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Good morning ...

Precious Metals

Gold was in positive territory right up to the New York open on Thursday, but fell off a cliff at that point, nosediving straight down from $946 to as low as $928 in the first hour of trading, rebounded past $938 in the late morning, then declined again to finish at $933.60/oz., down $11.70. For the holiday-abbreviated week, gold was up three-quarters of one percent.

Platinum also hit the skids at the New York open, but managed to hang on slightly above the $2000 mark, ending at $2009/oz., down $46. For the week, platinum was off 1.6%.

Silver's decline was as sharp as gold's, but it rebounded more decisively, advancing to recover about half its lost ground and closing at $18.26/oz., down just 11 cents. For the week, silver was up a healthy 4.5%.

The precious metals were all down as traders left their desks for the long Fourth of July weekend, but both gold and silver posted gains overall during the short week.

Rising crude prices did their part to provide support, but a slightly strengthening dollar - based on bad news that wasn't as bad as might have been - kept the metals in check.

Even though the conventional wisdom with gold has always been to sell in May and go away, "Expectations of a quiet summer in the gold pits have been summarily dismissed as a confluence of bullish factors have led gold to rally sharply and test the high side of the recent trading range," writes Mark O'Byrne, of Gold and Silver Investments Ltd.

O'Byrne looks for gold to rally further this summer, "as it did last year and has done most years since the inception of the gold bull market."

Phillips agreed, saying that investment buying has made the yearly "doldrums for gold, a vigorous season of its own," since "global macro-economic and currency markets ... look awful with little effective action going on to rectify matters."

And Peter Spina, of GoldSeek.com says confidently that, "Gold will continue to attract increasing monetary demand and the result will be a much higher price ... Sub-$1,000 gold days are drawing to a close [and] by the end of this year, I would find it difficult to explain a sub-$1,000 gold price.

Currencies and Economic News

In the currency market, the dollar edge higher against the euro. Late Thursday, the euro was trading at $1.571 vs. $1.588 on Wednesday.

The dollar's strength was pretty counterintuitive on a day in which the numbers lined up pretty fully against it.

First the European Central Bank, as widely expected, hiked interest rates a quarter point to 4.25%.

The widening of the rate spread between the U.S. and the eurozone would be expected to have a negative impact on the euro/dollar ratio. However, those reading the tea leaves of rhetoric were dismayed, as ECB President Trichet repeatedly emphasized he had "no bias" on interest-rate policy. Trichet uttered none of the words used in the past to signal that a further rate hike is on the way.

"The market was highly disappointed by the fact that Trichet repeated at least five times he had no bias," said Kathy Lien, of DailyFX.com. "Further rate hikes seems to be on the tip of his tongue, but Trichet does not want to spook the markets right now which is why he is simply leaving the door open for another rate hike this year."

The other big negative was the Labor Department's non-farm employment report, which showed that the U.S. economy shed 62,000 jobs in June. That was even worse than the 40,000 job loss expected by economists. And the unemployment rate remained at 5.5%, also worse than expected.

A broader measure of unemployment that includes discouraged workers rose from 9.7% to 9.9%, the highest in four years.

But the grim data, which strongly suggests the Fed may be unable to raise interest rates, at least in the near term, failed to push the buck down. Who knows why.

Energy

In the energy market Thursday, crude for August delivery jumped as high as $146, before settling at yet another alltime closing high of $145.29 up $1.72. July reformulated gasoline tacked on 2.2 cents, to $3.571/gallon.

Crude is "finding support here as it pushes higher towards $150," wrote Zachary Oxman, of Wisdom Financial. "Watch for higher lows as crude moves up towards $150 within the next week."

It certainly didn't help any that Saudi Arabia's Oil Minister Ali Naimi implied that his country has no immediate plans to boost crude production, the Associated Press reported. Al Naimi says Saudi Arabia is concerned about the price level, and stands ready to raise production if necessary, but he also said that his country's oil buyers are satisfied and happy.

Robert Arber, an analyst at Stockhouse.com, commented that, "If we have rising inflation while the credit crisis continues to force the Fed's hand in terms of keeping rates low, it's simply a recipe for increasing oil prices."

Regarding gasoline, Neal Ryan, of Ryan Oil & Gas Partners, mused that, "With this being the travel weekend ... it'll be very interesting to se the EIA data points next week on gasoline.

"The average consumer in the U.S. is moaning and groaning, but there doesn't seem to be any wholesale changes afoot yet, which means prices are only going to trend higher as supply growth stagnates."

Base Metals

The base metals were all deeply in the red on Thursday. As soon as copper had closed above the psychologically-important $4 mark, it gave it right back, dropping precipitously through the pre-dawn hours and then trading flat to finish near its intraday low at $3.8945/lb., down 21 cents. Nickel experienced a similar fall, closing at $9.2374/lb., down more than 31 3/4 cents. Zinc recovered some ground after its pre-dawn falloff, ending at $0.792/lb., down 4 cents. Aluminum lost ground but held up better than the other metals, losing 3 cents to $1.4036/lb., while lead had a ghastly day, falling well below the 70-cent mark in the pre-dawn hours before rallying to just above it at $0.7027/lb., still down 6 1/3 cents.

Lead's fall was its worst in six weeks, as the former market darling is trash now. Analysts cited the steep dropoff in the auto industry, as American consumers cut back on driving and vehicle purchases. 70% of lead production goes into car batteries.

"We're bearish on lead," said David Thurtell, an analyst at BNP Paribas in London. "High oil prices will damage demand for new vehicles and people will also get rid of their second cars or old ones."

Lead has lost 39% already this year, and worse yet, as Bloomberg reported: "Supply will outpace demand by 130,000 tons this year, Goldman Sachs JPWere Pty Ltd. said July 2. That's 29 percent more than all the lead held in warehouses monitored by the LME.

"Inventories tracked by the bourse have more than doubled this year, to 100,675 tons. Open interest, or outstanding contracts, rose 0.9 percent this week as prices fell, indicating investors are adding to bets on further declines."

Meanwhile, copper supply worries eased as the Peruvian strike faltered. Mine workers can't maintain the strike after some miners broke rank and returned to their posts, said Cirilo Yarihuaman, spokesman for the Mining Federation, which organized the demonstrations.

"Workers at three mining operations in Peru including Southern Copper Corp.'s Ilo smelter ended a strike yesterday after the government said the action was illegal," Bloomberg wrote.

That's what's happening ... see you tomorrow!

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