Good morning …

Precious Metals

Gold was flat until just before the New York open on Thursday, popped about $10 from there, but then gave it back before trading rangebound for the rest of the day, finishing at $934.20/oz., up 40 cents. Overnight, gold has fallen off.

Platinum prolonged its recent bust-out to the upside, pushing as high as $1160 early in New York, then declined through the Comex and went flat on the Globex, ending at $1142/oz., up $21. Overnight, platinum is trending lower.

Silver pushed higher from Hong Kong through to the noon hour but eased gently from there, closing at $13.52/oz., up a penny. Overnight, silver is sharply lower.

It was another very lackluster day for the precious metals, except for platinum, which is generating a good bit of buying interest and yesterday touched a six-month high.

“Some people may think that perhaps the car industry will start to pick up,” said Greg McKinnell, a precious-metals trader at London-based Johnson Matthey. “With the economic stimulus package at the moment there’s some confidence in the market.”

Nevertheless, “it’s very hard to say with any real conviction that this is the start of the upturn,” McKinnell added. “There’s no real change with the fundamentals.”

China is also a factor.

“Platinum jewelry demand in China is very strong at the moment,” wrote John Reade, UBS AG’s head metals strategist in London. He said the relatively small price difference between gold and platinum is “proving very attractive to manufacturers, retailers and consumers.”

Regarding gold, “Overall conditions still appear to favor a push toward higher values over the course of at least the next week,” said Kitco’s Jon Nadler. “The expected economic recovery is currently not being given high odds until sometime in 2010.”

“The dollar is still under some pressure,” said Stephen Platt, of Archer Financial Services in Chicago. “There’s growing concern that the U.S. monetary base is expanding. That’s helping foster renewed buying interest in gold.”

But Tom Hartmann, of AltaVest Worldwide Trading in Mission Viejo, California, cautioned that, “What’s holding gold back is that there’s no apparent inflation yet. Until that happens, gold is just going to hang around.”

Currencies and Economic News

In the currency market, the dollar gained slightly on the euro. Late Thursday, the euro was trading at $1.352 vs. $1.358 on Wednesday.

Thursday brought some grim economic numbers.

As Marketwatch wrote: “Now that the books are closed on the fourth quarter's performance, it's fair to say that the final three months of 2008 will go down as the worst quarter for the U.S. economy since the 1930s.”

The Commerce Department reported revised fourth quarter GDP figures yesterday, showing that output fell at a 6.3% annualized rate. That’s the biggest drop since 1982 and the third worst gross domestic product figure in the past 50 years.”

In addition, real gross domestic income fell even faster than GDP, sinking at a 7.6% annual pace in the quarter, the worst showing since 1980 and the second worst in the past 50 years.

Underscoring those dismal numbers, the Labor Department released jobless claims data. For the week ended March 21, first-time claims for benefits rose 8,000 to 652,000, or 78% higher than the same period in 2008.

The number of people collecting state unemployment benefits also reached another new record, jumping 122,000 to a seasonally adjusted 5.56 million.

Energy

In the energy market on Thursday, the price of oil rose, with crude for May delivery closing at $54.35/barrel, up $1.58. April reformulated gasoline gained 3.16 cents, to $1.5311/gallon.

Traders actually celebrated the 6.3% drop in GDP, because it wasn’t as bad as the 6.7% decline forecast by economists.

“Things are terrible but not as bad as feared,” said Phil Flynn, of Alaron Trading. “Oil is on a manic macroeconomic journey. Just focus on the hope that the economy won't go into total meltdown.”

Despite the pickup in price, many were predicting that Wednesday’s inventory figures argue for a bear market going forward.

“The inventories report is a reminder that we still have too much oil in stockpiles,” said James Williams, of WTRG Economics. “It could add pressure on prices across the board in the following sessions.”

Base Metals

The base metals were all in positive territory on Thursday. Copper gained from the pre-dawn hours to mid-morning, then held on, to finish just off its intraday highs at $1.8285/lb., up nearly 6 cents. Nickel came well off its intraday highs, but held in the green, closing at $4.3318/lb., up 7 3/4 cents. Zinc pushed higher all day, ending at $0.5937/lb., up almost 3 cents. Aluminum had a strong day, adding a penny and a half, to $0.6408/lb., while lead had another good day, tacking on more than a penny, to $0.5911/lb.

Copper led the sector higher, jumping the most in a week on speculation that demand from China will pick up.

“The stimulus plan in China seems to be working, and that’s going to be positive for demand,” said Michael K. Smith, of T&K Futures & Options in Port St. Lucie, Florida. “I’m pretty bullish on copper.”

China, the world’s third-largest economy, seems to be showing some signs of recovery, and the “rapid decline in growth has been curbed,” says People’s Bank of China Governor Zhou Xiaochuan.

There was also some carry-over of positive feeling from the better-than-expected numbers on durable goods orders and new home sales released on Wednesday.

Smith added that, “A lot of people had really low expectations for the economy … There was all of this talk of things looking like a depression. The reality is that things aren’t that bad. This is starting to be reflected in copper.”

And mega-miner Rio Tinto chipped in, saying it expects metal prices to rise in the second half of this year, helped by China's economic stimulus package, which will boost infrastructure spending.

Still, Japan's demand for copper wire and cables is expected to sink to its lowest level in 34 years in the next business year, with no end in sight because of a deepening demand decline in the world's No. 4 consumer.

“There's concern in the industry as we cannot tell when we will hit bottom,” said Kazuhiko Ohashi, chairman of the Japanese Electric Wire and Cable Makers' Association.

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


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