Gold Falls on Anticipated Dollar Strength

U.S. 10-year Treasury bonds fell today, on
speculation that the Fed will not lower interest rates until at least October.
Last week’s Fed announcement reemphasized the Fed’s primary focus of monitoring
inflation. Although the Fed admitted that the economy could begin slowing,
inflation remains the key focus for the U.S. central bank, causing traders to
pare bets that the Fed would be cutting rates any time soon. The price of 2-year
notes fell to the lowest levels in 4 weeks, further signaling that most traders
are not looking for a cut.

The euro grinded higher against the U.S.
dollar and Japanese yen today. Last week, the ECB held borrowing rates, but
promised continued “vigilance” on inflation. Traders took that as a hint that
futures hikes are around the corner, and now the European currency is pushing
towards new records against the yen. The euro neared matching record highs
against the yen, rebounding from Friday’s lows. The dollar strengthened
fractionally over the yen. The Canadian dollar resumed its advance over the
U.S. dollar; the price of Canadian commodity exports like oil and gold are
rising, pushing the Canadian currency higher.

Crude oil futures were basically flat today, as
investors speculated on summer demand and refinery capacities. Crude oil rose
gradually last week, as traders began to up bets that this summer will be one
of high demand. Low gasoline inventories have traders worried that refineries
will not be able to handle any serious spike in demand or dent in supplies;
most investors are watching for crude to go higher this summer. Natural gas
futures rose about 0.5% on similar summer-related demand issues.

Gold prices fell about 0.3% today, on speculation
that the euro is topping against the dollar. Gold usually trades inversely to
the dollar and with oil; despite euro gains over the dollar today, traders bet
that the euro would not be able to sustain its advance. Traders sold gold in
favor of anticipated dollar strength. Copper futures fell about 3% today, on
speculation that demand from China will dry up as the year goes on.

Grains traded mixed today. Corn fell 1.7%, wheat
gained 0.8% and soybeans rose 1.2%.


No major news to
report today for the U.S.

John Lee

Associate Editor