Good morning …

Precious Metals

Gold hit its intraday day high just above $955 late in the far east but immediately started to lose ground at the London open where it dropped to almost $930 before gaining some back in New York after noon, finishing at $945.50/oz., down $6.60. Overnight, gold has traded mostly sideways .

Platinum stayed in a much tighter range compared to yesterday, only straying slightly below $1040 early in Hong Kong and above $1055 later in Hong Kong, ending near its intraday high at $1052.00/oz., up $5. Overnight, platinum is sharply higher.

Silver began a downward trend at the London open and continued to fall through most of New York, closing at $13.12/oz., down 61 cents. Overnight, silver is little changed.

It was another tough day for the precious metals. Gold has lost $47.70 in the past four days and silver has lost $1.29 in the past three.

The Hightower Report had this to say about the gold sell-off: “The gold market was hit by another session of heavy profit taking as an increase in investor risk appetite prompted a shift away from safe haven assets to riskier ones. Gold was also undermined by higher equity market which held onto gains despite more bearish economic news. Rising signs of unemployment, a drop in durable goods and a slump in new home sales failed to stir up and fresh economic anxiety. In fact, news that the government had proposed another $750 billion to support the financial industry seemed to alleviate some of the extreme distress over the banking sector problems seen earlier in the week and that also seemed to diminish the appeal of gold. A lack of fresh investment flows into gold-backed securities also contributed to the negative market bias.”

That same report touched on the silver situation as well: “The silver market was pushed sharply lower which seemed to snowball as the market fell though several critical chart points. The silver market's extreme overbought condition certainly contributed to the selling bias this session. But buying interest in silver has also dried up as the government revealed details on its banking sector rescue plans and as the President puts aside extra funds in the budget to shore up the financial system which has taken away some of uncertainly and the need for safe haven investments.”

Currencies and Economic News

In the currency market, the dollar lost ground against the euro. Late Thursday, the euro was trading at $1.2735 vs. $1.2718 on Wednesday.

In economic news Thursday, the Labor Department reported that first-time applications for state unemployment benefits for the week ended Feb. 21 rose 36,000 to a seasonally adjusted 667,000.

The level of initial claims now stands at its highest since October 1982 – up 86% from the same period in the prior year. The four-week average of new claims, which measures the underlying trend, rose 19,000 to 639,000 – also the highest level since October 1982.

The trend in claims is sharply upwards, reflecting the depth of the recession, and we see no reason for it to peak anytime soon, said Ian Shepherdson, chief U.S. economist with High Frequency Economics. Companies are throwing in the towel as they recognize that no sector is safe.

A separate report from the Commerce Department showed demand for U.S.-made durable goods fell for a record sixth straight month in January amid widespread weakness from both domestic and foreign buyers.

Orders for durable goods – such as airplanes, computers and washing machines – fell 5.2% in January, the Commerce Department reported Thursday. Orders had never fallen six months in a row since the data collection began in 1992.

Orders fell in every major sector, signaling that companies and consumers across the globe are battening down the hatches by delaying or canceling major purchases. Weakening business investment is expected to be a major drag on the economy in the first quarter as it was in the fourth quarter.

The government data and surveys of industry indicate an ongoing collapse for capital spending, said Josh Shapiro, chief economist for MFR Inc.


In the energy market on Thursday, crude for April delivery gained $2.72 to close at $45.22/barrel. March reformulated gasoline rose 13.44 cents, to $1.3004/gallon.

On Thursday, the United Arab Emirates, the third-largest producer in OPEC, said it will cut its April production by 15% - 17%, Dow Jones Newswires reported.

OPEC will meet in March to discuss another potential production cut. The cartel already has announced a production reduction of 4.2 million barrels since September, equivalent to about 5% of global oil demand.

Oil prices could work slightly higher from here as we approach the OPEC meeting, and as participants begin to discount another likely cut, wrote Edward Meir, an analyst at MF Global.

Base Metals

The base metals were mixed on Thursday. Copper gained 3.41 cents from yesterday’s close to $1.5598/lb. Nickel lost 4.61 cents to finish at $4.4959/lb. Zinc fell one-third of a penny, ending at $0.5042/lb. Aluminum tacked on half a cent, closing at $0.5988/lb., while lead moved to $0.4708/lb., up three-quarters of a cent.

The price of copper rallied on Thursday amid hopes government assistance plans will help improve demand in the U.S. and China. The red metal rose to its best level in more than two weeks.

“As governments put more money toward infrastructure and into stimulus plans, it’s going to help out copper,” said Michael K. Smith, the president of T&K Futures & Options. “It seems like people are feeling better about the outlook for metals.”

“We’ve gotten some clarity on the plan to rescue banks and the plan to stimulate the economy and that’s given people some optimism,” said Michael Pento, the chief economist at Delta Global Advisors.

The metal has also gained this week on speculation that inventories may fall. The amount of copper scheduled to be taken out of warehouses monitored by the London Metal Exchange, known as canceled warrants, jumped to the highest in a year. LME stockpiles dropped 0.5% to 545,475 metric tons today.

Still, the weak economy will mean copper prices will continue to struggle “in the near term,” Pento said.

That’s what’s happening … see you tomorrow!


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