Good morning …

Precious Metals

Gold was higher in the far East on Monday, flattened out in London, but took off once New York opened and continued to rise to a peak of $900 at noon, at which point it was driven down and declined through the rest of the Comex and went flat on the Globex, finishing at $892.60/oz., up $13.40. Overnight, gold has been flat.

Platinum prolonged its recent bull run, shooting as high as $1245 in the first hour after noon in New York, then eased slightly for the rest of the day, ending at $1237/oz., up $50. Overnight, platinum is trending lower.

Silver burst higher in Hong Kong, trailed off in early London trading, then really caught fire at the New York open, going ballistic and adding over 40 cents by the second hour on the Comex, then seesawed through the rest of the day to close at $12.74/oz., up 41 cents. Overnight, silver has drifted lower.

Traders returned from the long weekend in an obvious buying mood with regard to the precious metals, as all of them posted especially strong days, with platinum leading the way.

Gold rose as the usual suspects were mixed, with equities little changed, oil dropping in price, but the dollar plunging vs. the euro.

“There’s some positioning ahead of financial results,” said Matt Zeman, of LaSalle Futures Group in Chicago, in anticipation of soon-to-be-released earnings reports from the sector. “Financials led us down this path, and they’re going to be the sector that leads us out. You might see the flight-to- quality buying in Treasuries and gold if earnings don’t meet expectations.”

This week will see first-quarter results from many financial companies, including Citigroup, Goldman Sachs, and JPMorgan Chase, as well as General Electric and more than 30 companies in the S&P 500 Index.

Technicians weighed in with their opinions, also, saying that gold’s gains accelerated after the price failed to close below the 200-day moving average last week. “We’re seeing some technical strength,” Zeman said. “There’s short covering now that the price held the 200-day.”

“In the past, a close below the 200-day moving average has prompted liquidation from technically driven traders,” wrote John Reade, of UBS AG in London. “Until this has been seen or until gold has bounced sharply from current levels, it is too soon to call an end to this correction.”

Currencies and Economic News

In the currency market, the dollar was slammed vs. the euro. Late Monday, the euro was trading at $1.3363 vs. $1.3158 on Thursday.

Analysts said the buck slid as the possible bankruptcy of General Motors and the upcoming bank earnings, expected to be negative, weighed on U.S. stocks, the main driver for the greenback in the absence of hard data.

As Jeff Sakamoto, of Union Bank of California put it, “On a day like today, with really no economic news, people are paying a little more attention to U.S. stocks.”

That might seem a tad counter-intuitive, as Citigroup, Morgan Stanley, JP Morgan, and Goldman Sachs were all up on the day.

Regarding GM, the Treasury Department has directed the company “to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite GM's public contention that it could still reorganize outside court,” according to the New York Times.

As MarketWatch.com wrote, “The preparations are aimed at ensuring that a GM bankruptcy filing is ready if the company is unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and to get needed concessions from the United Auto Workers union.”

Overall, “The market takes a break from policy this week and turns its focus to credit indicators and U.S. earnings,” wrote Jessica Hoversen, of MF Global. “U.S. earnings will remain paramount as the market continues to gauge the health of the economy.”

Energy

In the energy market on Monday, oil plummeted, with crude for May delivery closing at $50.05/barrel, down $2.19 from Thursday. May reformulated gasoline fell nearly 2 cents, to $1.4632/gallon.

Traders ran for cover after the International Energy Agency released a report saying that it is cutting its demand projection by 1 million barrels a day.

After its latest reconsideration, the IEA believes that global demand this year will now come in at 83.4 million barrels a day. That would be 2.4 million barrels a day below the 2008 level.

“The IEA report and lower stocks are pushing oil lower,” said Phil Flynn, of Alaron Trading. “It is hard for oil to continue to ignore evidence of weak demand when the stock market is floundering.”

And MF Global analysts said that, “We do not expect the relationship between U.S. stocks and energy to end anytime soon.”

Base Metals

The base metals were all flashing green on Monday. Copper was up early in the New York morning, then plateaued through the day, finishing at its intraday high of $2.0934/lb., up almost 4 cents from Thursday. Nickel was flat through most of the day, rising late to surge past the $5 mark and close at $5.1014/lb., up 25 cents. Zinc had a good day, ending at $0.6279/lb., up a penny and three-quarters. Aluminum was modestly higher, adding just under a half-cent, to $0.6814/lb., while lead tacked on just short of a penny, at $0.6381/lb.

Copper led the industrial metals higher, rallying to a 6-month high as falling inventories and signs of economic recovery in China, the world's largest copper consumer, gave traders some optimism about the metal's prospects.

As Bloomberg wrote: “China’s government is considering additional stimulus measures to spur growth, the official China Securities Journal reported [yesterday]. New loans in China jumped sixfold from a year earlier to a record in March, the central bank said on April 11.”

China is planning a new economic stimulus package on top of an already announced 4 trillion yuan ($585 billion) stimulus plan to combat the economic crisis.

While the LME was closed for holiday yesterday, copper inventories monitored by the Shanghai Futures Exchange fell 18%, to 18,766 metric tons. That marked their lowest since early February.

Bloomberg again: “A report last week showed that China’s imports of [copper] jumped to a record in March. Shipments of refined copper surged 14 percent from the previous month to 374,957 metric tons, China’s customs office said on April 10, citing preliminary data. Copper-scrap imports were 330,000 tons, down 39 percent from a year earlier.”

And on the Shanghai Futures Exchange, copper for July delivery rose as much as 7%, the maximum allowed, leading Matthew Zeman, a trader at LaSalle Futures Group in Chicago, to comment that, “The fact that we were limit up in Shanghai is a big positive.”

In company news, Chile’s state-owned copper giant Codelco and China's Minmetals are studying mining prospects with a view to joint exploration projects in Asia and Latin America, Chilean Mines Minister Santiago Gonzalez said.

“The companies are evaluating mining prospects at the moment. They are still not conducting any actual exploration as such, but we know that they are evaluating and analyzing some mining prospects in some parts of the world,” Gonzalez said.

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


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