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Tuesday, May 08, 2007

Gold and the Dollar

From the Bloomberg Wire (sorry, not on the web yet) ...

May 8 (Bloomberg) -- Gold fell as a rebound in the dollar against the euro may erode investor demand for precious metals as an alternative investment. Silver declined.
Gold has moved opposite the dollar against the euro 79 percent of the time this year. The dollar gained today for the first day in three before the Federal Reserve meets tomorrow to discuss interest rates.
There is a ``threat of a stronger dollar in the near term'' before the Fed meeting, John Meyer, an analyst at Numis Securities Ltd. in London, wrote in a note today. ``The Fed may raise interest rates to combat inflation.''

XX My take -- I find it highly unlikely that the Fed is going to raise rates, not with the 2008 election cycle already getting underway. So this rise in the dollar/dip in gold is probably a good chance to get long gold. I expect the Fed to disappoint dollar bulls at its meeting tomorrow, and the dollar should slide lower. I've made a chart showing the existing trend ...

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