Good morning ...
Gold began Friday about where it left off at the end of the New York session on Thursday, but caught some fire after the first hour, and traded higher for the rest of the day, finishing at $913.90, up $9.90. For the week, gold lost 1.8%.
Platinum nudged over $2000 in the first hour, dropped back for a while, then breached it again near noon and held the gains, ending at $2018, up $32. For the week, platinum eased six-tenths of one percent.
Silver closely mirrored gold's action, dipping to $17.30 early in New York, but then rising even more strongly and closing at $17.72, up 34 cents. For the week, silver shed nine-tenths of one percent.
Another day of strength in the precious metals took them nearly back to where they were a week ago, cheering investors who had held on during the tsunami of a selloff at the first quarter's end.
The usual suspects lined up to do their parts, as the dollar declined and crude rebounded.
The Hightower Report wrote of the day's action: The gold market was initially undermined by the Non Farm payroll report but then managed a mid day recovery bounce and a rise above the prior two sessions highs. However, it was clear that the Dollar weakness wasn't significant enough to drive aggressive buyers back into gold. However, energy prices were supportive to gold as was the initial reaction in the equity market to the monthly payroll information. It is also positive that other metals markets and a host of other physical commodity markets showed some strength on Friday as that suggests the fear of too much slowing and the fear of broad based physical commodity selling has been temporarily mitigated.
'Temporarily' is the key word there. It's a war in the metals pits, as investors search for the nerve to keep climbing during the Wall of Worry phase of this bull market.
One view: Metal markets seem to be torn between rallying on the back of a weaker dollar on the one hand, and selling off on those occasions when the realization sets in that slowing growth, which is driving the dollar lower in the first place, has the potential to knock demand back, wrote Edward Meir, of MF Global.
How this tussle eventually plays out remains to be seen, Meir added, but we have been arguing for some time that the demand component will eventually prevail and exert downward pressure on metals, Meir added, especially if the U.S. slowdown spreads to Europe, Japan, and the Asian economies.
That scenario, of course, ignores gold's particular and historic safe-haven status.
Currencies and Economic News
In the currency market, the dollar slumped against the euro. Late Friday, the euro was trading at $1.5764 vs. $1.5673 on Thursday.
The news of the day was the anxiously-anticipated Labor Department report on non-farm payrolls, which came in worse than expected. Payrolls fell by an estimated 80,000 in March, Labor said, marking four consecutive months of losses, as well as the largest decline since March 2003.
The number was well below the already-pessimistic 60,000 job loss predicted by economists, leading Dow Jones Marketwatch to term it employment data that would seem worthy of the name recession.
To make matters worse yet, payrolls in January and February were revised lower by a cumulative 67,000. And the unemployment rate surged to 5.1% last month, the highest level since September 2005.
And what was the reaction of equities? The Dow was in positive territory for most of the day, only slipping by 17 points late, while the NASDAQ and S&P both posted gains. It is impressively difficult to fathom what stock investors are thinking at this point.
In the energy market Friday, crude for May delivery posted substantial gains, closing at $106.23/barrel, up $2.40. May reformulated gasoline added 4 cents, to $2.76/gallon.
It's certainly counterintuitive to think of the price of oil rising in the face of recession, but that's part of the nature of the beast. Weakness in the dollar, making oil cheaper for non-dollar end users, counterbalances diminution of demand.
But Michael Fitzpatrick, of MF Global, believes that any uptrend is likely to be temporary.
Uncertainty over future demand has undermined every rally recently, and if the jobs number is any measure of the pulse of the economy, it certainly has to be disappointing relative to energy demand growth, Fitzpatrick says.
The base metals were all in positive territory on Friday. Copper was flat until mid-morning, but then took off, rising sharply until the noon hour before leveling off just short of the $4 mark, finishing at $3.9856/lb., up more than 5 1/2 cents. Nickel traded through a fairly narrow 25-cent range, with a mild upward bias, closing at $13.22/lb., up 8 3/4 cents. Zinc was up slowly but steadily, ending at its intraday high of $1.0627/lb., up two cents. Aluminum followed copper, shooting up at mid-morning to its intraday high of $1.3181/lb., up 2 3/4 cents, while lead was comfortably in the black, adding better than 2 1/4 cents, to $1.3397/lb.
Copper soared to its highest level in a month as more speculators piled into the metals as a hedge against inflation.
The weakness of the dollar is making commodities more attractive, said John Gross, publisher of the Copper Journal.
The metal gained despite a third straight day of rising stockpiles. Inventories monitored by the LME added a robust 2,575 metric tons of copper yesterday, to 115,150 tons, after two days of much more modest increases.
Despite the weak jobs data, base metals traders were apparently relieved that the numbers weren't worse.
I think it would have taken 100,000 jobs [lost] to move the market (down), said David Thurtell, analyst at BNP Paribas. The data shouldn't give bulls more confidence. But it doesn't give bears enough to justify smashing (prices) down either.
Future supply worries also factored in.
There is a certain amount of concern over supply disruptions in South America, most notably in Chile over the power supply shortages and possible strike action in Mexico, one analyst said.
Additionally, A huge amount, as much as $30 billion, has poured into commodities in the past three months, said Austin Brown, of hedge fund Touradji Capital Management. Copper is being a little more driven by money flow than fundamentals, he said.
The market now awaits next week's interest rate decisions from the European Central Bank, the Bank of Japan and the Bank of England.
And after Anglo-Australian mining giants BHP Billiton and Rio Tinto reportedly dismissed as too low a 65% increase in annual iron ore contract prices agreed to by Brazil's CVRD, the powerful China Iron and Steel Association issued a warning that the companies could face revenge for aggressively pursuing higher prices.
That's what's happening ... see you tomorrow!
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