Mais um interessante Market Wrap Up retirado do site FinancialSense.com.
"Many Thanks to the BOJ"
Today the dollar firmed-up against most major currencies and money moved into Treasury bonds on speculation the Bank of Japan was selling yen to buy dollars, and would then use the dollars to purchase U.S. Treasury debt. Analysts close to the foreign exchange market suggested that Japan’s central bank may have sold $5 to $6 billion in yen during overnight trading. Based on past occurrences, it is assumed that the yen sales would be used to support the falling U.S. dollar, and therefore support Japan’s export industries. The dollar ended the day by strengthening 0.16% versus the euro to $1.2187, gained 0.24% versus the Swiss franc and 0.14% versus the British pound, and to confirm the Japanese intervention, the dollar gained 1.1% versus the yen, so a dollar now buys 107.9 yen. An unnamed floor trader said that the yen sales started when the dollar weakened to 107.4, and would continue if the yen strengthens to the 107 level again.
The Bank of Japan has sold $165 billion worth of yen this year alone in an effort to slow the decline of the U.S. dollar. I say many thanks to the Japanese, because without their support we would surely be looking at higher interest rates and a dollar with lower purchasing power. The Japanese have increased their holdings of U.S. Treasury debt by 26% this year to almost $500 billion, so one must begin to wonder how much longer they will continue to increase their purchases of Treasury debt or if they are nearing the point of saturation. According to Ken Landon, senior currency strategist at Deutsche Bank, “Asian banks have been major buyers of Treasury bonds, but historically that hasn’t pushed the dollar higher – it has only kept it from collapsing.” As time goes by the U.S. is becoming more and more dependent on foreign capital to sustain our financial assets. The Federal Reserve has done virtually everything in their power to give us easy money, and for a “considerable period,” but we must continue to get more money from our foreign friends just to support the status quo.
Impeccable Timing
The BOJ currency strategists sure nailed the timing to support the U.S. dollar and bond market since the U.S. Treasury is selling more debt today. Remember the Treasury auction that took place on November 13th saw the ten-year note draw a bid-to-cover ratio of 1.90, while previous auctions saw stronger demand with bid-to-cover ratios at 2.2 in September and 2.0 in October. The demand for Treasury debt is clearly diminishing, but the BOJ stepped in right when they were most needed. Today the U.S. Treasury sold $16 billion in new five-year debt and tomorrow they plan on selling $12 billion of ten-year notes. I’ll be looking for the bid-to-cover ratios for these debt offerings to see if the BOJ intervention was enough to pump up the demand for U.S. debt instruments. We will just have to see how long treasuries can remain at these lofty levels. Since the Fed stance on inflation/deflation has softened to neutral, the market has assumed interest rates will be heading higher sometime next year. Moving into 2004 there will clearly be pressure on bonds to hold interest rates at the current 45-year lows.
Stocks Looking for Direction
With most of the focus on treasuries, stocks flip-flopped around break-even most of the day without ever getting any real direction. The major indices hit their lows with about two hours remaining in the session, but bounced back to close with minor losses. The Dow Industrials dropped one point to close at 9,921, the NASDAQ fell three points to 1,904, and the S&P 500 shed one point to close at 1,059. The Fed’s re-flation campaign has been progressing quite well throughout most of 2003, but has it already been priced into stocks? With the Dow touching 10,000 and the NASDAQ touching 2,000, how much higher can stocks go without further stimulus? Higher interest rates don’t bode well for a fragile economy that is dependent on higher debt levels just to maintain current spending. Stocks will need some kind of new catalyst (or stimulus) going into next year for the bulls to keep the party going. I don’t see it happening, especially with higher interest rates.
Gold and silver shares took a hit today with the HUI Gold Index dropping 6% to close at 227.62, a drop of 14.6 points. The index has now pulled-back roughly 31 points (or 12%) after reaching the high of 258.60 at the beginning of December. It looks like many of the gold and silver enthusiasts are hitting the road in anticipation of a pull-back in the price of the metals. Today gold hit a new intra-day high of $413.30 on the February futures contract, but finally settled the day at $407.00, with March silver closing at $5.62 per ounce, down $0.035 for the day. Traders in the precious metals arena will need to be especially nimble if they hope to capture their current gains by selling with the hope of buying back the shares at a cheaper price after a pull-back.
The biggest regret I have heard so far from gold and silver share investors is that they sold out too early and haven’t been able to buy back the shares at a lower price yet. The hard-core gold bugs have been conditioned that a brutal beating lies ahead. That has been the pattern for many years but I am not convinced it remains true. Recent price declines in the metals have been met with aggressive buying. Barrick has thrown in the towel on hedging and the dollar decline is on everyone’s radar screen. Foreign central banks are deliberately weakening (printing more of) their currencies to slow the dollar decline. I would like to see the central governments print more gold and silver to keep up with the global monetary debasement that runs rampant today.
So far, gold has risen in U.S. dollar terms from roughly $250 per ounce to $400 per ounce, but the same cannot be said in yen and euro terms. With the yen and euro strengthening against the dollar, they have basically kept pace with rising gold and silver prices in dollar terms. They are not yet seeing the bull market in precious metals that we see as U.S. dollar holders. If the Japanese continue to weaken their currency and the EU decides the euro is too strong at $1.25, they will both need to intervene in order to slow the dollar decline. That should be enough to launch gold and silver to bull market status in both yen and euros. In my mind that will mark the beginning of stage two of this young bull market in precious metals. According to John Reade, an analyst at UBS Ltd., “Gold will continue to take support from the currency markets.” He expects gold to trade in a range of $370 to $470 an ounce through 2004.
More Fuel For the Fire
With an election year right around the corner, Mr. Bush will have plenty of fires to put out. We have the tensions of international terrorism, trade wars complete with tariffs and quotas, competitive currency devaluation from all corners of the globe, and now we have Canada, Germany, France, Mexico, China and Russia upset with a new policy decision from the Bush administration. Yesterday, U.S. Deputy Defense Secretary Paul Wolfowitz released the list of 63 countries that are approved to bid on the reconstruction of Iraq, and the countries listed above are not on the list. The authorities in the EU said they will be looking into the U.S. actions to see if the Bush administration is breaking trade rules by not allowing alternate bidders. In the end I see ongoing international tensions that will put continued negative pressure on U.S. financial markets and especially on the strength of the U.S. dollar. The international tensions will continue to be friendly to gold and silver investors as investors run from declining fiat currencies.
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