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With the US markets closed on Monday for Presidents’ Day, we will not be publishing the Daily Resource or Casey’s Daily Resource+ again until next Wednesday.
Gold slogged through another full day without any strong moves on Friday, as buyers and sellers once again found themselves in near-balance and kept the metal stuck inside a very tight $7 range that had it finishing near the high end at $941.60/oz., down $5.60. For the week, gold was up 3.3%.
Platinum peaked in Hong Kong at $1070, drifted lower through most of the Comex, then rallied a bit at the end of the day to end at $1061/oz., down $7. For the week, platinum was the big winner, at 6% higher.
Silver fared better than gold, falling as low as $13.25 in the first hour in New York, but then rallying strongly straight through the rest of the day and closing at $13.67/oz., up 17 cents. For the week, silver tacked on 4.2%.
It was a mixed day for the precious metals, with gold and platinum continuing to consolidate their positions, but silver showing surprisingly more strength than its more lustrous sisters.
Gold’s performance was particularly disappointing, as it should have received solid support from both rising oil prices and a declining dollar, but didn’t.
The Hightower Report’s take on the day’s action: “Given that the gold market managed a low to high pulse this week of almost $65.00 an ounce it wasn't surprising to see prices forge at least a modest correction setback early Friday morning. While some weakness in the Dollar might have provided some support to gold in the past, the Dollar action today didn't seem to be of that much interest to the trade. It certainly seemed like the anticipated passage of the US stimulus package, the potential for US mortgage assistance and the weekend G7 meeting all served to knock down the flight to quality interest in the gold market. In fact, talk of coordinated G7 easing is usually something that serves to tamp down macro economic anxiety.”
Meanwhile, SPDR Gold Trust, the largest bullion-backed ETF, continued its gangbusters accumulation of metal. GLD’s holdings jumped again, as it pushes toward 1,000 metric tons. The ETF's vaults now contain 970.57 tons, or 31.2 million ounces! It rose 1.125 million ounces in one day and has increased nearly 5.8 million ounces in a month.
With all of that activity, some analysts are beginning to wonder where all that bullion is coming from. It’s not from the Comex nor, apparently, from central bank sales. Mints across the globe are stamping out coins with every ounce they can lay hands on. So, where are they getting it? We’d love to know. Anyone with an answer, please drop us a line at firstname.lastname@example.org. Thanks.
Currencies and Economic News
In the currency market, the dollar slid against the euro. Late Friday, the euro was trading at $1.2887 vs. $1.2858 on Thursday.
The session was marked more by what traders are waiting for than by what they saw.
Many had their eyes on the agenda of finance ministers and central bankers from the Group of Seven wealthy nations gathering in Rome last night and today.
While most are not expecting a significant change in the wording of the group's communique today, G7 meetings are nevertheless closely watched by currency markets for crucial changes in tone that can sometimes foreshadow crucial turning points.
“Although no one is happy with the sharp moves in the U.S. dollar, Japanese yen and British pound, they may not be willing to commit to harsher language on Asian currencies,” said Kathy Lien, director of currency research at GFT. “The dollar is already strong, and a tougher stance on the yen and (Chinese) yuan could trigger a broad-based dollar rally,” she added.
Also awaited were the results of Congressional dickering over the Obama stimulus package.
The day’s hard number was the University of Michigan/Reuters index of consumer sentiment, which fell in early February to 56.2 from 61.2 in January. That was much worse than economists’ expectations for a decline only to 61.
In the energy market on Friday, oil turned sharply, with crude for March delivery rising to close at $37.51, up $3.53. Contrarily, March reformulated gasoline dropped 5.2 cents, to $1.2063/gallon.
As oil rose after five straight losing sessions, analysts said that some investors who had been short selling the March contract were buying it back to cover their short positions before the contract expires.
The large contango that had developed between front and future month contracts has also begun to erode.
The April contract yesterday fell 0.5% to $41.97, narrowing the contango with the March contract, expiring on February 20, to less than $5.
But despite the Friday rally, the front-month crude contract still lost 6.6% on the week.
The base metals were stuck solidly in the mud on Friday. Copper spent most of the day well in the green, but some late selling dropped it back to near break-even as it finished at $1.5362/lb., up a bit more than a penny. Nickel had a pair of sharp ups and downs that left it little changed at $4.6017/lb., down a penny and a quarter. Zinc was also near flat, ending at $0.5073/lb., up just a tenth of a cent. Aluminum was dead flat at $0.6065/lb., unchanged, while lead pushed slightly higher, closing at $0.5135/lb., up a quarter of a cent.
Copper eked out a small gain on a day that couldn’t have been more uninteresting for the industrial metals. After a couple days of this, is it possible we’ve finally reached some kind of equilibrium point, where the sudden, sharp moves we’ve become accustomed to become less frequent? It’s too soon to call it a trend, but stay tuned.
Analysts attributed at least some of the limited positive interest that did surface during the day to short covering ahead of the holiday weekend in the US.
“A steadier tone in U.S. equity markets after Thursday's sharp rebound and a slightly weaker dollar lent a bit of strength to the copper market,” said Sterling Smith, vice president with FuturesOne in Chicago.
Also lending a hand was speculation that a stimulus package is boosting growth in China and will buoy demand. Economists surveyed by Bloomberg News estimated that the Chinese economy may expand at a 6.6% annual rate in the second quarter after the pace slows to 6.3% in the three months through March, the weakest pace since 1999.
“This is a China rally,” said William O’Neill, of Logic Advisors LLC in Upper Saddle River, New Jersey. “The picture looks better in China, but if you take the whole picture of the global economy, things don’t look as good … In the longer term, these prices will move higher. But to say there’s going to be any imminent improvement in demand in the short term is a bit of a stretch.”
Certainly, stockpile growth didn’t take a breather yesterday. Copper inventories monitored by the LME advanced by 2,875 metric tons, to 519,550 tons, the highest level since October of 2003.
That’s what’s happening … have a great holiday weekend and see you Wednesday!
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