Good morning ...
Gold went on a very wild ride on Tuesday, falling as low as $912 just before London trading opened, then rising to $920, getting sold off during the first hour of the New York session, shooting higher and peaking above $924 at the noon hour, and finally pulling back sharply through the Access Market and finishing at $916.20, down 90 cents. Overnight, gold has edged lower.
Platinum noodled around between $1980 and $2000 until the second hour of New York trading, then pushed higher until noon, after which it leveled off to end at $2025/oz., up $13. Overnight, platinum is trending lower.
Silver wasn't quite as volatile as gold, but it too rose sharply until noon, peaking above $17.80, before retreating to a close at $17.51, up 9 cents. Overnight, silver has been flat.
It was surely another disappointing day for metals investors as the big stars-sinking dollar and rising oil-once again lined up in their favor, suggesting a knockout day that never materialized.
That the metals didn't react more powerfully is puzzling, and adds some credence to the view that the market is being heavily manipulated in order to make the collapse of the dollar seem less awful than it really is.
Nick Ruggiero, a trader at Eagle Futures in New York, noted the support from oil and the buck, and said sarcastically that, Possibly by the end of the year, we'll see metal prices catch up.
A bit more optimistic is Mark O'Byrne, executive director at Gold and Silver Investments Ltd., who wrote that, Gold continues in a tight range between $910 and $930, but the path of least resistance looks to be to the upside. . .
But Dennis Gartman, editor of the Gartman Letter, has had enough. Gartman wrote that good bull markets don't fall in the way that gold fell on Friday.
Gold has broken this well-defined bullish trend line and it failed miserably on Friday, Gartman wrote. It has bounced today [Monday], and we shall sell that bounce and exit entirely!
Gartman contrarians will note that this is not the first time his patience has been tried, and are probably aware that even the strongest bull markets do indeed turn up and down sharply, sometimes on a dime. Those folks likely can't wait for a dip below $900 to buy in.
Currencies and Economic News
In the currency market, the dollar sank to yet another record low against the euro. Late Tuesday, the euro was trading at $1.5993 vs. $1.5913 on Monday.
Earlier in the day, the euro breached the psychologically significant $1.60 mark for the first time, before yielding it to some late selling. So now what?
It could well get worse, says Kathy Lien, chief strategist at Forex Capital Markets. Noting that the skyrocketing price of oil will affect everything, This continual rise in inflationary pressures raises the risk of a rate hike from the European Central Bank, Lien says. And that of course is even more dollar-negative.
Playing into that fear, Bank of France Governor Christian Noyer, who is also a member of the ECB's rate-setting Governing Council, said Tuesday that the ECB would do whatever is necessary, including moving interest rates, to ensure that inflation returns to the central bank's target of just below 2% by 2009.
Yesterday's data included a report from the National Association of Realtors showing that resales of U.S. homes and condos dropped 2% in March. Resales have now sunk 19.3% in the past year, and are down 33% from the peak in 2005.
There is still little evidence of stabilization in U.S. housing markets, though the recent pace of decline in sales has slowed, wrote Sal Guatieri, of BMO Capital Markets.
Sales will eventually benefit from improved affordability, but the near-term picture remains clouded by ongoing job losses and more discriminating lenders, Guatieri said.
In the energy market Tuesday, crude for May delivery capped its run as front-month contract by rocketing to yet another record close at $119.37/barrel, up $1.89. May reformulated gasoline gained 3.37 cents, pushing past $3 to $3.0164/gallon.
Crude's rise is reflected in pain at the pump. The Automobile Association of America reported that regular gasoline now averages $3.511 a gallon, a new record high. Regular exceeded $4 a gallon in some stations in San Francisco on Monday.
For the moment, there does not seem to be anything stopping the price juggernaut, wrote Edward Meir, of MF Global. Markets are seizing on bullish news while ignoring anything bearish coming their way.
Traders will have their eye on domestic inventory data, due out from the Energy Information Administration today, but Meir says he doubts the numbers, whatever they are, will do much to dislodge the current psychology.
The base metals were all in positive territory on Tuesday. Copper started up in the pre-dawn hours and rose straight through to late morning, coming just off its intraday high late to finish at $3.9782/lb., up 6 cents. Nickel followed a similar pattern, poking above $13 in the late morning and holding there, to close at $13.0408/lb., up 22 2/3 cents. Zinc clawed its way back over the $1 mark, ending at $1.01/lb., up more than a penny and a half. Aluminum was a modest gainer, adding a penny, to $1.3706/lb., while lead pushed steadily upward to its intraday high of $1.289/lb., up 2 1/2 cents.
Copper rebounded strongly after three days in the red, as supply worries trumped demand fears, at least for the time being.
On the demand side, traders had been hoping that China would pick up any slack from the worsening U.S. economy. However, some of that optimism was dampened as the price differential between copper traded on the LME, as opposed to the Shanghai Futures Exchange, suggests that Chinese demand may be softening.
The market realized that Chinese consumers are not buying copper at the elevated levels, and that the spread between copper in Shanghai and at the LME widened to around $938 (per tonne) last week, said Peter Fertig of Dresdner Kleinwort.
Nevertheless, the Chilean situation is not getting any better. All but one of state-owned Codelco's mines are now closed, as El Tienente joined the Andina and Salvador operations in shutting down, after an employee was injured in violence there. That left Norte, Codelco's biggest division, as the only one running.
The prospect of spreading Chilean strikes, across both worker classes and facilities, will keep the markets on edge until they are fully resolved, wrote Edward Meir.
And Frank Holmes, CEO of the highly successful U.S. Global Investors funds, is unabashedly bullish.
The demand side for copper is going to be very strong, boosted by usage in China and other emerging markets, Holmes said. We could see $8 a pound for copper, he predicted.
In company news, diversified Canadian miner Teck Cominco is expecting business to continue to boom. Teck CEO Don Lindsay says he expects no demand falloff, and that, There's more than a reasonable chance that ...our copper and coal businesses alone will generate record earnings...so the next 12 months look pretty good.
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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