in this category over the life of the data series that I am using. While we have seen reductions in their holdings from week to week on occasion over the data range, this is the first time we have seen a reduction in US Federal Agency debt holdings that has continued for this length of time.

As a side note – the huge amount of US Treasury purchases which has sent that chart nearly vertical helps to explain the continued rally in the US Dollar. It is a near certainty that something has been transpiring behind the scenes involving various Central Banks in regards to the US Dollar. Should any of this Foreign CB buying abate for any reason whatsoever, the Dollar will lose all of its support immediately. With yields on US Treasuries headed firmly lower only a foolish investor would see bonds or notes as a safe haven given what we all know about the real rate of inflation here in the US in contrast to the absurd and mentally insulting numbers that the knavish Feds are dishing out.

I repeat my main assertion - Foreign Central Banks are behind the rally in US Treasuries and as a consequence, the rally in the US Dollar. How much longer they remain willing to ply this gambit is unclear but one is not at all murky, someone is going to get stuck holding the bag.

Click here for today’s Custodial Holdings and Account Balance charts with commentary from Trader Dan Norcini”- Dan Norcini, JSMineset.com

“December Gold finished down 2 at 835.2, 7.2 off the high and 1.2 up from the low.

December Silver closed up 0.002 at 13.707. This was 0.007 up from the low and 0.163 off the high.

The gold market might have disappointed some bulls with its action Friday, as the market was presented with a series of potentially supportive themes from the week and yet many of the potential flight to quality themes seemed to lose their influence during the trade Friday. Certainly the gold market was supported by concerns that the upcoming tropical storm might wreak havoc on the US economy and certainly some gold bulls were anticipating that another record insurance loss in the US Gulf States could put several US financial sector stocks back on the brink of failure. While the Dollar did show some periodic weakness this week, the Dollar was pretty impressive in its ability to hold up around and above the 77.00 level and that probably leaves some gold bulls on edge. In a positive note the gold market leaves the week with a series of very favorable gold coin stories in the marketplace and the market also seems to have reconfirmed ongoing strong gold ETF demand and that could help the market discount the lingering fears of too much slowing.

The silver market in general this week showed the capacity to continue its short covering impetus from the early August lows. Clearly the silver market continues to take its direction from the gold market and from flight to quality issues. However, with clear divergence between the precious metals markets and the industrial metals on Friday, it is clear that lingering concerns of too much slowing is serving to discourage some silver buyers. In the end, the biggest physical supply side news of the week in silver was supportive for prices, as Mexico (a key silver producer) posted a rather significant decline in June silver production.”- The Hightower Report, Futures Analysis and Forecasting

GATA Posts:

China makes it hard to believe commodity boom is over

No currency intervention? Jim Sinclair knows better

Russia may cut off oil and gas to Europe

U.S. appeals court validates gold clause in rental contract

The Statistics:

As of close of business: 8//2008

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

 Note: No change in Total Tonnes from yesterday’s data.

COMEX Gold Trust (IAU)

 Note: Change in Total Tonnes from yesterday’s data: 1.69 tonnes were removed from the trust.

Silver Trust (SLV)

 Note: No change in Total Tonnes from yesterday’s data.

The Stocks:

IAMGOLD’s (IAG) bid for Euro Resources (EURR.PA), Eldorado’s (EGO) project update, and Sterling Mining’s (SRLM.OB) lease were among the big stories in the gold and silver mining industry making headlines Friday.

WINNERS