Good morning ...
Gold was little changed until New York opened, whereupon it rose to its high for the day at $911, then fell from mid-morning to noon, bottoming at $890, and finally rallied through the Globex to finish at $900.60/oz., down $4.20. Overnight, gold has drifted lower.
Platinum was in negative territory all day, experienced a sharp drop at the noon hour, but pushed higher from there to end at $961/oz., down $9. Overnight, platinum has edged higher.
Silver had a day of little consequence, peaking at the New York open, skidding below $12.20 at the noon hour, but then igniting a strong rally that carried it all the way back just into positive territory at $12.45/oz., up 2 cents. Overnight, silver has slipped lower.
It had to be a disappointing day for the gold bugs, as the usual suspects lined up pretty much in its favor, with equities posting gains, the dollar falling off, and crude on an upswing.
Analysts attributed the blah day to some carryover selling off of last week's rally, as well as speculation that the global slowdown will weigh heavily on all commodities.
Typical was Tom Hartmann, of Altavest Worldwide Trading in Mission Viejo, California, who said that, The reality is we're still stuck in a deflationary mode ... There's potential inflation in the future that will help gold, but right now we're just seeing worsening economic conditions.
Short term, said Tom Pawlicki, of MF Global in Chicago, Investment has been a key supporting factor for gold, and thus Passage of the stimulus package in its current form would likely be inflationary and bullish for gold while a Senate filibuster would be bearish.
At the same time, Rapidly growing ETF holdings are a clear sign of safe-haven buying of gold, says John Reade, of UBS in London.
And legendary investor Eric Sprott, of Sprott Asset Management in Toronto, said the U.S. is at the beginning of an economic depression that will help gold prices more than double, exceeding $2,000 amid a series of financial catastrophes.
Of interest to coin fanciers will be stats from the U.S. Mint showing that it stamped out 94,500 gold Eagles in January. Well, if so, then where are they? That is not a small number, especially for January, but none of the several dealers we contacted has seen any, nor have they been informed as to when the 2009 Eagles will be available. Very peculiar, as they say ...
Currencies and Economic News
In the currency market, the dollar slid lower against the euro. Late Tuesday, the euro was trading at $1.3044 vs. $1.284 on Monday.
In a small ray of hope, the National Association of Realtors said the number of new sales contracts on existing homes jumped a seasonally adjusted 6.3% in December as buyers took advantage of lower mortgage rates and falling prices.
Euro/dollar bulls were quick to capitalize on positive U.S. data following a lackluster performance during the European session, wrote Matthew Strauss, senior currency strategist at RBC Capital Markets.
The euro was up despite data showing producer prices across the euro zone experienced their fifth consecutive monthly drop in December, bringing the annualized pace down to 1.8% from 3.3% in November.
The European Central Bank meets tomorrow, with most analysts expecting policy makers to keep the region's key lending rate at 2%, after dampening remarks by ECB President Jean-Claude Trichet.
The Bank of England's rate-setting Monetary Policy Committee also meets this week, and is expected to further cut key interest rates tomorrow, with no clear consensus on the outcome after BoE slashed the benchmark to an all-time low of 1.5% in January.
In the energy market on Tuesday, oil rose, with crude for March delivery closing at $40.78, up 70 cents. March reformulated gasoline added 1.78 cents, to $1.167/gallon.
Oil is gaining on OPEC talks, said Phil Flynn, of Alaron Trading. The pending home sales also give hope to the market that the economy can recover.
OPEC's 11 members bound by output targets pumped 26.23 million barrels a day of oil in January, down from 27.24 million in December, analysts found. But that was higher than their target of 24.84 million that took effect on January 1.
Saudi Arabia, OPEC's top producer, did reduce supply by 230,000 barrels a day, to bring its output slightly below its implied target. Struggling Venezuela, though, lowered supply by less than its projected cutback.
Perhaps a bit wryly, Flynn added that, Oil bulls latch on to every ray of economic sunshine they can in these cloudy economic times.
The base metals were all in positive territory on Tuesday. Copper was steady through the pre-dawn hours and moved steadily higher through the New York day, just coming off its intraday highs late to finish at $1.5018/lb., up more than 7 1/2 cents. Nickel bottomed at the New York open and was all up from there, closing at its intraday high of $5.1914/lb., up more than 17 1/3 cents. Zinc followed copper's path closely, ending at $0.5164/lb., up nearly 2 1/2 cents. Aluminum had a modestly good day, adding almost a half-cent to $0.6114/lb., while lead also found the green at $0.5199/lb., up just short of 2 cents.
Copper helped spur the sector higher on Tuesday, as the housing numbers furnished traders with something to hang an optimistic hat on.
Cautiously, analyst David Thurtell, of Citigroup in London, ventured the opinion that, If the bottom has indeed been seen in the U.S. industrial production cycle, copper may well have seen its low.
On the stockpile front, however, Monday's modest decline was a one and only, as copper inventories monitored by the LME rose again, adding 4,100 metric tons yesterday, to 495,300 tons.
Also factoring in was the sliding dollar.
And Michael Widmer, of BNP Paribas, said that, We see people covering their short positions ... [The] data triggered some short covering, but I don't see a build up of new long positions.
However, Goldman Sachs' London-based analyst Peter Mallin-Jones was more aggressive, writing that, We would advocate building copper exposure as we believe it will be the first metal to see prices rise should demand stabilize and then pick up.
Goldman's estimate is that copper inventories this year will be only 48% of the average for the past 10 years, compared with more than twice the 10-year average for aluminum, nickel and zinc, Mallin-Jones wrote.
But nickel is still mired in difficulty. Ningbo Sunhu Chemical Products, China's biggest nickel trader, said its sales since the New Year holiday last week slumped badly, as 90% of its customers remained closed because of a lack of demand. Sales are off 95% from the same period last year, Ningbo said.
That's what's happening ... see you tomorrow!
NEWS YOU CAN USE:
MAX intercepts 50 feet of 0.1212% Mo, 100 feet of 0.0706% Mo at Gold Hill Molybdenum/Copper/Gold project in Alaska.
MAX Resource Corp. (TSX.V: MXR; OTCBB: MXROF; Frankfurt: M1D) has now received all assays from a ten hole diamond drill program (7,664 feet) completed at the Gold Hill molybdenum/copper/gold project in Alaska in September 2008. (News Release February 2, 2009)The 2008 ten hole drill program in Alaska followed up on a five hole drill program MAX conducted in 2007 that intersected significant molybdenum mineralization over long intervals starting at surface and ending in mineralization at depth in four of the holes. For the complete results from MAX's 2008 drill program and a map showing the 2007 and 2008 drill site locations is now available on our web site at www.maxresource.com.
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