Good morning …

Precious Metals

Gold was in the red until just before the New York open on Friday, shot up as high as $938 a few minutes into the session, but then dropped back by mid-morning and traded sideways through the rest of the Comex and the Globex, finishing at $928.20/oz., up $2.10. For the week, gold was down 1%.

Platinum traded within a tight $13 range all day, and in the end wound up little changed at $1055/oz., up $4. For the week, platinum lost 1.4%.

Silver followed along with gold for a fourth straight day, peaking at $13.29 in initial New York trading, then easing a bit into a close at $13.20/oz., up 25 cents. For the week, silver declined just under 1%.

The precious metals held on as the week wound down, in a day more of consolidation than volatility in either direction.

Perhaps a little more might have been expected from gold as equities pushed higher again and the dollar slipped lower, but oil also slid after Thursday’s big rally, and that may have applied some drag.

“Gold prices are buoyed by ETF demand,” said James Moore, of It “should benefit further in the coming sessions by renewed investment demand as the economic and financial sector outlook deteriorates further.”

SPDR Gold Shares continues to pile up metal. GLD’s holdings added a fresh 3.36 tons (108,000 ounces) yesterday, hitting a new record of 1,041.53 tons (33.49 million ounces). Moreover, that means the ETF has edged past Switzerland to become the sixth-largest holder of gold in the world. The Swiss have 33.47 million ounces.

Gold’s rise, though, could be capped by the positive rhetoric out of DC.

As Bill Murphy wrote on “In addition to Obama’s comments on buying stocks, Fed chairman Bernanke is going on 60 Minutes Sunday, a highly unusual move to begin with and unprecedented three days before a Fed meeting (next Wednesday). All of a sudden ‘the generals’ of America’s most established corporations were brought back from the dead to pronounce to America that suddenly all is going well. We have seen the top dogs of Citigroup and Bank of America visibly pronounce they are making money. JP Morgan’s Jamie Dimon, gave his own pep talk. Other banks have come out and stated they want to sent their ‘Tarp’ money back. Even GM says it doesn’t need the $2 billion it just requested, due to cost saving measures.

“There is more, but suffice it so say, all of this seems too pat. A wave of the magic wand and the crisis is under control? Time will tell on that score, but it seems highly suspect to me.”

Currencies and Economic News

In the currency market, the dollar was lower against the euro. Late Friday, the euro was trading at $1.2907 vs. $1.2818 on Thursday.

The Commerce Department reported that the U.S. trade deficit narrowed by 9.7% to $36.0 billion in January, a six-year low, on an across-the-board decline in global trade flows.

“The big story here is not the decline in the deficit but the continuing collapse in trade volumes,” wrote Nigel Gault, chief U.S. economist for IHS Global Insight.

The speed and depth of the decline has stunned analysts.

“The numbers have been wild since the summer of last year, before the bankruptcy of Lehman Brothers, when a combination of falling demand - and we surmise - much tighter trade credit, began to squeeze both exports and imports,” wrote Ian Shepherdson, chief economist at High Frequency Economics.

And the euro continued to benefit from the Swiss central bank's decision Thursday to intervene in foreign exchange markets to halt the Swiss franc's rise versus the common currency.


In the energy market on Friday, the price of oil drifted lower, with crude for April delivery closing at $46.25/barrel, down 78 cents. April reformulated gasoline rose three-quarters of a cent, to $1.3529/gallon.

Traders reacted to the possibility that OPEC may not cut production when it meets in Vienna on Sunday.

President Obama is reported to have been jawboning King Abdullah of Saudi Arabia, and Energy Secretary Steven Chu warned OPEC that if it cuts production, it could severely hamper attempts at economic recovery.

“They are trying to convey to OPEC that it is time they did their part to help speed the global economic recovery,” said Phil Flynn, of Alaron Trading.

James Williams, of WTRG Economics, says that there are several factors suggesting that OPEC will leave quotas unchanged this time: The Saudis have cut a disproportionate amount and will most likely push for others to come into line before agreeing to another cut, he said. Previous cuts have stabilized prices to above $40. And the full impact of recent cuts has not yet been felt in the U.S. because of shipping lag times.

Base Metals

The base metals were little changed on Friday. Copper bottomed in the late pre-dawn hours, pushed higher from there to mid-morning, then eased into a finish at $1.6449/lb., up 2 1/3 cents. Nickel had a series of $4.31 peaks into the New York morning, but then slid for the rest of the day, closing at $4.257/lb., up just over a penny and a half. Zinc fell from its mid-morning highs and wound up at its intraday low of $0.5356/lb., down a half-cent. Aluminum had a slight gain, adding less than two-tenths of a cent, to $0.5951/lb., while lead was also modestly higher, tacking on just under a half-cent, to $0.561/lb.

Copper clung to its gains for the day, as a reversal of formerly-burgeoning stockpiles suggested that demand could have seen its lows.

Inventories monitored by the LME fell 6,700 metric tons yesterday, dropping below the 500,000 ton mark for the first time in weeks, to 497,625 tons. And in Shanghai, stocks there eased to 34,735 tons from 38,468 tons a week ago.

“Copper prices and inventory have a very high inverse correlation,” said Gijsbert Groenewegen, of Gold Arrow Capital Management in New York. “People really watch the inventories.”

In addition, “There’s some strength coming today from the rhetoric out of China,” said Michael Gross, of in Tampa, Florida. “China uses a lot of copper, so any more growth there is going to help demand.”

Gross referred to remarks by Premier Wen Jiabao yesterday. China has “adequate ammunition” to spur the economy and can add to its 4 trillion yuan (US$585 billion) stimulus package at any time, Wen said.

And the Qatar Investment Authority, that country’s $60 billion sovereign wealth fund, said yesterday that it plans to increase investments in commodities after volatility in financial markets subsides. The statement was a “vote of confidence” for raw materials, Barclays Capital analysts.

“Investors seem to have considerable faith in the long- term outlook for commodities,” the Barclays analysts wrote.

And, in the seemingly-endless Oyu Tolgoi negotiations, the national Parliament of Mongolia has concluded its winter session without approving a draft investment agreement for Rio Tinto and Ivanhoe on the mega-mine.

That’s what’s happening … have a great weekend and see you Tuesday!

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