Of (greedy) Men and of (putative) Angels

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Gold's late afternoon and overnight rebound continued albeit muted physical demand kept prices under $936 ahead of the NY opening. Crude oil prices gained for a second day as Nigerian militant threats and continued stalling by Iran on a response to the package of carrots and sticks it recently received raised supply apprehension levels a notch.

A high-ranking Iranian cleric said today that ultimatums regarding its nuclear development plans would "not help talks." The dollar slipped back from the near 73 level it had been gunning for, largely on reports that ECB council member Klaus Liebscher indicated that policymakers across the Atlantic still have room to raise interest rates this year, despite obvious signs of slowing Eurozone growth. The common currency rose to $1.575 following the jawboning.

New York bullion prices opened with small gains as gold added $0.20 to $926.70 as participants gear up to square books and look forward to July options expiry next week. Today's focus will remain on the dollar, which -absent more domestic jawboning- could be dented by reports of rising foreclosure filings in sunny California, Nevada, and Florida - former hotbeds of 'home buyers' who opted to quit work in order to reap their next $100K of income by simply squatting in a McMansion for a few months.

Financials could be pressured on the session. The next item on the agenda is the feel of durable goods orders and new home sales figures due to be released shortly. Silver lost 2 cents, opening at $17.39 while platinum was trying to regain some of the hefty value losses that brought it to six-month lows this week. The noble metal was up $24 at $1719 and palladium climbed $1 to $386 per ounce.

Oil traded at $126.15 (up 66 cents) on the aforementioned global tension news but traders remain wary about the market's structural developments in the wake of news such as those reported in the L.A. Times overnight. Surprised? Not us.

"Like we said, nobody is manipulating energy prices . . . if you don't count the Dutch: The Commodity Futures Trading Commission on Thursday alleged that Dutch trading firm Optiver Holding manipulated trading in New York futures contracts for oil, gasoline and heating oil in March 2007 -- and turned a profit doing so. The case comes a day after a CFTC task force issued its preliminary report on high oil prices and found no basis for blaming speculators." ...and a day after Casey Research economist Terry Coxon characterized oil speculators as "closer to angels and saints than the evil forces they have been made out to be."

The NY Times reports that the: "Optiver scheme, which the defendants referred to in conversations caught on tape as a plan to "bully the market," produced illegal profits of more than $1 million, according to regulators. On at least five occasions, global benchmark prices of those products settled at artificial levels, they said." Angelic behavior, indeed...

The CFTC "complaint charges all Optiver defendants with 19 separate instances of attempted manipulation involving the aforementioned energy futures contracts on 11 days in March 2007. The complaint further alleges that in at least five of those 19 attempts, defendants successfully manipulated certain of these energy futures contracts, causing artificial prices. In three of those instances, defendants forced futures prices lower, and in two instances, defendants forced futures prices higher.

The complaint alleges that defendants profited by approximately $1 million from their manipulative scheme, and that the defendants employed a manipulative scheme commonly known as "banging" or "marking"’ the close. "Banging the close" refers to the practice of acquiring a substantial position leading up to the closing period, followed by offsetting the position before the end of the close of trading for the purpose of attempting to manipulate prices."

Gold remains on alert for further possible bouts of selling as several technical levels of support were recently taken out and as the commodity complex undergoes what appears to be shaping up as a shift in investment allocation strategies.