Good morning …
Gold traded sideways through Hong Kong and most of London then trended upwards in New York before settling back down a bit in electronic trading on the Globex to finish at $938.40/oz up $6.00. For the week, gold is up 1.4%.
Platinum was pretty flat all day long but managed to tack on $8.00 before all was said and done, ending at $1070.00/oz. For the week, platinum is up 1.1%.
Silver got a big boost early in London then trended slightly downwards the rest of the day to close at $13.33/oz., up 9 cents. For the week, silver is up 2.9%.
It was a good day overall for the precious metals. While they didn’t show the same strength as the day before, they all posted respectable gains.
A weakening dollar, deteriorating stock market, and rising unemployment figures all provided a bit of a boost to gold on Friday. It’s actually quite surprising the yellow metal didn’t fly further up.
It's a mixture of fear and worry that the recession and credit deflation are going to take gold prices lower, said Thomas Winmill, portfolio manager of Midas Fund in New York.
Gold is considered in the first instance at the moment an insurance premium and a safe haven, Commerzbank analyst Eugen Weinberg said. It is the equity markets and risk aversion that are moving the market.
However, fund managers said that prices could consolidate further due to weak jewelry demand and as short-term traders take profits after a sharp rally driving gold to above $1,000 an ounce on February 20.
At this time of the year, there is very little fundamental demand from jewelry fabrication. I will be concerned that there is too much speculative flow in the gold market at this time, Winmill said.
Meanwhile, buying of gold-backed exchange traded funds was also stagnant. Gold holdings in SPDR Gold Shares, the largest gold exchange-traded fund, again stood at a record high of 1,029.29 metric tons, unchanged for a sixth day, according to the latest data from the fund.
Currencies and Economic News
In the currency market, the dollar fell against the euro. Late Friday, the euro was trading at $1.2641 vs. $1.2548 on Thursday.
Some of today's dollar losses could be attributed to traders' wariness of going into the weekend long after trading patterns we observed on the past two Friday morning, said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Conn.
On the economic front, here are a couple rather shocking quotes from the jobs report released yesterday by the Bureau of Labor Statistics:
“Nonfarm payroll employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment has declined by 2.6 million in the past 4 months. In February, job losses were large and widespread across nearly all major industry sectors.”
“The number of unemployed persons increased by 851,000 to 12.5 million in February, and the unemployment rate rose to 8.1 percent. Over the past 12 months, the number of unemployed persons has increased by about 5.0 million, and the unemployment rate has risen by 3.3 percentage points.”
This is what falling off a cliff looks like, said Lawrence Mishel, president of the Economic Policy Institute.
President Barack Obama called the losses astounding and said the figures proved that Washington did the right thing by passing the historic $787 billion economic stimulus plan last month.
We hope the President is correct, but history and sound economics say he is wrong. All the so-called stimulus spending today may provide at most a brief bump up (like a shot of adrenalin) but will ultimately prolong the current crisis and make things much worse in the longer run.
Sadly, we fully expect the situation to become much more dire before any sort of real sustained turnaround is seen.
In the energy market on Friday, crude for April delivery rose $1.91 to close at $45.52/barrel. April reformulated gasoline finished up at $1.3322/gallon.
Oil futures rose Friday as dollar weakness and expectations of further output cuts by OPEC partially offset the grim news contained within the jobs report.
Oil is moving up because the big job loss has shaken some faith in the dollar, said Phil Flynn, vice president at Alaron Trading. Oil is acting as a hedge or alternative to the dollar and that seems to be the reason oil moved up.
Still, oil should be back down soon, as it will be remembered that the rest of the globe will have jobs issues as well, he added.
Other fundamentals are driving the energy complex higher despite the bad unemployment report, said Burton Schlichter, director of trading at New World Trading. He pointed out this week's data that showed a surprising decline in crude inventories and rising demand for gasoline.
The Energy Information Administration reported this week that U.S. crude inventories fell by 757,000 barrels in the week ended Feb. 27, while analysts had expected a buildup of more than two million barrels.
Meanwhile, the EIA reported gasoline demand in the past four weeks rose 2.2% from a year ago.
Expectations of a production cut at the next OPEC meeting also weighed on oil prices Friday, Schlichter said.
Base metals were mostly up on Friday. Copper jumped 3 cents to close at $1.6607/lb. Nickel added 5 and one-third cents to finish at $4.3772/lb. Zinc tacked on 40% of a penny, ending at $0.5445/lb. Aluminum lost almost half a cent, closing at $0.5744/lb., while lead moved to $0.5414/lb., up two full cents from the previous session.
LME copper stocks fell 3,175 metric tons to 522,025 tons, in line with falls seen in the past week, with Asian deliveries rising. But cancelled warrants, material earmarked for delivery, fell to 54,000 metric tons from Thursday's 60,775 tons.
The question on investor's lips now, is whether the rises seen in cancelled warrants last week are due to a start of an improvement in demand from China or stockpiling.
The $64 million question is whether it's going into China because of an improvement in demand, which is unlikely, or is it going into building of stocks by the trade and the government, Robin Bhar, senior metals analyst at Calyon, said.
Offering further clues, the chairman of state-owned trading firm Minmetals told reporters China plans to buy copper, aluminium and other metals for reserves.
In company specific news reported by Reuters, Glencore International AG has notified Zambian authorities it plans to halt operations at the Mufulira copper mine and put its Nkana mine under maintenance, the country's mines minister said on Friday.
Glencore has notified the government that it wants to cease operations of Mufulira copper mine due to high costs of production. They have also said they want to place assets of Nkana mine under care and maintenance, Mines Minister Maxwell Mwale said on state television.
Mwale said the Swiss firm, which operates the Nkana and Mufulira mines as a joint venture with Canada's First Quantum Minerals, had said it would only resume operations at the mines once copper prices reached around $5,500 per metric ton [about $2.50/lb.].
The company alleges it has been making losses due to the global crisis, but as government we feel there is a way to keep these units running, Mwale said but he gave no further details.
Have a great weekend… see you on Tuesday!
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