Good morning ...
Gold pushed higher in the far East and London, but slacked off at the open of the New York session on Tuesday, falling in the first hour, then trading sideways for the rest of the day, and finishing at $928.00/oz., up $3.30. Overnight, gold has been pushing higher.
Platinum rose above $2010 in Hong Kong and held there until it, too, was taken down in New York, where it fell steadily to end at $1979/oz., up $6. Overnight, platinum is sharply higher.
Silver breached the $18 mark in Hong Kong, but declined in London, then traded very narrowly through the New York day, closing at $17.83, up 12 cents. Overnight, silver is trending higher.
Another day of little movement in the metals prices, albeit to the positive side this time, at least for gold and silver.
Consolidation is the name of the game in the absence of any impetus for gold to make a stronger up or down move. Yesterday, the metal shrugged off modest strength in the dollar and took its cue from record-setting oil prices.
With crude surging to a near record price today, gold's role as a hedge against inflation will likely see it supported at $900 and again challenge resistance at $950 in the coming days, said Mark O'Byrne, of Gold and Silver Investments Limited.
James Moore, of TheBullionDesk.com agreed, writing that, Given the ongoing recessionary/inflationary fears and liquidity issues dogging the credit market, we remain bullish in the mid to longer-term and expect gold to reclaim $1,000 an ounce later in the year.
Injecting a note of caution were analysts who speculate that gold's rally may stall as investors opt for other commodities as hedges against inflation. Oil and corn prices, for example, have risen more than gold in the past year.
The speculation that you had a month ago in gold has gone on to other things like agricultural commodities, said Marty McNeill, of R.F. Lafferty in New York. Gold will catch up, but it's going to take some time.
One measure of the metal's stability, though, can be found in bullion holdings of StreetTracks Gold Trust, which have remained steady for the past two weeks.
Currencies and Economic News
In the currency market, the dollar posted a modest gain against the euro. Late Tuesday, the euro was trading at $1.5791 vs. $1.5803 on Monday.
The Labor Department reported that the producer price index surged by 1.1% in March, far more than the 0.4% gain predicted by economists. Core PPI, excluding food and energy, rose 0.2%, in line with expectations.
John Ryding, U.S. chief economist for Bear Stearns, expects the Fed to cut the funds rate by only a quarter-point later this month. Inflation is everywhere within this report, Ryding wrote. Fed policy is stuck between the rock of recession and the hard place of rising inflation pressures.
It'll opt for the hard place, said Mike Englund, of Action Economics. The Fed has abandoned the luxury of addressing the inflation threat for now, he said, but hefty price gains will likely still be a problem, even after the problems of turmoil in the financial market are resolved.
And the futures market is pricing in a 32% chance of a half-point rate cut when the Fed meets April 29, down from 44% on Monday. A quarter-point cut is fully priced in.
In the energy market Tuesday, crude for May delivery rocketed to a new high, closing at $113.79/barrel, up $2.03. May reformulated gasoline gained 5.92 cents, to $2.881/gallon.
The price at the pump also hit a record high, of $3.386 a gallon. That was a gain of 1.3% on the day and 10 cents ahead of the month-ago price of $3.285, according to the AAA Daily Fuel Gauge Report.
Supply worries drove the market. In addition to the weekend's troubling news out of Nigeria was added news that bad weather has forced further export terminal closings in Mexico. Petroleos Mexicanos, the third-largest U.S. supplier of crude, said that 5 terminals are now closed.
Everyone is awaiting the Energy Information Administration's inventory report, due today. After last week's surprisingly large decline, analysts are projecting a 1.5 million barrel build this week. Another surprise could have a major effect on prices.
The base metals were mostly in the red again on Tuesday. Copper pushed past $3.97 in the pre-dawn hours, but couldn't hold there once New York trading began, as it declined through most of the day, just coming off its intraday low to finish at $3.9133/lb., down more than 3 1/2 cents. Nickel traded narrowly all day, to little end result as it closed at $12.9667/lb., down 2 2/3 cents. Zinc rallied sharply just after the open but gave most of it back, ending at $1.0247/lb., up a third of a cent. Aluminum also peaked in the pre-dawn hours and slumped from there, shedding nearly a penny and a half to $1.3387/lb., while lead also declined, dropping 2 1/3 cents, to $1.2834/lb.
Copper fell after it was clear that the dollar was strengthening, reducing the appeal of the base metals for inflation hedging purposes.
Underscoring the trend, Edward Meir, of MF Global, wrote that, We still expect metals to continue to take their cue from the dollar.
Nevertheless, There's general commodity strength that's constructive for the red metal, said Eric Wittenauer, of Wachovia Securities in St. Louis. Despite the weak showing, the UBS Bloomberg Constant Maturity Commodity Index still rose 0.9% yesterday, to 1,526.792, and is up 18% already on the year.
Some analysts are saying that the pullback is only a minor technical correction, and argue that prices could bounce back because of ongoing tightness in the copper market, with the threat of supply disruptions adding an extra kicker.
Alex Heath of RBC Capital Markets said that, Fundamental factors -- supply disruptions -- wait in the wings and remain high in probability which in turn could force the market right back to test the highs.
However, a potential rise in the copper price was capped by rising supply. Inventories monitored by the LME gained 900 metric tons yesterday, to 117,150 tons.
In aluminum news, Moscow-based Rusal, the world's largest producer, increased output in the first quarter to 1.1 million tons from 1 million tons a year earlier, the company said. Aluminum prices are bound to rise, due both to surging demand in China and a decline in the value of the dollar, Rusal's CEO said.
And tin is on a tear, as prices rose to a fresh all-time high as LME-monitored stocks fell for the eighth day in a row to hit their lowest level since 2005. There were also reports that Indonesia, the world's second-largest producer, will further limit its output this year.
That's what's happening ... see you tomorrow!
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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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