Good morning …

Precious Metals

Gold was only marginally higher from Hong Kong through to mid-morning in New York on Thursday, but then it suddenly went vertical until the noon hour, tacking on almost $15 before easing a bit through the Globex to finish at $903.80/oz., up $13.10. Overnight, gold is pushing higher.

Platinum bottomed late in the Hong Kong session, then was up sharply adding about $20 over a two-hour period, then traded wildly up and down the rest of the day but never quite regaining its peak, and ending at $1179/oz., up $10. Overnight, platinum is little changed.

Silver followed gold’s chart exactly, but with an even steeper blastoff that carried it nearly to $12.90 before a slight late-day slump led to a close at $12.82/oz., up 50 cents. Overnight, silver has been flat.

It was a very good day for the precious metals yesterday, with silver turning in an especially strong showing, up 4%. There was some support offered by the usual suspects, as oil was up slightly and the dollar weakened against the euro, while equities finished a volatile day just into the green.

Gold’s close above $900 was its first such in almost three weeks.

Dan Norcini, writing on jsmineset.com: “Gold put on a very impressive breach of upside resistance in today’s session as bulls were finally able to shove prices high enough to reach the bevy of buy stops that had been building above the $902 level basis June ...

“I am not sure what the catalyst was [yesterday] that provided the impetus to push prices higher other than the fact that the Dollar was down and most of the commodity markets were higher, a few markets excepted. Equities were struggling and that might have been generating some further safe haven flows but normally on days in which stocks are weak, we have been seeing the Dollar move higher. That was not the case [yesterday] however. Regardless, the buying was impressive … and could spur some further short covering heading into the weekend [on Friday].”

The metals are definitely getting a good look for their safe haven properties, especially after the IMF’s gloomy projections Wednesday. IMF Chief Economist Olivier Blanchard said at a briefing in Washington that while a recovery will start early next year, a “return to normal” will take much longer. “This is not the time for complacency,” Blanchard said.

Gold will likely also get a boost from an increase in jewelry demand. Gold imports by India, the largest consumer, are poised to double this month from a year ago as the drop in prices revives demand before the nation’s biggest bullion festival next week, according to the Bombay Bullion Association.

Currencies and Economic News

In the currency market, the dollar fell against the euro. Late Thursday, the euro was trading at $1.3145 vs. $1.3001 on Wednesday.

The euro got a boost after the Markit euro-zone purchasing managers indexes, which are among the most closely-followed leading indicators, rose to six-month highs.

Economists noted that the readings still indicate a sharp contraction in activity. But they offered hope that the second-quarter GDP may contract at a significantly slower pace than that seen in 4Q08 and 1Q09.

Domestically, the day’s numbers were uniformly ugly, beginning with unemployment. The Labor Department reported that first-time jobless claims rose to 640,000 for the week ending April 18. That’s yet another record high.

Then the National Association of Realtors reported that sales of existing homes and condominiums fell 3% in March to a seasonally adjusted annual rate of 4.57 million units, with distressed sales now accounting for half of all sales.

Trying to put the best face on, Stephen Gallagher, chief U.S. economist for Societe Generale, wrote that, “The report was slightly weaker than anticipated, but the data remain consistent with tentative stabilization in housing demand on the back of rising affordability.”

Energy

In the energy market on Thursday, crude for June delivery rose, closing at $49.62/barrel, up 77 cents. May reformulated gasoline added just over a penny, to $1.4015/gallon.

Traders somehow managed to shrug off the grim jobless data and crude's inventory glut, and focused more on the weakened dollar.

As Phil Flynn, of Alaron Trading, put it, “Oil continues to defy supply and demand.”

“The recent EIA numbers seem to be telling us that the OPEC cuts are not making the desired dents in overall crude oil inventories, as the drop in global demand seems to be outpacing the OPEC-engineered supply declines,” wrote Edward Meir, of MF Global.

“However, for the time being, the energy markets seem to be giving OPEC the benefit of the doubt, which is why prices are holding up around the $50 mark,” Meir added.

Base Metals

The base metals were all gushing red on Thursday. Copper was in the green until New York opened, then down it went, falling especially steeply in late morning, and barely coming off its intraday lows to finish at $1.9542/lb., down nearly 6 cents. Nickel started down earlier, but was off as sharply, closing at its intraday low of $4.9872/lb., down almost 16 cents. Zinc followed a similar path, shedding 2 cents, to $0.6247/lb. Aluminum was modestly lower, ending at $0.6408/lb., down less than a half-cent, while lead fell to its intraday low of $0.6478/lb., down 2 cents.

Copper led the other industrial metals deep into the red, as the unemployment numbers out yesterday had traders questioning the possibility of economic resurgence anytime soon, and many decided to cash out recent gains.

“Copper's price correction was exacerbated by earlier losses in equity markets and data showing a further deterioration in the labor and housing sectors of the economy,” said Sterling Smith, of FuturesOne in Chicago.

Peter Boockvar, equity strategist at Miller Tabak & Co in New York, commented that, “The (housing) data shows a market that still remains somewhat in the doldrums. We've seen … purchase data [that] shows weakness outside of foreclosures.”

And from a technical viewpoint, there has been a “correction from the triple-top chart formation last week below $2.25 a lb.,” noted John Gross, publisher of the Copper Journal.

However, the stockpile data continue to be strongly supportive. Copper inventories monitored by the LME plunged again yesterday, falling by 9,625 metric tons to 440,475 tons.

RBC Capital Markets sees copper “supported near $2.00 a lb.,” citing those “steady inventory declines” along with “rising Chinese imports, expectations of higher growth prospects in China, high physical premiums in China, [and] a recent shift in London Metal Exchange (LME) spreads into backwardation.”

In company news, Xstrata said yesterday its copper-gold project in southern Philippines will require an initial outlay of $5.2 billion to develop, according to the results of its pre-feasibility study. The mine is estimated to contain 12.8 million tonnes of copper and 15.2 million ounces of gold.

And Potash Corp. of Saskatchewan, the world’s largest fertilizer producer, said 2009 profit will be less than it previously expected after North American sales of the crop nutrient reached “a virtual halt.”

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


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