Good Morning,

Friday's action in the metals pits appeared to echo the patterns seen in previous sessions. That is, a gold price that (up to now) still shows it has difficulties overcoming the $930 value zone in a convincing manner , a crude oil price which exhibits similar stalling patterns above $60 per barrel, and a dollar that is sporadically being bought when the alternative choice involves the euro. Spikecharts.com analysts summarize the warm/fuzzies (or lack of same) towards the euro as follows:

The EUR/USD has been trading lower following this morning's German GDP number shrank its most in more than 13 years! The same has happened with the French economy; therefore traders have exited any euro positions they have! The fact that the Euro zone data continues to disappoint weighs on the currency and any rallies toward 1.40 fade quickly.

The next level to watch on the downside is 1.3530 ahead of 1.35 which is a very important support level. If the latter gives way we may have further losses towards 1.3460. However, as today is Friday we may see some profit-taking in the pair and also traders may not want to be exposed during the weekend.

The fact that Trichet said in the last monetary meeting, that Euro zone economic outlook has improved, makes one wonder, as more bad economic data are released every now and then, making investors think twice about going long euro and stay long. The truth of the matter is, that lately, traders are reacting more with their emotions rather than anything else and ones day's good news becomes a rally, where another day of dismal economic outlook becomes their worst nightmare.

There is no sentiment on any currencies particularly at the moment, and traders are buying the lesser of two evils. For example, when US outlook seems gloomy, traders are turning to euro for comfort, however, that changes the minute we see deteriorating data out of EU.

A quick price scan this morning offered up gold at $927 per ounce, silver at $13.91 and platinum at $1109 per ounce. Friday book-squaring and an absence of tradable news kept participants on sandwich hunts outside their workstations with little else to do this morning. There is always hope for an afternoon stirring of the pot...but, it might not come from the gold ETF. Its holdings have been static-to-lower since reaching a record in April. early April.

The same lack of market-moving sentiment (and news) has hampered bullion prices as well. Gold, near $930, silver above $14, and -to a certain extent- the noble metals, albeit that niche is not lacking for (bad) news... GM will shed some 1,100 dealerships according to termination notices it sent out this morning. By year-end, the company (if is still exists in its current form - a doubtful thing) will aim to have pared its US dealer body down to a total of 3,600 shops. Chrysler, in turn, will chop 789 dealerships from its sales network, effective as of June 9.

The two former giants could erase as many as 3,000 dealerships from the US sales map. Car culture (something that has -at least in part- defined America for decades) appears to be dying a slow death. People are driving less, and they are seeking alternatives that might not leave them (literally) under water in ecological or financial terms. Thus, if you are a car nut, and a value shopper, your boat has just dropped anchor.

Entire car segments were invented during the go-go era, aiming to foster a false belief that soccer moms needed more than a decent wagon, and/or that brawny dads needed more than a simple Wrangler to climb over...the curb and parking bumps at Costco. Time to reassess. Time to get on with alternatives. Time for platinum and palladium to find alternative sources of demand, and/or to rely on the rest of the world's auto sales patterns to keep them in the loop.

Crystal-ball time, as we get near the middle of 2009 (already?!). Our long-time friend James Steel over at HSBC in New York has raised the limbo bar for gold for the current year. By $50 per ounce. Bloomberg says that:

HSBC Securities raised its 2009 gold forecast to $875 an ounce from $825, analyst James Steel said in a report dated yesterday. “Strong investor demand for ETFs, coins, and bars, driven by inflation concerns, is supporting gold despite ongoing deflationary pressures,” Steel said in the report.

We note that U.S. consumer prices were unchanged in April, after seasonal adjustments, and have fallen 0.7% in the past 12 months, the largest decline in 54 years , the Labor Department reported Friday. The decline in the consumer price index has sparked concerns about deflation in the United States.

At the very least, retail level inflation is in cryogenic suspension. We note that US factory output fell 0.5% in April. Most of all we note that US capacity utilization fell to a record low of 69.1%. If that is not a headline for the state of the inflation hysteria versus reality, we do not know what is. You need CU up in the mid 80s area in order to begin talking about inflation. Thus, we feel that today's price increase fears are little more than a case of an inverted bottle of Heinz ketchup. As sung by Carly Simon. Some three years before it became legal to own/trade gold. For those of you who remember.

We note that last year's average price was $871.96 per ounce. We note that the minimum any self-respecting hard-money newsletter vendor allowed for the market last year, or this year, started in the four-digits. We note that reality is somewhere else. Like in the following little set of numbers:

The average gold price for the period 1974 to 2000:$335
1974 to 2009:$387
2001 to 2009:$541
2006 to 2009:$759
2009 to date:$905

And, finally, we note that investment demand has become the sine qua non in this gold market and is a component without which you can pick at least two of the numbers in the above table and say 'reversion to the mean' without hesitation. Nothing new there. It has always been a question of 'ifs' and 'buts' and they are anything but candy and nuts.

We can never know about the days to come

But we think about them anyway, yay

And I wonder if I'm really with you now

Or just chasin' after some finer day...