Good morning …

Precious Metals

Gold was dead flat until just after mid-morning on Friday, but then it began a slow, steady decline that continued through the Globex, dropped it below $900, and culminated in a finish at $893.80/oz., down $10.20. For the week, gold lost 3.2%.

Platinum traded within a tight $20 range all day, ending near the high end at $1155/oz., unchanged. For the week, platinum added 2.8%.

Silver peaked just after the London open at almost $13, skidded from there into the first hour in New York, rallied to mid-morning, but flagged again until just before noon, after which it traded sideways through the rest of the day to close at $12.75/oz., down 16 cents. For the week, silver slumped 4.4%.

Although platinum is somehow managing to hold its ground, the selloff in gold and silver continues apace.

The usual suspects have not been able to give a lot of direction to the precious metals lately, and that was true yesterday, as equities moved a bit higher, the dollar was essentially unchanged vs. the euro, and crude finished fractionally lower.

Perhaps, as Matt Zeman, of LaSalle Futures Group in Chicago, says, “There’s just not a lot of interest in gold, and it goes back to the rally we’ve seen in equities … A lot of the flight-to-quality buying has come out of the market.”

Zeman is bearish going forward, noting that, “As people see data coming out showing improvements in the economy, interest in gold will dwindle.” He might have added, if such data emerge. So far, there’s been more in the way of wishful thinking than substance.

The proposed IMF gold sales may also still be spooking the market. On that subject, Julian Phillips, of goldforecaster.com, had this to say:

“For the I.M.F. gold sales to take place [and they have been expected for well over a year now] Congress must first agree to them. Second, the purpose of the sales was originally to shore up the I.M.F. Balance Sheet. The $750 billion injection from the G-20 removes that need now. Aid to the poorest nations replaces that. Gold sales at current prices would achieve proceeds of $116.5 billion. The sales, if approved, could take place over a few years if dropped into the 'open' gold market. This is less that the Central Bank Gold Agreement 'ceiling' at the moment. If sold by auction China and or Russia would be happy to snap up this amount. As Russia is already buying around 5 tonnes a month at the moment, they would love to get 400 tonnes even in one shot as they have pledged to increase their gold reserves to 10% from the current 3% of their reserves.

“So in conclusion, I.M.F. gold sales will either have no impact on the gold price [even when they eventually take place] or if another central bank buys will act as a positive factor in the gold market.”

Currencies and Economic News

In the currency market, the dollar was slightly lower against the euro. Late Friday, the euro was trading at $1.3483 vs. $1.3447 on Thursday.

The tensely-awaited jobless report from the Labor Department was greeted with a sigh of relief when it didn’t come in as bad as feared. Labor said nonfarm payrolls shed 663,000 jobs in March, fewer than the 688,000 projected by economists.

At the same time, the unemployment rate surged to a 26-year high of 8.5%, from 8.1% in February, in line with expectations. 5.1 million jobs have now been lost since the start of the recession.

“There is nothing in this report that points to economic recovery,” said economists at RDQ Economics.

Indeed, “It appears that the jobless rate will continue to rise at a rapid clip over the next few months and should breach 10% sometime in the second half of 2009,” wrote economists at Morgan Stanley.

Other U.S. data Friday were disappointing, as well. The Institute of Supply Management's non-manufacturing index fell to 40.8 in March from 41.6 in February, much worse than predictions it would improve to 42. A reading below 50 indicates that businesses are contracting.

Energy

In the energy market on Friday, oil edged lower, with crude for May delivery closing at $52.51/barrel, down 13 cents. May reformulated gasoline rose 2.26 cents, to $1.4924/gallon.

Traders shrugged when confronted with the poor economic data.

“The jobs report was bad, but everyone was kind of expecting it,” said Burton Schlichter, of New World Trading. “Investors have discounted the bad news and are hoping for an economic recovery.”

There was also still some leftover optimism from the feel-good G-20 meeting that left many optimistic about an economic rebound.

In supply news, Mexico's oil exports could decline by 18% in 2010, driving crude production below 2.5 million barrels per day next year, a Mexican finance ministry report said. The report projected exports to drop to 1.125 million barrels per day in 2010 from 1.370 million forecast for this year.

Base Metals

The base metals all posted healthy gains on Friday. Copper continued on its current tear, pushing higher from the pre-dawn hours straight through the day and barely coming off its intraday highs late to finish at $1.9465/lb., up almost 8 cents. Nickel was off until mid-morning, rallied into the afternoon hours, then pulled back late to close at $4.7748/lb., up 7 1/4 cents. Zinc had a strong late-morning push that took it to $0.6056/lb., up a penny and three-quarters. Aluminum was a steady all-day gainer, adding nearly 2 1/2 cents, to $0.6542/lb., while lead also showed well, tacking on better than 2 1/2 cents, to $0.596/lb.

Copper shot higher, threatening the $2 level for the first time in more than five months, and prolonging a rally that has been based more on feeling than fundamentals.

“There’s been some confidence that the economy is going to be able to restart,” said Patrick Chidley, of Barnard Jacobs Mellet in Stamford, Connecticut. But he noted that copper’s runup is “sentiment-driven.”

Traders “are very focused on looking forward,” Chidley added, as “demand is still weak, and there isn’t much of a physical basis for the move.”

Supply numbers provided some support, too, as inventories monitored by the LME fell by 4,825 metric tons yesterday, to 502,150 tons.

The bad-news-isn’t-bad-if-it-isn’t-horrific syndrome was in evidence, as well.

Thus, grim as the report was, “the jobs data was very close the economists’ predictions,” said Mike Rapson, of MF Global. “Given the surprises on the downside of these numbers in recent months, the market is taking comfort in the fact that perhaps the situation is stabilizing.”

Looking ahead, Larry Young, of Infinity Futures in Chicago, predicted that, “COMEX copper is likely to see some profit-taking and consolidation from recent strength, when prices climbed more than 9 percent on the week.”

Finally Bloomberg reported that: “Freeport-McMoRan Copper & Gold Inc., which lowered production targets last year as the price of copper tumbled, said a rally fueled by Chinese purchases is unlikely to prompt a surge in investments.

“Demand is ‘very weak’ in the U.S., Europe and Japan and global financial markets aren’t ‘fully opened,’ said Richard Adkerson, chief executive officer at the world’s largest publicly traded copper mining company.”

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


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