MONDAY Market Excerpts

Gold eases in consolidative trade

The COMEX August gold futures contract closed down $10.10 Monday at $952.50, trading between $943.80 and $961.10

June 8, p.m. excerpts:
(from AP, Bloomberg & DowJones) — Prices for gold and other commodities retreated Monday as investors cashed in on some recent gains and as the dollar rose against other currencies.

The dollar moved higher versus European currencies on worries about the European economy and following a downgrade to Ireland’s debt rating by Standard & Poor’s.

Rob Kurzatkowski, futures analyst with OptionsXpress, said the pullback in commodities prices was being seen as a healthy sign given the strong run they have had recently. “When prices rise too fast, those are boom-and-bust markets,” Kurzatkowski said. “Markets that correct along the way are going to be healthier markets.”

Jean-Marie Eveillard, the senior investment adviser for the $7 billion First Eagle Global Fund, said it is 10 percent to 12 percent invested in gold and gold-mining securities.

“It’s insurance to protect against the fact that current policies by the American government and the Fed are potentially wildly inflationary,” Eveillard said today, referring to the Federal Reserve.

The dollar gained on speculation that the Fed will raise interest rates by the end of the year as the economy recovers. The U.S. Dollar Index, a six-currency gauge of the dollar’s value, climbed as much as 1 percent after jumping 1.7 percent on June 5, the most in more than four months.

Gold futures for August delivery dropped $10.10, or 1 percent, to $952.50 on the New York Mercantile Exchange’s Comex division.

Earlier, the price touched $943.80, the lowest for a most-active contract since May 26. “Gold prices could eventually fall toward $930 before rebounding back toward last week’s high at $990,” Tom Pawlicki, an analyst at MF Global in Chicago, said today. “We’re not sure a focus on U.S. recovery can continue, as the small signs of recovery have occurred globally, and Fed funds rates are likely to remain low for a long period of time.”

“There is one all-encompassing theme and that is the well-bid U.S. dollar,” said Bart Melek, global commodity strategist with BMO Capital Markets.

Currency analysts cited several factors underpinning the greenback, including global equity-market weakness, general risk aversion, Friday’s stronger-than-forecast U.S. jobs data and a downgrade to Standard & Poor’s credit rating for Ireland.

George Gero, vice president with RBC Capital Markets Global Futures also cited the continued wait ahead of congressional action on proposed International Monetary Fund sales of gold to generate funds to help poor countries. While this is expected, there nevertheless remains some uncertainty over exactly how events will unfold, he said.