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Murhphy''s ''Midas'' commentary for June 23 posted at GoldSeek
By Pham-Duy Nguyen
Bloomberg News Service
Thursday, June 23, 2005
http://www.bloomberg.com/apps/news?
pid=10000080&sid=aXqKxtJ7mmRo&refer=asia
Gold prices in New York rose to a three-month high amid speculation
China soon will raise the value of the yuan against the dollar,
boosting the appeal of precious metals as an alternative to
investments in other currencies.
China should raise the value of the yuan by 5 percent to 10 percent
in a single move, the Beijing Morning Post reported, citing a report
in a journal published by the State Council, the country's highest
governing body. A revaluation of the yuan, which has been fixed at
about 8.3 to the dollar for a decade, would benefit gold prices,
traders said.
"Gold is the obvious alternative" when China raises its peg to the
dollar, said Daniel Vaught, an analyst at A.G. Edwards & Sons Inc.
in St. Louis. "That will tend to weigh on currencies across the
board, and particularly encourage the Chinese to buy gold."
Gold futures for August delivery rose $3.50, or 0.8 percent, to
$443.20 ounce on the Comex division of the New York Mercantile
Exchange, the highest close since March 16. A futures contract is an
obligation to sell or buy a commodity at a set price by a specific
date.
Speculation that China will revalue its currency heightened as some
U.S. lawmakers criticized China for trade policies that many say are
harming U.S. companies. Imposing sanctions would be misguide and put
the U.S. economy at risk, Federal Reserve Chairman Alan Greenspan
and Treasury Secretary John Snow said today at a Senate Finance
Committee hearing.
"China is now ready and should move without delay in a manner and
magnitude that is sufficiently reflective of underlying market
conditions," Snow said. "Implementation of trade sanctions would
lead to retaliatory policies against our exports, damaging the U.S.
and global economy."
Many U.S. legislators want the Bush administration to apply more
pressure to China to abandon policies that tie the value of its
currency to the dollar, which they say undercuts U.S. factories and
contributes to a near-record trade deficit. The Senate is
considering legislation that would impose punitive tariffs on
Chinese imports.
China lawmakers "don't respond well to that kind of persuasion,"
Vaught of A.G. Edwards said.
Chinese President Hu Jintao is prepared to discuss China's fixed
exchange rate at the Group of Eight summit in Scotland next month,
The Associated Press reported, citing the Chinese Foreign Ministry.
Some investors are selling euro and buying gold, traders said. The
euro dropped for a second day against the dollar as a decline in
Italian consumer confidence added to speculation the European
Central Bank may reduce interest rates.
"Since the euro has lost some of its credibility, some people turn
to gold now instead of buying the dollar," said Robert Cameron, a
precious-metals trader in New York at Mitsubishi International
Corp., a unit of Japan's largest trading company.
The link between the euro and gold began to diminish after voters in
France and the Netherlands rejected referendums on a proposed
European Union constitution. Against the dollar, the euro fell to
$1.2031 at 2:21 p.m. n New York from $1.2129 yesterday.
"Gold is now trading on its own merits," Cameron said. "I'm not sure
if the dollar breaks down $1.20, gold is going to go lower."
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