Good morning ...
Gold was off in the far East, but picked up in London trading and continued higher until the noon hour of the New York session on Monday, after which it pulled back from $930 to finish another lackluster day at $924.70/oz., down $1.20. Overnight, gold has been pushing higher.
Platinum plunged in early Hong Kong trading and, although it was mostly up from there, it failed to escape the red, ending at $1973/oz., down $35. Overnight, platinum is sharply higher.
Silver pretty much mirrored gold, bouncing off a $17.30 low to regain positive territory around noon, only to give it back in the afternoon as it closed at $17.71, down 3 cents. Overnight, silver is trending higher.
A second lackluster day in a row had to be a very disappointing one for gold bulls, especially given that the usual suspects-a dollar that weakened through the session, and rising oil-had both lined up in the metal's favor.
The Hightower Report pretty well nailed the day's action, writing that: The gold market waffled around both sides of unchanged on Monday, with the initial scheduled reports prompting a decline in gold prices in the wake of a fleeting bounce in the Dollar. However, the gold market quickly shrugged off the post report reaction in the Dollar and instead seemed to gain favor in the wake of a recovery in oil prices. In fact, the action Monday highlighted the gold market's recent tight correlation with the energy complex. In the end, seeing a slightly weaker US Dollar and a better than expected US retail sales report was the 'best of two world's' for the gold bulls.
But there are signs that gold may be preparing for an up move.
Gold is forming a nice base here, said Walter Otstott, of Dallas Commodity Co. The dollar fell apart, and gold is coming back.
The G7 meeting, held in Washington over the weekend, also factored in.
Gold is stronger as the dollar has weakened, despite leaders of the G7 and IMF governing council saying they would do all in their powers to provide market stability, wrote Mark O'Byrne, of Gold and Silver Investments Ltd.
Continuing worries about the health of the international financial sector has led to declines in stock markets internationally and renewed risk aversion, which will likely lead to a flight to quality, O'Byrne added.
Short term, gold seems set to spend more time consolidating in its current range as cash generating liquidation caps the metal, while strong support is found back towards $900 an ounce, wrote James Moore, of TheBullionDesk.com.
Currencies and Economic News
In the currency market, the dollar gained early against the euro, but then lost it all. Late Monday, the euro was trading at $1.5803 vs. $1.5809 on Friday.
Dollar apologists could not have been pleased with the currency's performance after a little good news. The Commerce Department reported that retail sales showed some improvement in March, rising 0.2%. Economists had been predicting a 0.1% decline.
Commerce also reported that inventories rose 0.6% in February, with gains in all three subcategories: the retail, factory and wholesale sectors. As inventory builds surprise to the upside, that may be enough to keep first quarter growth above zero, said economists at Lehman Brothers.
The G7 finance ministers issued their usual communique after meeting over the weekend, and French Finance Minister Christine Lagarde said yesterday that the foreign exchange market doesn't fully understand the magnitude of their language shift on currencies.
I'm not surprised [if] it will take a few more hours for the meaning to sink in, Lagarde said. For the first time since 2000, we are collectively expressing concern. We all together believe the level of volatility and the discrepancy between where a currency lies relative to the fundamentals of the economy are just not right at the moment.
Pressed on whether the G7 would be concerned if the dollar moved even slowly lower versus the euro, Lagarde replied, Yes.
In the energy market Monday, crude for May delivery advanced, closing at $111.76/barrel, up $1.62 from Friday. May reformulated gasoline gained 1.45 cents, to $2.8218/gallon.
Crude reacted to the better-than-expected retail data that could signal that demand will rise.
Supply problems also contributed to the rally. Royal Dutch Shell's Capline pipeline, which transports crude from the Gulf of Mexico to the Midwest, was shut down over the weekend after a leak was discovered in Tennessee.
Also, Eni SpA, Italy's biggest energy company, reported yesterday that sabotage over the weekend caused a fire at oil plants in Nigeria, resulting in a total output loss of about 5,000 barrels a day.
The base metals were mostly in the red on Monday. Copper fell below $3.87 in the pre-dawn hours, then moved steadily higher from there although it failed to return to break-even, finishing at $3.9442/lb., down 3 1/2 cents from Friday. Nickel was also down early, but bucked the general trend by fighting its way back into positive territory, punching through the $13 mark before easing late in the day to close just below it at $12.9932/lb., up 22 cents. Zinc slipped from the black to the red around the noon hour, ending at $1.0208/lb., down more than a penny. Aluminum traded sideways after its pre-dawn lows, winding up at $1.3528/lb., down a bit under 2 cents, while lead also declined, dropping nearly 2 cents, to $1.3072/lb.
Copper continues to meet serious resistance at $4, as it fell short of that mark again yesterday, primarily on nervousness about the economy.
The unease wasn't helped any by some disappointing quarterly results. Goldman Sachs analysts noted that first-quarter U.S. earnings reports got off to an awful start last week, with GE stunning investors as it posted a decline in profit, and Alcoa reporting that earnings plunged by 54%.
Poor equity-market performance is behind copper's listlessness, wrote Michael Jansen, a London-based analyst at JPMorgan Securities. Demand continues to remain weak, especially in the U.S.
With the exception of nickel, the sector was off yesterday, leading Michael Widmer, metals analyst at Lehman Brothers, to say that, Base metals are pretty weak, though they recovered some since this morning. Macroeconomic data that wasn't as bad as many had thought may have contributed to that. Widmer cited data showing industrial output in the eurozone increased more than expected in February.
And Ralph Preston, of Heritage West Financial in San Diego, California, said that, The recovery from the overnight spike to $3.8155 is very bullish for the metal ... As long as the copper stays above $3.85, the bulls are still in control.
In company news, Teck Cominco made a complex move, reporting that it will pay $425 million to acquire Global Copper, in order to gain control of the Relincho copper/molybdenum mine in northern Chile.
Global's copper assets in Argentina, however, will be spun out as a new TSX-listed mining play, to be called Lumina Copper, which will also hold a royalty in the Chilean mine. Global Copper has agreed not to solicit rival bids and there's a $12.5-million break fee due to Teck if a better offer is received.
That's what's happening ... see you tomorrow!
NEWS YOU CAN USE
First Majestic Silver Corp. is committed to building a senior Silver producing mining company based on an aggressive acquisition and development plan with a focus on Mexico. The Company presently owns or operates three silver mines in Mexico: The La Parrilla Silver Mine; The San Martin Silver Mine and the La Encantada Silver Mine. Annual production from these three mines was anticipated to be 5 million ounces in 2007.
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