Good morning ...
Gold declined a bit in the far East, then spent the entire day range trading between $970 and $980, before finishing near the mid-point at $973.20/oz., down $10.30. Overnight, gold is sharply higher.
Platinum was down in Hong Kong, then dipped again in the second hour of New York trading, before rallying back and then trading sideways to end at $1067/oz., down $32. Overnight, platinum has pushed higher.
Silver peaked at $14.40 in Hong Kong, then declined with every rally snuffed straight through the Comex, bottoming at $13.90 before regaining a little lost ground on the Globex and closing at $14.03/oz., down 31 cents. Overnight, silver is trending higher.
It was probably to be expected that the precious metals would take a breather following the stout gains of the previous two days, and that's just what happened. Losses, though, were probably capped by the declining dollar and rising oil prices.
No one was calling a market turn. Kitco's Jon Nadler summed up by saying that the overall tenor of the market remained firm.
The Hightower Report diagnosed the silver action thusly: The silver market broke sharply and even fell below a key chart point which seemed to add to the selling pressure. Seeing silver prices back at the highest level since August also prompted profit taking in an overbought market. A weaker Dollar and the S&P market holding its own seemed to dampen the safe haven appeal of silver seen in the previous session's trade. The sharp sell off in silver may have also been tied to this week's economic news the majority of which supports a weakening economy just ahead which could be damaging silver's status as a quasi industrial metal. It was surprising that silver failed to garner any support from the sharp early gains in copper and that also suggests this market was trading off of technical signals.
Meanwhile, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, showed no signs of slowing. GLD holdings moved to yet another record high of 1,024.09 metric tons, or nearly 33 million ounces.
GLD is now the seventh-largest holder of gold in the world, after the IMF and the governments of the U.S., Germany, France, Italy and Switzerland, with the Swiss, at 1,040 tons, likely to fall behind the ETF soon.
Currencies and Economic News
In the currency market, the dollar slid against the euro. Late Thursday, the euro was trading at $1.2668 vs. $1.255 on Wednesday.
Traders have poured back into the euro today on news that Germany will spend more of its Treasury to support a union to which it is anchored, wrote Jack Crooks, of Black Swan Capital.
Germany's Cabinet on Wednesday approved legislation that would allow the forced nationalization of banks as a last resort. And Chancellor Angela Merkel said yesterday that Germany is willing to shore up the International Monetary Fund if needed.
Merkel added that the euro zone is strong and has proven its worth in the crisis.
There's a sense perhaps that Europe is going to take an activist role, or acknowledge that more needs to be done, said Daragh Maher, currency strategist at Calyon.
Among the hard data, the Labor Department reported that producer prices rose in January for the first time since last July. Producer prices for finished goods climbed by 0.8%, while core PPI (minus food and energy) rose by 0.4%. Those were much higher than economists' projections for 0.4% and 0.1% gains.
In the energy market on Thursday, oil rocketed higher, with crude for March delivery advancing to close at $39.48, up $4.86. March reformulated gasoline added 3.34 cents, to $1.0986/gallon.
In its weekly inventory report, the Energy Information Administration said that crude stockpiles fell by 200,000 barrels for the week ending February 13. Gasoline supplies increased by 1.1 million barrels, while distillates decreased by 800,000 barrels. Refineries were operating at 82.3% of capacity which, while still a low level, was up from the previous week's 81.6%.
The EIA also said the U.S. consumed nearly 20 million barrels a day of petroleum products over the past four weeks, up 2.6% from a month ago, to the highest level in a year.
With gasoline prices two-thirds of last year at the pump it isn't a big surprise to see us using more gasoline even though many are losing jobs, said James Williams, of WTRG Economics. There is no way to read this report that isn't bullish.
The base metals were little changed on Thursday. Copper leapt ahead from the pre-dawn hours to mid-morning in New York, briefly popping over $1.50 before easing through the rest of the day to finish at $1.4712/lb., up 2 1/2 cents. Nickel followed a very similar path, closing at $4.421/lb., up 13 1/4 cents. Zinc was slowly and steadily up and then down, ending virtually unchanged at $0.4934/lb. Aluminum mimicked zinc, up less than a tenth of a cent at $0.587/lb., while lead tacked on just under a quarter-cent, at $0.4801/lb.
Copper managed to post positive numbers for the third session in four, as the declining dollar enhanced buying appeal for the metal.
Yes, The weaker dollar is helping the upbeat tone in metals, wrote Edward Meir, of MF Global. But also, Most markets are higher in what seems to be a bounce from oversold conditions.
Putting a cap on, though, were stockpiles' reversal from their one-day decline. Inventories monitored by the LME advanced by 2,950 metric tons, more than wiping out Wednesday's 1,125 ton drop, and rising to 528,250 tons.
Some analysts are beginning to see copper as having bottomed. Copper will trade from present levels to slightly higher on average in 2009, and it is likely to climb next year, said Andrey Kryuchenkov, of VTB Capital in London.
The second quarter is crucial, Kryuchenkov said. If we see an industrial pick-up in demand, the picture will be slightly more optimistic.
And Ralph Preston, of Heritage West Futures in San Diego, wrote that a close over $1.56 is needed to embolden the bulls ... Stable trade under $1.50 keeps the bears in firm control, with a close below $1.39 setting the stage for another leg down.
In aluminum news, the China State Reserve Bureau is likely to buy another 400,000 metric tons of aluminum ingot from domestic smelters, which would definitely support the market, local sources said yesterday.
And Chinalco will not change its $19.5-billion investment plan in Rio Tinto, even if a rival bid emerges, the company said.
That's what's happening ... see you tomorrow!
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