Good morning ...

Precious Metals

After two lackluster days in a row, gold rocketed higher on Friday, turning sharply north at the London open, leveling off from there to the New York open, then really taking off at mid-morning, peaking above $900 shortly after noon, before easing slightly through the rest of the day and finishing at $899.10/oz., up an impressive $42.70. For the week, gold added a healthy 6.8%.

Platinum was in the red in late Hong Kong trading, but busted higher from there to a peak of $960 in the first half-hour after the Comex, though it eased slightly through the Globex to end at $951/oz., up $29. For the week, platinum was up only 8/10 of a percent.

Silver was in negative territory until mid-morning, when it too caught fire and spiked 80 cents over the next two hours, topping out at $12.07 before settling a bit lower on the Globex to close at $11.94/oz., up 55 cents. For the week, silver bagged a 6.3% gain.

What a day for the precious metals, as they all posted solid to spectacular gains. The usual suspects provided little in the way of impetus for the rally, as equities were mixed, the dollar was stronger vs. the euro, and oil leapt higher.

That gold did so extraordinarily well is suggestive that it may be finally decoupling from the US dollar. At the least, there is a clear flight to quality going on in the face of the deepening recession.

Kevin Kerr, editor of Global Commodities Alert grabbed the spirit of the day, commenting that, Investors are starting to see that the yellow metal is one of the few havens for protection from what is an inevitable wave of inflation.

In addition, Kerr said that, Technically, gold is surging through some key levels, along with silver, and we are starting to see investors dip their toes back in the market ... Gold may well lead commodities out of this [recent] widespread sell-off.

We couldn't agree more.

Peter Spina, of, is confidently looking forward to a further rally towards $1,000 an ounce, which is possible with momentum and buying interest very strong this week.

Spina added that, Investors are looking to shelter their wealth and gold is one of the few choices they have in these unstable markets ... Wealth preservation is 2009's theme.

Currencies and Economic News

In the currency market, the dollar edged higher against the euro. Late Friday, the euro was trading at $1.2977 vs. $1.3007 on Wednesday.

The U.S. dollar and Japanese yen are higher against the major and most emerging currencies as they continue to benefit from the weak financial and economic environment and the ongoing deleveraging process, wrote currency analysts at Brown Brothers Harriman.

The Brown Brothers analysts also cited the probability that the relatively aggressive monetary and fiscal policy and the drop in oil prices will encourage an earlier recovery in the U.S.

Across the pond, Britain continues to hit the skids. The pound changed hands at $1.3797, which was actually a rally off of its low of $1.3501, the lowest level against the dollar since 1985.

How badly the country is hurting was emphasized by an Office for National Statistics report saying U.K. gross domestic product contracted by 1.5% in the fourth quarter of 2008 compared with the third, marking the steepest quarterly drop since 1980.

That led Charles Davis, economist at the Center for Economic and Business Research, to comment that, This supports our view that the [UK] economy is set for the steepest contraction in the post-war era in 2009. Davis expects the year-on-year drop in GDP to be in the region of 3%.


In the energy market on Friday, oil reversed early weakness again and moved higher, with crude for March delivery closing at $46.47, up $2.80. March reformulated gasoline rose 6 cents, to $1.18/gallon.

As commodities rose across the board, with the Reuters/Jefferies CRB Index rising 3.3%, oil benefited as well.

People are running out of Treasurys and moving into the commodities as a safe haven, because they are wondering what will be the next shoe to drop, said Phil Flynn, of Alaron Trading.

Also factoring in was data a report from Petrologistics, which estimated that OPEC's oil supply, excluding Iraq, will decline by 1.55 million barrels per day in January.

And some traders are still hoarding crude. Inventory levels at Cushing, Okla. -- the delivery point for oil futures used on the New York Mercantile Exchange -- rose 200,000 barrels to reach a record 33.2 million barrels.

Base Metals

The base metals all moved higher on Friday. Copper declined into the New York open, but then soared straight through, finishing at its intraday high of $1.3906/lb., up more than 7 1/2 cents. Nickel followed a similar path, although it came off its highs late in the day to close at $5.1566/lb., up 27 1/4 cents. Zinc moved up sharply, ending at $0.5199/lb., up 2 cents. Aluminum was a modest gainer, adding a penny to $0.5981/lb., while lead had a very strong day, adding 3 3/4 cents, $0.5126/lb.

Copper led the uptrend in the industrial metals, winding up in positive territory for the first time in four sessions. Analysts attributed the rally to supply concerns raised by an earthquake in Chile, the world's leading producer, that measured 4.9 on the Richter scale.

Most saw it as likely a temporary upturn.

The earthquake is why copper isn't down, said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. Copper is trying to claw its way uphill. Barring any major supply disruption, it will have a hard time making a big move higher.

Indeed, the rise in stocks continued unabated. Copper inventories monitored by the LME advanced by another 2,175 metric tons yesterday, to 424,625 tons. That's enough for a week of global copper demand.

Traders also responded positively to President Obama's plea to congressional leaders to reach a consensus on an $825 billion stimulus plan. Obama is aiming to get the plan approved by mid-February.

There is some optimism and some hope that the stimulus plan will take affect soon and help copper demand, said Donald Selkin, of National Securities Corp. in New York.

However, Selkin was quick to add that, Users may be looking to buy at these prices to replenish their supply ... This is just a bounce within the bearish fundamentals. I don't see this as the beginning of a bullish move for copper.

And Citigroup analyst Heath Jansen contended that, We still see significant downside risk to prices and earnings for the sector ... Calling the depth and severity of this downturn may be near impossible. Nevertheless historical commodity bear markets have lasted two to three years.

That's what's happening ... have a great weekend and see you Tuesday!


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