Ed Steer: One day in February put it all together

Section:

8:20p ET Thursday, February 23, 2006

Dear Friend of GATA and Gold:

Thanks to Peter Grandich of The Grandich Letter
for inducing CBSMarketWatch today to mention the
Federal Reserve's new plans to intervene in the
currency markets, about which GATA reported to you
last night. The CBSMarketWatch story is appended.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Gold falls 1% to close at one-week low

By Myra P. Saefong
CBSMarketWatch.com
Thursday, February 23, 2006

http://www.marketwatch.com/News/Story/Story.aspx?
column=Metals+Stocks&siteid=mktw&dist=

SAN FRANCISCO -- Gold futures lost 1% Thursday to close at their
lowest level in a week after chalking up gains totaling nearly $14
an ounce in the past few sessions.

"This slump will be likely followed by a good rebound as we get into
next week," said Jon Nadler, an investment products analyst at
bullion dealer Kitco.com, adding that for now, "people want to test
the lower end of the range."

"The pattern of trading remains confined to the $540-$560 range and
each smaller move has the precision (and excitement) of a chess
match," he said.

If someone were "to liquidate a position, there will be another
party willing to take an opposite stance," he said. But "neither
side is too enthusiastic about their commitments at this time. We
see a few more probing attempts to validate the bottom of the price
range and reconfirm support for gold as the first, and most likely
moves."

Gold for April delivery fell $5.70 to close at $550.90 an ounce, a
level not seen since Feb. 16. On Wednesday, the contract closed
unchanged, following three sessions of solid gains.

"With the near-term outlook turning ominous" prices may work back
below the Feb. 14 low, with $525 "looking like a logical downside
objective basis for the April contract," said Dale Doelling, chief
market technician at Trends In Commodities.

If prices "break" to the 50-day moving average of $545.50, " it will
just be another attempt to drive the weaker longs from the market
and, in turn, put the market back into [an] extreme oversold
condition, which would act as a springboard for the next leg up," he
said.

Meanwhile, the minutes released from former Federal Reserve chief
Alan Greenspan's last interest-rate meeting showed that Richmond Fed
President Jeffrey Lacker dissented from votes to authorize the Fed's
trading of foreign currencies, including the euro and yen, according
to Peter Grandich, editor of the Grandich Letter.

This raises two questions: "Why does the Fed think it must be
prepared to intervene ... and if they're willing to intervene in the
currency market, how about the stock, bond, or gold markets?" said
Grandich.

For now, Citigroup said that after adding $100 an ounce since
November, it expects gold to remain in a period of consolidation as
investment demand matures in what is typically a soft period for
fabrication.

"Looking ahead, we continue to be positive on gold, seeing multiple
handoffs between fabrication and investment demand, and between
commodity fundamentals and macro/monetary catalysts," said analyst
John Hill.

Citigroup's expecting gold to move higher over time -- and to test
$600 an ounce at some point this year.

In the meantime, "we would not view a correction to the $520-$540
level as any more negative than the eight such episodes greater than
$20 per ounce during 2004-2005," said Hill.

Citigroup is forecasting an average gold price of $540 an ounce for
2006, followed by gains to $560 an ounce in 2007 and $580 in 2008.

Other metals trading in the futures market followed gold lower
Thursday.

March silver futures fell 10.8 cents to close at $9.467 an ounce.
April platinum lost $7.40 to finish at $1,023 and March palladium
eased $2.15 to close at $285 an ounce. March copper lost 5.95 cents,
or 2.6%, to end at $2.205 a pound.

On the supply side, copper inventories were down 541 short tons as
of late Wednesday, according to New York Mercantile Exchange data.

Gold stocks fell by 1,608 troy ounces to 7.52 million troy ounces,
while silver supplies rose by 713,414 troy ounces to 127.5 million
troy ounces.

On the equities side, indexes that track the metals-mining sector
closed lower Thursday, pulling back on the heels of weakness in the
metals futures and minor strength in the previous session. ...

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----------------------------------------------------

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----------------------------------------------------

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