Good morning ...
Gold held steady at around $945 in the far East, but started down once London opened, and continued to plummet through the first hour of the New York session on Friday, falling as low as $905 before turning north for the balance of the day and finishing at $916.20, down $18.10. For the week, gold lost 1.3%.
Platinum continued to ignore the downtrend in the other precious metals and, although it did fall back nearly to $2000, it also rebounded from there to recapture all the lost ground and end at $2053/oz., up a buck. For the week, platinum tacked on 2.2%.
Silver's fall was even more pronounced than gold's, carrying it from a peak of $18.47 all the way down to $17.36 just after the New York open and, though it rallied nicely from there, closed in the red at $17.84, down 40 cents. For the week, silver shed 0.7%.
Though the week ended on a decided down note, gold and silver traders got some lift from the rallies the metals made off of their lows. And, while those metals did post red numbers for the week, platinum performed well.
The Hightower Report wrote of silver that the market started out choppy before getting hit with a concentrated selling wave that seemed to surface in a broad range of commodity markets on Friday morning. While the action in the Dollar and weakness in the gold market undermined silver traders, some traders have suggested that physically orientated metals like silver and copper could begin to de-link with the Dollar and could now begin to correlate with either the equity market or the oil markets.
Gold suffered, at least in part, as traders rotated money into equities on the back of Citigroup's better-than-expected earnings report.
That caused Jim Sinclair, writing on JSmineset.com, to comment that, Citicorp only loses 5.1 billion in the last quarter. Talking heads cheer Citicorp's earnings because Citicorp lost less than predicted by the Street, declaring now that the OTC derivative problem is over. Talk about world class BS!
World class indeed.
Not only is the crisis not over, there is an ominous sign that it may be much worse than most think, according to the Wall Street Journal. In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable, the Journal wrote on Wednesday.
Libor plays a crucial role in the global financial system and growing suspicions about Libor's veracity suggest that banks' troubles could be worse than they're willing to admit, said the Journal.
Currencies and Economic News
In the currency market, the dollar firmed some more against the euro. Late Friday, the euro was trading at $1.5804 vs. $1.5895 on Thursday.
The buck shot up after Citi, the largest U.S. bank, reported not only its $5.1 billion quarterly loss, but also more than $6 billion in pre-tax writedowns and billions in other downward adjustments caused by the subprime debacle.
And this is the good news.
Nevertheless, a real rebound in the shaky dollar is a distinct possibility. Jean-Claude Juncker, Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 meeting, at the personal request of President Bush.
The two leaders discussed the dangers to Europe's economy of the cratering dollar, and rising calls for protectionism on the continent. Mr. Juncker flat out warned that matters could quickly spin out of control if the U.S. doesn't take steps to defend its currency.
I don't have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting, Juncker said.
In the energy market Friday, crude for May delivery resumed its upward arc, closing at $116.69/barrel, up $1.83. May reformulated gasoline gained 3.15 cents and inched closer to the $3 mark, ending at $2.9893/gallon.
Traders attributed the day's action to news that the main militant group in Nigeria's oil-rich Delta region said it sabotaged a pipeline operated by a unit of Royal Dutch Shell on Friday.
With this pipeline blowing up, traders have to think what else could happen over the weekend, said Phil Flynn, of Alaron Trading. The bears are already having kind of a weak hand now.
Flynn added that, The rise in the [oil] price has little to do with supply and demand, and has everything to do with the value of the dollar ... It really is all about the dollar right now and if the dollar shows any sign of strength, you'll see a lot of money come out of oil very quickly.
The base metals were mixed on Friday. Copper pushed above the $4 level in the pre-dawn hours, but once again was unable to hold there, as it fell sharply through the first hour of the New York session, but then came off its lows to finish at $3.9512/lb., down less than 2 cents. Nickel followed a similar pattern that saw it plummet to below $12.90 before rising into a close at $12.9962/lb., down 16 3/4 cents. Zinc prolonged its slide, ending at $1.0163/lb., down more than a penny. Aluminum fell prior to the open but then came back aggressively to regain positive ground at $1.3711/lb., up more than a half-cent, while lead also had a good day, advancing to its intraday high of $1.3035/lb., up more than 3 1/2 cents.
Copper ended the week on a down note, wrapping up the biggest weekly loss in a month as the strengthening dollar made the metal less attractive to investors holding foreign currencies.
A firmer dollar appears to be playing a role in base (metals), and with relatively elevated base metals prices, thin trade and no sign of any urgent consumer demand, only renewed US dollar weakness or further production disruptions will keep metal prices supported, said UBS analyst John Reade.
The reallocation of capital is also playing a clear role, as traders place bets that equities have made their bottom.
Equity markets are trading in the black this morning as investors increasingly gravitate towards the view that the worst of the financial markets difficulties are behind the main players, said JP Morgan analyst Michael Jansen.
A view that the credit market crisis is fading would be broadly U.S. dollar-supportive and help to chip away at the gains made in commodity prices, Jansen added.
Nevertheless, fundamentals watchers see the bull market running on. We expect 2008 to be another year of sluggish supply growth, Barclays Capital analysts wrote yesterday.
And there will inevitably be disruptions such as are now occurring in Chile. State-owned Codelco, the world's largest producer, has already closed two mines because of strike-related violence, and more closings may follow, the company says.
If we see a clear risk to people's lives and safety, we are going to have to halt operations, not just at the request of union leaders but as a management decision, said Codelco vice-president Daniel Barria.
That's what's happening ... have a great weekend and see you Tuesday!
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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