Gold Up on Dollar

Source: Dow Jones Newswires  (10/18/07)

Today's meeting of the G7 finance ministers and central bankers could dictate the near-term direction for the dollar and thus gold, said Peter Grandich, analyst and publisher of the "Grandich Letter."

Gold and silver futures advanced Thursday as they continued their recent reaction to the moves in two other markets - U.S. dollar weakness and strong crude oil.

But while bullish enthusiasm from speculators for gold continues at the moment, one analyst cautioned that the market is becoming increasingly vulnerable to profittaking. Keys will be future direction in oil and the dollar, the latter which may be impacted by a Group of Seven meeting Friday afternoon...

"For months, there has been a sustained correlation between gold prices and dollarrates and interest-rate expectations," said Gary DeDuke, fund manager with Corsair Trading. "After three weeks of consolidation, in late September and early October, gold bulls are really once again in control."...

A Friday meeting of the G7 finance ministers and central bankers could dictate the near-term direction for the dollar and thus gold, said Peter Grandich, analyst and publisher of the "Grandich Letter." Currency market participants will be watching for signs on whether monetary officials are uncomfortable with dollar weakness, and if so, this could prompt worries about intervention or other moves to stem the slide. "The last time the G7 actually chose to intervene in the currency market was back in 2000," Grandich said. "For the currency and gold market, what is said, and even more important, what is not said and the interpretation, from the G7 is going to go a long way in determining what gold and the dollar does next week and possibly for a few weeks after that," he said. There is potential for considerable volatility in the next several days, especially when considering the large net short position of the large commercial accounts on Comex, Grandich added.

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