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Good morning ...

Precious Metals

Gold was up all day and, though it dropped to a low of $958 early in the New York session, picked up from there and rose slowly but steadily, finishing at $965.80/oz., up $11.20 from Friday. Overnight, gold is sharply higher.

Platinum blasted $30 higher in the European market, but the enthusiasm dissipated as soon as New York opened, and the metal gave it all back, ending at $1832/oz., up just $2. Overnight, platinum has been pushing higher.

Silver followed gold's path very closely, moving steadily higher after mid-morning to close at $18.41/oz., up 30 cents. Overnight, silver is trending higher.

After last week's declines, gold and silver got a boost on Monday, and started the week with a bang as the usual suspects supplied some help with crude starting up again and the dollar falling.

"The new week started out on a firm note in the precious-metals complex as a combination of geopolitics and weather boosted crude-oil prices," said Kitco's Jon Nadler.

Nadler referred to weekend talks over Iran's controversial nuclear program, which went approximately nowhere, and the movement of Tropical Storm Dolly toward the western Gulf of Mexico.

Or it could have been, as Zachary Oxman of Wisdom Financial said: "I think the market was a bit oversold last week and it seems [that] for lack of a better trade today, gold seems to be catching a small bid."

The big boys are moving into gold, as the Commodity Futures Trading Commission reported that hedge-fund managers and other large speculators increased their net-long positions in New York gold futures for the week ended July 15.

Speculative long positions outnumbered short positions by 202,783 contracts on the Comex, the highest disparity since February. Net-longs rose by 13,181 contracts, or 7%, from a week earlier.

In addition, smaller investors are hopping the train. Bullion vaulted by the SPDR Gold Trust, the biggest exchange-traded fund backed by gold, rose to an all-time high of 705.9 metric tons (22.65 million ounces) on July 11 before backing off. As of last Thursday, the fund held 702.5 tons (22.59 million ounces).

Looking ahead, "In the near term, gold will be driven by risk-aversion fears," wrote John Reade of UBS. "If gold moves from being a minority-held asset class to a popular safe haven, then our short-term forecast of $1,000 in one month and $1,050 in three months will look very conservative."

Currencies and Economic News

In the currency market, the dollar was off sharply against the euro. Late Monday, the euro was trading at $1.5923 vs. $1.5841 on Friday.

Traders responded to more weak economic numbers.

The Conference Board reported that its index of leading economic indicators, which attempts to forecast turning points in the economy, declined 0.1% in June. That came on top of a downward revision to the May result, from a 0.1% gain to a decline of 0.2%.

"The domestic economy is showing no sign of strength," wrote Board economist Ken Goldstein. "The deep financial crisis, a prolonged, intense slump in housing, high gasoline and food prices, weak consumer confidence and a weak dollar are all combining to produce unrelenting downward pressure on economic activity."

Dismal as it was, the index was likely unrealistically rosy. Ian Shepherdson, chief U.S. economist at High Frequency Economics, noted that June's results were "saved from a much larger drop" by a change in building permit rules for multifamily units in New York City that pushed up total starts.

Even Treasury Secretary Paulson is finally facing reality, saying that, "This is a tough time ... We're going to be in a period of slow growth for a while."

Energy

In the energy market Monday, crude for August delivery, which ends its run as front-month contract today, moved higher, closing at $129.80/barrel, up 92 cents after hitting $132 intraday. August reformulated gasoline added 5 cents, to $3.22/gallon.

"Oil prices were up partially on the back of the weather concerns," wrote Michael Davies, an analyst at Sucden Research. "The weather and Iran have much in common, both being highly unpredictable and both having the potential to have a significant impact on prices."

Davies noted, as Tropical Storm Dolly threatened to build to hurricane strength, that "This has served as a reminder that there remains a threat to oil and gas facilities in the Gulf of Mexico while we remain in the hurricane season."

Base Metals

The base metals all moved higher on Monday. Copper peaked during the pre-dawn hours and, though it declined to mid-morning, staged a later day rally to finish at $3.7938/lb., up more than 3 cents. Nickel fell off its peak around the noon hour, but remained in positive territory at $9.2238/lb., up 4 2/3 cents. Zinc bottomed at mid-morning, but took off strongly from there, ending at its intraday high of $0.8371/lb., up nearly 2 1/2 cents. Aluminum traded very jaggedly, to little eventual effect, closing at $1.3615/lb., up three-quarters of a cent, while lead was up straight through the day, just coming off its intraday high at $0.9295/lb., up 4 1/3 cents.

Copper was strong on the rise in crude, and the associated strength in the broader metals complex.

"With oil bouncing back to $130 after inconclusive Iran talks and gold inching back over $965, the 'safe haven players' may be adding back some metals longs recently liquidated," said analysts at RBC Capital Markets.

There were also supply concerns. Inventories monitored by the LME have bumped up by 5% so far this month, to 128,725 metric tons, the highest since March 12, but there are worries related to who's in control.

Since those stocks are held by "only a few market participants," availability is limited, Norddeutsche Affinerie AG, Europe's largest copper refiner, said.

Traders ignored news that a strike planned to start yesterday at Southern Copper's Cuajone mine in Peru has been suspended by the labor union. Cuajone, which produced 148,939 tons of copper in 2007, is Southern's biggest Peruvian mine.

Nickel also rebounded on supply shortages. LME inventories have fallen 6% this month, to 43,728 metric tons, the lowest level since November 23. BHP Billiton Ltd. has shut its Kalgoorlie refinery in Western Australia through June 2009, cutting sales of the metal by 25,000 tons, or about 57% of existing LME stocks.

"You probably started to see the impact from supply disruption in Western Australia," said Max Layton, an analyst at Macquarie in London. However, Layton said, "It may be short-lived," adding that "overall we see a small surplus this year."

Meanwhile, Aluminum Corp. of China, the nation's biggest producer, said 2008 production may decline by 30,000 tons after it reduced capacity at two ventures in Shanxi province because of the winter power shortage.

And Shanxi Huaze Aluminum & Power Co. suspended 25% of its 280,000-ton annual capacity as of July 18, while Shanxi Huasheng Aluminum Co. announced that it is trimming 22% off of its 220,000-ton capacity.

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

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