Good morning ...
Gold was flat until just before New York opened on Tuesday, when it made its big upmove for the day, rising all of $10 to peak at $895 before drifting downward into the noon hour and then going flat to finish at $883.30/oz., down $1.50. Overnight, gold is little changed.
Platinum held up in the far East, but slowly deteriorated after that, falling below $1150 halfway through the Comex, then inching back up to end at $1153/oz., down $9. Overnight, platinum is trending higher.
Silver was higher until the New York session, fell to just before noon, rallied back to the end of the Comex, but then declined again on the Globex to close at $12.06/oz., down 4 cents. Overnight, silver is slightly higher.
After a couple of days of sharp moves, the precious metals caught a serious case of the blahs again yesterday, with all of them ending essentially back where they started the day.
Gold might have picked up a smidgeon of support as the dollar inched lower against the euro, and as oil erased early losses to track equities higher, but neither provided enough lift to get the metal moving.
The day's rebound in equities probably worked against gold, as well, with investors developing an appetite for stocks later in the day.
That led Bayram Dincer, a Dresdner Bank commodity analyst in Zurich, to assert that, Gold's price is very sensitive to the U.S. equity market's trajectory ... We expect this correlation to exist in the short term.
Ralph Preston, of Heritage West Futures, added that, Risk aversion in the gold market is taking hold as optimism reigns supreme that U.S. government officials will do all that is necessary to shepherd the economy through the valley of the recession.
Whether all that is necessary actually turns out to be effective remains to be seen.
Gold-mining stocks began the day strong, but faded back into the red. Nevertheless, Eric Le Coz, a member of the investment committee at Carmignac Gestion in Paris, said that they like the miners. Because the recession will be prolonged in the advanced economies, you want to have some kind of insurance in the fog, and gold-mining equities are the best ones, Le Coz said.
Currencies and Economic News
In the currency market, the dollar slipped slightly against the euro. Late Tuesday, the euro was trading at $1.2957 vs. $1.2924 on Monday.
The euro benefited after the Mannheim-based Center for European Economic Research, or ZEW, said its closely-watched monthly sentiment gauge rose to 13 in April from a reading of -3.5. That marked its first positive reading since July 2007.
Along with other indicators, the ZEW sentiment indicator reveals that there are well-founded expectations that the downward dynamics of the business cycle are bottoming out, said ZEW President Wolfgang Franz. It is even becoming more likely that the economy will slowly recover in the second half of this year.
However, the survey has little correlation with gross domestic product, said Jennifer McKeown, European economist at Capital Economics. For that, market participants will turn to the Ifo Institute's German climate index and the euro-zone purchasing managers survey, to be released later this week.
On balance, while the pick-up in some of the forward-looking indices is a broadly encouraging sign for the future, we still expect German GDP to fall by a whopping 6% this year, McKeown wrote.
And the IMF was saying the global financial crisis is far from over. In a new report, the fund said financial institutions now face total losses of $4.1 trillion on loans and other assets, including $2.7 trillion in write-downs in the U.S., up from the $2.1 trillion it estimated in January and almost double what it forecast last October.
U.S. banks so far have only taken about half the write-downs they face, the IMF said. If banks took all the write-downs immediately, the IMF calculates it would wipe out their common equity altogether.
In the energy market on Tuesday, crude for May delivery ended its run as front-month contract by rising slightly to close at $46.51/barrel, up 63 cents. The more active June contract ended up 4 cents, at $48.55. May reformulated gasoline added a quarter-cent, to $1.4144/gallon.
Crude, which had fallen as low as $43.83 in early trading, turned around with equities and followed them higher.
While Oil prices appear to be using the equity markets as an indicator, said Shane Wisdom, of Wisdom Financial, there is nevertheless concern that the global economy probably isn't as healthy as the recent stock market rally may have led some to believe.
Close attention will be paid to today's inventory report from the Energy Information Administration, with Platts expecting a rise of some 3 million barrels in crude stockpiles, but declines in both gasoline and distillates.
The base metals were mixed on Tuesday. Copper was down sharply in the early pre-dawn hours and lumbered along below the $2 mark until mid-morning, when buyers emerged to push it back to a finish at $2.0338/lb., down 2 3/4 cents. Nickel was also down early, but failed to rally much, closing at $5.2012/lb., down 27 1/2 cents. Zinc's late surge carried it almost to break-even, ending at $0.6491/lb., down less than two-tenths of a cent. Aluminum did make it back into positive territory, adding just short of a penny, to $0.6406/lb., while lead also showed some spunk, tacking on two-thirds of a cent, to $0.6654/lb.
Copper set the tone for the industrial metals, which all featured late morning rallies tied to a turnaround in equities, although it was unable to reach green numbers as gloomy earnings reports weighed on the market.
Both stocks and the base metals got a boost from Treasury Secretary Timothy Geithner, who reassured Americans yesterday that the vast majority of the nation's banks have more capital than needed, easing concern about the outlook for financial companies.
However, Shanghai copper went limit down on the day, falling the maximum allowable 5%, and that could signal further weakness ahead, wrote William Adams, an analyst at Basemetals.com in London.
We would keep a firm eye on equities to see if the slide halts and on metals charts to look for signs of consolidation, which may well initially trigger some nervous bargain-hunting, Adams said.
The stockpile situation continues to be supportive, however. Copper inventories monitored by the LME plunged again yesterday, falling by 5,025 metric tons to 457,300 tons. And canceled warrants -- stocks earmarked for delivery -- rose to 72,375 tons from 68,325 tons on Monday.
In company news, beleaguered miner Teck Cominco caught a break, as its lenders have agreed to defer $4.4 billion in debt payments due in 2009, giving Teck some breathing room in its attempt to pay down debt from the purchase of Fording Canadian Coal Trust. Investors applauded, driving Teck's shares up by 30%.
That's what's happening ... see you tomorrow!
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