Fund manager sees gold above $500 in one year, then higher still

Section:

By Vivianne C. Rodrigues and Mark Tannenbaum
Bloomberg News Service
Tuesday, November 30, 2004

http://www.bloomberg.com/apps/news?
pid=10000101&sid=aTS926UikSV0&refer=japan

NEW YORK -- The dollar reached a record low against
the euro for the 10th time this month on speculation
European finance officials will refrain from selling their
currency to protect exports.

European Central Bank President Jean-Claude Trichet
said financial conditions are "very favorable" in the 12
nations that use the euro. Japan didn't sell yen for an
eighth straight month in November, the Ministry of
Finance said, even as the currency reached a
four-year high.

"The only thing that could ease selling on the dollar right
now would be news of Europe or Japan intervening in the
currency markets," said Steven Englander, a senior
currency strategist at Barclays Capital Inc. in New York.
"It doesn't seem likely that central bankers in those two
regions are planning to take some action soon."

Against the euro, the dollar traded at $1.3291 at 4:01
p.m. in New York from $1.3282 late yesterday, according
to electronic foreign-exchange dealing system EBS. It
reached a record $1.3336 per euro after a private survey
showed U.S. consumer confidence unexpectedly
declined this month. Against the yen, the dollar traded
at 102.90 yen from 102.86.

The dollar is down this month against all 16 major
currencies tracked by Bloomberg, falling the most versus
the euro since December 2003, or 3.7 percent, amid
concern a record current-account gap will cut demand for
the currency.

"Conditions remain in place for the euro region to grow
around 2 percent in 2005," ECB President Trichet said in
comments to the European Parliament's economic and
monetary committee in Brussels.

Trichet also said contributions from exports to growth in
the third quarter were "negative," and he repeated his
remark that recent currency movements are "not
welcome."

Exports make up a fifth of the European economy, twice
as much as in the U.S., making growth vulnerable to
the euro's appreciation. Germany's DaimlerChrysler AG,
the world's fifth-biggest carmaker, said Nov. 26 the dollar's
drop will reduce profit at its Mercedes-Benz unit.

U.S. growth will outpace that of Japan and the euro region
next year, the Organization for Economic Cooperation and
Development predicted today. The U.S. will expand 3.3
percent, faster than Japan's 2.1 percent pace and the
euro-region's 1.9 percent rate, according to the forecast.

A government report today showed the U.S. economy
grew 3.9 percent in the third quarter. The gain in gross
domestic product compared with the 3.7 percent
previously estimated, the Commerce Department said in
Washington.

"It's hard to be a buyer on the dollar" even after today's
GDP report, said Brian Taylor, chief currency trader at
Manufacturers & Traders Trust Co. in Buffalo, N.Y, with
$50 billion in assets. "You know you can get burnt by
having a long-dollar position."

U.S. consumer confidence fell to the lowest in nine
months during November as concern about energy prices
and job prospects grew, a private survey found. The
Conference Board's consumer confidence index fell to
90.5 from a revised 92.9 in October. Optimism about
the economy over the next six months dropped.

The dollar fell 5.3 percent against the euro this year
and needs to drop another 15 percent to cut the
country's current-account deficit to sustainable levels
and prevent "disruptions" to the world economy,
according to a study by the Institute for International
Economics in Washington.

The current-account gap was a record $166.2 billion
in the second quarter.

In Japan, industrial production fell a seasonally adjusted
1.6 percent in October from the previous month.
Household spending slid 1.2 percent, against the median
forecast for a 0.1 percent gain. Japan's unemployment
rate rose to 4.7 percent in October from 4.6 percent.

Some currency strategists, such as Paul Chertkow at
the Bank of Tokyo Mitsubishi Ltd. in London, expect
Japan to sell yen.

"The key level is probably a move down through 102"
yen per dollar, he said. "The Ministry of Finance wants
to avoid a sustained breach of the 100 level."

Japan hasn't sold its currency in the financial year that
started April 1, after spending 14.8 trillion yen ($144
billion) to buy dollars in the first three months of this
year to stem gains. The Ministry of Finance announced
no yen sales for the period Oct. 28 to Nov. 26 in a
monthly report released in Tokyo.

Since Japan is not selling yen, "it's very unlikely we're
going to see the tide stemmed" by European or U.S.
officials, said Neil Jones, a director of foreign exchange
at BNP Paribas SA in London. "We really have yet to
reach the end of the dollar weakness."

The pace of declines on the dollar may slow as traders
last week pared bets the currency would fall against
the yen and the euro.

Net bets by hedge funds and other large speculators
that the euro would gain against the dollar fell 40 percent
in the week to Nov. 23, to the least since September,
Commodity Futures Trading Commission data showed
yesterday. Net wagers that the yen would gain fell for
the first week in eight.

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