Good morning …

Precious Metals

Gold was in positive territory until New York opened on Thursday, then sellers took out their big bats and began whacking away, driving it down about $15 by mid-morning, after which it leveled off through the Comex, only to get slammed again on the Globex before finally limping to a finish at $874.30/oz., down $16.30. Overnight, gold has fallen off.

Platinum followed a roughly similar path, though it was not hit as hard in the afternoon, and ended at $1203/oz., down $14. Overnight, platinum has edged higher.

Silver was more of the same, although it got hit much harder and more consistently straight through, with not even a teensy late Globex rally able to put much of a charge into the day, as it was beaten down to a close at $12.22/oz., down 54 cents. Overnight, silver is sharply lower.

Anyone who had become accustomed to the series of blah days we’ve experienced for gold and silver lately was treated to a rude awakening yesterday, as both took a sound thrashing. Platinum held up a shade better, although it too found the red.

Among the usual suspects, equities and oil were both higher, but gold seemed more inclined to take its cue from the rising dollar.

Also factoring in were jobs data that suggested to some that the U.S. economy is stabilizing, and concerns that deflation is in the cards, reducing gold's attractiveness as an inflation hedge.

“There is a knee-jerk reaction to the earnings news and jobs data that are stripping gold of the safe-haven bid,” said Brian Kelly, of Kanundrum Research.

Or perhaps, as Dan Norcini wrote on jsmineset.com, it’s simply that “Gold just seems to be acting ‘tired’ right now. Keep in mind that modern markets have now morphed into being all about momentum. Funds do not make money if prices do not move particularly to the upside. Once momentum stalls out, funds go and look for opportunities elsewhere. That is what we are seeing in gold for now.”

A breather, or a continuing correction? Bears abound at the moment. With gold prices continuing to be capped under $915 an ounce, I would look for the market to roll over and play bear,” wrote Ralph Preston, of Heritage West Futures in San Diego. “A close under $853 an ounce projects another move down towards $800 an ounce.”

Currencies and Economic News

In the currency market, the dollar rose against the euro. Late Thursday, the euro was trading at $1.3177 vs. $1.3222 on Wednesday.

“The U.S. economy is starting to show some tentative signs of stability, while other economies, especially the euro zone, have a number of question marks over them,” said David Watt, senior currency strategist at RBC Capital Markets. “You get this backdrop where it's still largely not really a bullish backdrop, but an environment where the news is supportive of the U.S. dollar.”

But sifting through the numbers brought little to cheer about yesterday.

Among the day’s data, the Commerce Department estimated Thursday that housing starts fell 10.8% in March to a seasonally adjusted annual rate of 510,000 from 572,000 in February. That’s the second-lowest rate since the 1940s. And building permits dropped 9% to a 513,000 seasonally adjusted annual pace, the lowest on record.

Separately, the Labor Department said that first-time claims for state unemployment benefits in the latest week fell to their lowest level since the end of January. However, even that good news was tempered by the fact that continuing jobless claims remain at a record high.

The Philly Fed index increased to negative 24.4 from negative 35 in March, with readings below zero indicating that most firms surveyed say business is still getting worse. At the same time, expectations improved, meaning that “the region's manufacturing executives expect declines to bottom out over the next six months,” the Fed said.

Energy

In the energy market on Thursday, oil was higher, with crude for May delivery closing at $49.98/barrel, up 73 cents. May reformulated gasoline rose 2.75 cents, to $1.4743/gallon.

“Crude is following stocks again,” said Phil Flynn, of Alaron Trading. “This market is more choppy than chopped salad. It is so indecisive.”

While traders pondered slivers of hope out of the U.S., and Chinese numbers that, while down, were still well into positive territory, reports out of the eurozone left a great deal to be desired.

Industrial production across the 16-nation zone plunged in February, falling off 2.3% from January, according to statistics agency Eurostat. Worse, year over year production was down 18.4%. That marked the biggest annual drop since record-keeping began in 1990.

“This suggests that even our pessimistic 2009 GDP forecast of [a 4% contraction], while still miles away from the consensus, looks increasingly optimistic, said Daniele Antonucci, European economist at Capital Economics. “The chances are that economic activity might contract much more.” Which is, of course, very bearish for oil consumption.

Base Metals

The base metals were mostly red-tinged on Thursday. Copper peaked in the early pre-dawn hours, fell off to the New York open, rallied to late morning, but then declined again to finish at $2.1404/lb., down more than 4 cents. Nickel followed copper, except that it rallied after the second dip, and pushed back into the green at $5.5799/lb., up almost 3 1/2 cents. Zinc declined slightly, ending at $0.6665/lb., down a quarter-cent. Aluminum was weak, closing at $0.656/lb., down a penny and a third, while lead plummeted to its intraday low of $0.6663/lb., down 2 3/4 cents.

Copper led the bulk of the industrial metals lower, as a number of elements combined to roll back about half of the metal’s Wednesday gains.

Foremost was the negative data out of the housing market, which led many to cash in profits and head for the exits. “The housing data has taken a lot of the wind out of the sails for copper,” said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. “Housing is clearly not out of the woods yet, and that’s going to take a toll on copper demand.”

But also factoring in was the rising dollar and concerns about data showing a slower rate of expansion in China's economy.

China, the world's number one copper consumer, said its economy grew at a slower-than-expected 6.1% in the first quarter of this year, the weakest pace since the fourth quarter of 1999. But it also showed an uptick in March, which some were hoping signals the worst is past.

“The Chinese data disappointed,” wrote Alex Heath, of RBC Capital Markets in London. The figures were “not the kind of picture that should support further price gains on the metals.”

But stockpile numbers pulled in the opposite direction, perhaps limiting the day’s downside. Copper inventories monitored by the LME dropped again yesterday, shedding 5,200 metric tons to 475,200 tons. Stocks have now fallen for four consecutive sessions, the longest slide in a month, and are down 13% from the four-year high reached on February 25.

Much of that metal is headed for China, where the Shanghai premium over London is still about $150 to $200 a ton.

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


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