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Precious Metals

Gold moved slowly and steadily higher from Hong Kong through to mid-morning in New York, then shot higher, adding $25 before the noon hour, after which it eased slightly through the rest of the Comex and the Globex to finish at $939.10/oz., up $23.80. Overnight, gold has edged higher.

Platinum traded flat until 10:00, then it too soared, adding $40 over the next three hours, slipping only a bit the rest of the day to end at $1068/oz., up $35. Overnight, platinum is trending higher.

Silver capped the strong day for the sector, as it posted a 40-cent rise at mid-morning, then traded mostly sideways through the rest of the day, closing at $13.53/oz., up 39 cents. Overnight, silver has fallen off.

It was a second banner day in a row for the precious metals, helped along by a weakening dollar and rebounding equities, although crumbling crude prices may have served as a bit of a drag.

Gold punched its way to its loftiest close since last July, while silver and platinum both submitted four-month highs as traders scrambled to find a secure resting place for their cash amid widespread doubt about the new administration's plans to rescue America.

With Treasury Secretary Geithner ducking questions on toxic debt, illiquid assets and home prices as he rolled out his bailout plan on Tuesday, the uncertainty increased risk aversion and continued a flight to a safe haven of gold and platinum investments, said Bayram Dincer, a commodity analyst at Dresdner Bank in Zurich.

Many technical analysts had been predicting stiff resistance at the $925 level for gold, but the metal blew by that with ease. After breaching the $940 mark, it could rise to as high as $950 an ounce in the short term, said Ashraf Laidi, of London-based CMC Markets.

Investors also continue to flock to paper gold. Holdings of the SPDR Gold Trust, the largest bullion-backed ETF, ratcheted up another 4.3% yesterday, to a new record high of 935.09 metric tons (just over 30 million ounces). GLD has added nearly 120 tons, just in the past month.

Though platinum has also been on a tear, gains will be limited should investment demand stall, writes Miguel Perez-Santalla, of Heraeus Precious Metals Management in New York.

This thing can turn on a dime, Perez-Santalla said. It is all investment money. There remains to be seen any demand from industry.

Currencies and Economic News

In the currency market, the dollar edged lower against the euro. Late Wednesday, the euro was trading at $1.2894 vs. $1.2867 on Tuesday.

The dollar lost traction, giving back early gains, after negotiators from the House and Senate reached an agreement on a compromise $789 billion economic stimulus plan yesterday afternoon.

The buck had risen early because doubts about the U.S. government bank bailout plan continued to encourage flows into safe-haven currencies.

Market sentiment is still quite fragile following the disappointment -- and by now impatience -- over the lack of clarity in Obama-Geithner Financial Stability Plan, said Stephen Gallo, of Schneider Foreign Exchange Ltd.

The U.S. trade deficit shrank to a seasonally adjusted $39.9 billion in December, from a revised $41.6 billion in November, the Commerce Department said. Though that was the lowest reading in nearly six years, it failed to cheer economists, who had been looking for a much bigger narrowing of the deficit, to around $35 billion.

The data does not suggest any underlying improvement from what we already knew, wrote Alan Ruskin, of RBS Greenwich Capital. He called the report disappointing for the dollar since it needs trade rebalancing to be an important outcrop of the global travails.

Energy

In the energy market on Monday, oil continued to sag, with crude for March delivery closing at $35.94, down $1.61. March reformulated gasoline, though, stubbornly pushed higher, adding 2.6 cents, to $1.2698/gallon.

Trading was affected by the Energy Information Administration's weekly inventory report, which showed a larger-than-expected build in crude stocks of 4.7 million barrels for the week ending February 6.

Gasoline supplies fell by 2.6 million barrels while distillates were off by 1 million barrels. Refineries were operating at only 81.6% of capacity vs. 83.5% the previous week, the lowest level in four months.

Separately, the Paris-based International Energy Agency predicted yesterday that this year's global oil demand will fall by 1 million barrels a day, or 1.1%, from last year. Should it happen, that would be the biggest yearly drop since 1982.

While current OPEC supply curbs will eventually begin to clear the onshore stock overhang, significant volumes of 'floating' oil could dampen any upward price momentum in the short term, the IEA wrote.

Base Metals

The base metals were mixed on Wednesday. Copper started down in the pre-dawn hours and, except for a brief late morning bump up, declined through the day, finishing just off its intraday lows at $1.5196/lb., down 4 3/4 cents. Nickel was sharply lower in the pre-dawn hours, rallied to the late morning, then eased again to close at $4.6705/lb., down more than 18 cents. Zinc also rallied off its pre-dawn lows, but held near break-even, up less than a tenth of a cent at $0.5158/lb. Aluminum had a modestly positive day, adding a third of a cent to $0.6179/lb., while lead's ups and downs left it dead flat at $0.5172/lb.

Copper was off for the third straight day, as traders reacted to poor usage numbers out of China.

China's imports of unwrought copper and semi-finished copper products plunged 19% to about 232,700 metric tons in January vs. December, the Beijing-based customs office said. That was a surprise, as analysts had generally been expecting import levels close to December's near two-year high.

In addition, The ambiguity of the up to $2 trillion bank bailout plan unveiled by U.S. Treasury Secretary Timothy Geithner on Tuesday is scaring the metals complex in general, said Ralph Preston of HeritageWestFutures.com in San Diego, California.

Rising stockpiles added to the pessimism. Copper inventories monitored by the LME advanced again yesterday, though by a relatively-modest 2,025 metric tons, to 516,450 tons.

No question, Demand has weakened, said John Gross, the publisher of the Copper Journal in Cranston, Rhode Island. Worse, Fundamentals would suggest that prices will go lower, he added.

And in company news, debt-strapped miner Rio Tinto has agreed to a $19.5 billion cash injection from China's state-owned Chinalco.

The deal, to go public today, had been widely anticipated after Rio's chairman-designate, Jim Leng, quit the company three days ago because of objections to a tie-up with the state-run Chinese aluminum giant.

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



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