Good morning …

Precious Metals

Gold took a whacking on Thursday, with Wednesday’s final number the peak for the day, in Hong Kong, and nothing but down from there to late morning in New York, where it bottomed at $895 before a rather anemic rally saw it limp back to a finish at $904.00/oz., down $23.40. Overnight, gold is little changed.

Platinum also bottomed in the late morning, but it took off sharply higher from there, rising through the rest of the Comex, then leveling off to end at $1154/oz., up $19. Overnight, platinum has been flat.

Silver followed gold down in the early trading, hitting its trough at $12.55 at mid-morning, but like platinum it then provoked some strong buying that carried it all the way back to the $13 level before it eased slightly on the Globex to close at $12.91/oz., down 12 cents. Overnight, silver is trending lower.

Sellers were out for gold’s scalp yesterday and nothing was going to deter them, not rising equities, not soaring oil, not a plunging dollar. Gold bugs must have been consternated for fair, as things couldn’t have lined up better for the metal.

Traders, according to MarketWatch, have gone a bit starry-eyed with “optimism that global leaders meeting in London are taking measures to tackle the financial and economic crisis, which left investors more inclined to move into riskier assets.”

As Zachary Oxman, managing director at TrendMax Futures, put it: “With the markets pricing in the thought that we may be seeing some upside movement out of this recession, I think that some of the flight-to-quality trade is leaving gold and bonds.”

Also factoring in was the statement from the G-20 nations endorsing 403 tons of gold sales by the International Monetary Fund, with the proceeds going to provide finance for the poorest countries over the next two to three years.

That statement was taken as a tacit confirmation that the IMF's gold sales plan is likely to be approved by its member countries later this year. In the past, the U.S. Congress, from which the IMF must get the thumbs-up, has nixed similar schemes. Additionally, the IMF needs an 85% majority yea vote from its 185 members.

Should the IMF get its way, the result may not be disruptive. Hussein Allidina, an analyst at Morgan Stanley, wrote that he expects the sale, but do not believe that this presents a strong negative risk to gold prices - as it will be 'orderly' and maybe even off market.”

The fund is likely to find a lot of ready buyers in countries with low gold reserves, especially Russia and some Asian countries such as China, Taiwan, and India—to whom it could sell directly without entering the broader market.

Currencies and Economic News

In the currency market, the dollar crashed against the euro. Late Thursday, the euro was trading at $1.3447 vs. $1.3212 on Wednesday.

The common currency soared after the European Central Bank lowered its benchmark interest rate by only a quarter of a percentage point, to 1.25% from 1.5%. That surprised traders, who had expected a cut to 1%.

The buck lost some of its safe haven status in the wake of the conclusion of the G-20 meeting, at which leaders agreed to provide a total of $1 trillion in resources to the International Monetary Fund and other institutions.

“Equities and [some] currencies are higher because flushing the IMF with cash reduces the risk of bankruptcy for emerging market nations, which was a big concern,” wrote Kathy Lien, director of currency research at GFT.

“Previously investors were worried that the IMF would run out of money and be unable to extend additional assistance to struggling nations. That risk is now reduced significantly to the relief of global investors,” Lien added.

But all eyes now turn to today’s US jobless report. Economists are looking for about 660,000 job losses, and an unemployment rate of 8.5%. If the figures come in worse than that, all of today’s optimism is likely to be nipped in the bud.

Energy

In the energy market on Thursday, oil rocketed higher, with crude for May delivery closing at $52.64/barrel, up $4.25. May reformulated gasoline rose 9.72 cents, to $1.4689/gallon.

“The ECB has got us rocking today,” said Phil Flynn, of Alaron Trading. “It's an amazing turnaround for the ECB because some people speculated that they might go in and buy some debt, but they turned around and cut rates less than expected and that was very bullish for commodities.”

“With the rally in stocks and what seems to be the start of a turn around economically, I believe that crude as well as most commodities are beginning to price in the impending hyperinflationary period that we believe the U.S. is about to feel,” said TrendMax’s Oxman.

“Markets have generally registered assent with the idea that the worst may have passed,” said John Kilduff, of MF Global. “Of course, this idea may be dashed by the release of the Labor Department's March jobs report [Friday],” Kilduff said, adding that he expects the recent $45-to-$50 trading range for crude to remain in place.

Base Metals

The base metals were all flashing green on Thursday. Copper pushed higher from the pre-dawn hours straight through the day with only minor setbacks along the way, finishing at its intraday high of $1.8677/lb., up 5 cents. Nickel had a big dip between the New York open and mid-morning, but otherwise was also up, closing at $4.7022/lb., up nearly 21 cents. Zinc peaked at the New York open, then drifted lower to end at $0.5875/lb., up a half-cent. Aluminum was another steady gainer, adding a penny and a half, to $0.6301/lb., while lead came well off its highs late in the day, but still tacked on a penny and two-thirds, to $0.57/lb.

Copper was off to the races and never let up, galloping to a 5-month high and leading the sector upward as the industrial metals followed rising equities markets and took some good economic news out of China as a harbinger of better things to come.

“We have had some little signs of hope in the economy,” said William O’Neill, of Logic Advisors in Upper Saddle River, New Jersey.

The optimism was widespread, as the MSCI World Index of equities jumped as much 5.2% percent on a trace of evidence (read: hope) that the worst of the global recession may be over.

“As the stock market holds firm, you’re getting a little more optimism in copper,” said Frank McGhee, of Integrated Brokerage Services in Chicago. “These markets are starting to look forward and things are looking better.”

Especially heartening was that China’s manufacturing expanded in March for the first time in six months, according to the Federation of Logistics and Purchasing in Beijing.

The weakening dollar was also a key ingredient. “Commodities are a natural instrument for investors concerned about inflation risk, due to their role as the very basic raw materials used to produce the goods we consume,” wrote analysts at Merrill Lynch in London.

Bart Melek, of BMO Nesbitt Burns in Toronto, sees a confluence of positive factors: “Very low interest rates, fiscal stimulus planned in key countries (U.S., China, Japan, EU and Russia) and an improving credit market are likely to bring copper into $2.00/lb territory in late 2009/early 2010,” Melek said.

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


NEWS YOU CAN USE:

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