Comments from Jon Kaplan:COMMENTS OF THE DAY: Commodities rose significantly, with the CRB touching its highest peak since April 6,
1998. Precious metals were mostly higher; gold rallied $3.90 to $277.75 spot after touching an intraday peak of
$278.50 spot and an intraday nadir of $274.25 spot. Silver rose 7.3 cents, platinum fell $4.70, and palladium gained
$5.70. The spread between the XAU and spot gold surged 2.2 to 225.4, a negative development which bears
watching; this spread remains modestly above its equilibrium level of 220. U.S. Treasuries rose significantly, with the
yield on the long bond plunging to 5.665%. On Tuesday, April 11, 2000, the yield on the 30-year U.S. Treasury touched
an intraday bottom of 5.624%, its lowest level since April 30, 1999. The U.S. dollar was modestly higher versus most
European currencies and the Japanese yen, and modestly lower against the Australian dollar and the Canadian dollar.
U.S. equities were significantly higher.
KAPLAN'S CORNER: QUESTION: What did you think of today's weakness in the Swiss franc and euro, and the
late-day fade in the XAU? ANSWER: Both are probably related; gold shares are concerned that the gold price rose
on a day when the important European currencies all fell against the U.S. dollar. Also, call buying enormously
outweighed put buying on gold mining shares, indicating overly optimistic speculators. Therefore, it will probably
take a positive turnaround in the Swiss franc to enable the XAU to rebound. The Swiss franc is almost exactly at
critical support, with unbelievably positive traders' commitments and bearish analyst sentiment, so once the Swiss
franc starts to rally it should be powerful, and should bring the XAU along with it. The Australian and Canadian
dollars rose on Thursday; both closely correlate with the gold price, so these should also be watched closely.
Certainly the strong U.S. stock market helped contribute to the weakness in both the Swiss franc and gold mining
shares. |
