Good morning …
Gold started upward in Hong Kong, continued until a dip at mid-morning, then blasted past the $1,000 mark shortly before noon, cresting at $1006 before easing through the afternoon hours to finish at $993.20/oz., up $20.00. For the week, gold was up an impressive 5.5%.
Platinum peaked above $1090 right at the Comex open, then traded rangebound between there and $1080 for the rest of the day, ending at $1081/oz., up $14. For the week platinum tacked on 1.9%.
Silver was higher from Hong Kong almost uninterruptedly to near the end of the Comex, peaking just above $14.60 before sliding through the Globex to close at $14.41/oz., up 38 cents. For the week, silver fell just short of gold, adding 5.4%.
The precious metals rounded off a robust week in style, sloughing off Thursday’s consolidation to move sharply higher, capped by gold’s breakthrough of the $1,000 mark for the first time since last March.
Although there was clearly a boost to be had from the flight to safety from the plunging equities markets, gold was unaffected by deteriorating crude prices and a rebound in the dollar, and the metal’s inability to close above the psychologically-important millennium mark had few gold bugs fretting.
“The price slide of U.S. equities, with the Dow Jones Industrial Average falling to its lowest level since October 2002, should result in a continued positive mood of investors on gold,” said an analyst at Commerzbank.
Some analysts are counseling caution, believing that the recent steep runup in the gold price may make it vulnerable to a selloff in the short term. But with equities crumbling across the board, where would investors go?
The always-perceptive Peter Spina, of Goldforecaster.com, peers into his crystal ball, and writes: “Gold is pushing its record highs from last year, resistance will be formidable, but whether it does it in the next few weeks or in a few months, gold is clearly headed higher, much higher. $1,200 and higher gold is now a possibility in the short-term. Pullbacks will see continued strong investment demand, both from institutional and retail investors. At the rapid rate global paper currencies are being diluted, the destruction of trust and integrity within the financial and banking system and destabilizing consequences such actions will promote, gold and silver are going to attract record amounts of capital seeking wealth preservation.”
To which all we can add is: yup.
Currencies and Economic News
In the currency market, the dollar edged higher against the euro. Late Friday, the euro was trading at $1.2637 vs. $1.2668 on Thursday.
Unsurprisingly, the market was “dominated by more safe-haven trading, which provided background support for the dollar,” said analysts at Action Economics.
The euro was also hurt when the closely-watched Markit composite purchasing managers index for the euro zone slumped to a new record low of 36.2, from 38.3 in January. Economists had instead been projecting a rise to 38.7.
A figure of less than 50 signals a contraction in activity, and the PMI has now been below the 50 level since the middle of 2007.
Meanwhile, the Labor Department reported that the consumer price index rose a seasonally adjusted 0.3% in January, in line with economists’s expectations. It was the first increase since July.
For the past year, Labor said, consumer prices are unchanged. That marks the lowest inflation rate since 1955.
In the energy market on Friday, oil sagged, with crude for March delivery falling to close at $38.94/barrel, down 54 cents. March reformulated gasoline dropped 3 cents, to $1.07/gallon.
Yesterday marked the end of March as the front-month crude contract, and it went out with a whimper rather than a bang on a day that often features a great deal more volatility.
But the stock market turmoil proved more influential.
“Fears over a deteriorating global economic outlook sent equity markets tumbling in Asia and Europe, as investors shed riskier positions, with oil prices tracking them lower amid weakening demand concerns,” said Nimit Khamar, an analyst at Sucden Financial Research.
And, “Disappointing euro-zone PMI data highlighted remaining downside risks to growth this morning, and without a lasting stabilization in confidence, energy prices are likely to remain under pressure,” added analysts at Action Economics.
The base metals were all splashed with red on Friday. Copper cratered during the pre-dawn hours, and was still at its lows after the noon hour, but it staged a late rally that took it back to finish at $1.4519/lb., down only 2 cents. Nickel was down all day long, barely coming off its intraday low to close at $4.2502/lb., down more than 17 cents. Zinc fell in the pre-dawn hours, rallied into the afternoon, but then lost it all and ended at its intraday low of $0.4785/lb., down a penny and a half. Aluminum was also a daylong loser, giving up a penny and a third, to $0.5736/lb., while lead plummeted to $0.4553/lb., down 2 1/2 cents.
Copper posted another weekly decline, as skyrocketing stockpiles served as a stark indicator of global economic weakness.
Inventories monitored by the LME surged 17,350 metric tons yesterday, to 545,600 tons, a more than 5-year high.
The build in inventories “took some support away,” wrote Michael Widmer, an analyst at BNP Paribas in London. “In addition, purchasing managers in Europe were very weak. There are also concerns over economies in Eastern Europe.”
Norddeutsche Affinerie AG, Europe’s largest copper refiner, also alluded to the “unwillingness of investors and copper processors to take risks.” No surprise there, of course.
In Shanghai, copper inventories fell 11% from a week earlier to 30,105 metric tons. This was the first decline since mid-January, but back then stockpiles were just half the current level.
The International Copper Study Group said yesterday that the global copper market showed a supply surplus of 47,000 metric tons in November 2008, compared with a surplus of 38,000 tons in October.
The ICSG also reported that, for the first nine months of 2008, the market saw a production surplus of 147,000 metric tons, only slightly higher than the surplus of 143,000 tons during the same period of 2007. World refined copper usage in the first eleven months of 2008 increased by 2.6%, or 421,000 tons, year-over-year.
In company news, Brazilian mining giant Vale said on Thursday its net profit more than doubled in the fourth quarter as cost controls, production cuts and a weaker local currency helped it offset weaker demand for metals.
But miner Anglo American suspended its dividend for the first time since World War II and announced job cuts, saying it expects weakness in commodity prices to continue.
That’s what’s happening … have a great weekend and see you Tuesday!
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