Good morning ...
Gold held around $905 until the opening of the New York session Thursday, then it became another smackdown day, with the price heading lower until early afternoon, after which it leveled off to finish at $886.60, down $18.20. Overnight, gold has edged lower.
Platinum wasn't treated any more gently, shoved below $1960 before rallying modestly and ending at $1963/oz., down $38. Overnight, platinum is sharply lower.
Silver got whacked to as low as $16.50 just after the noon hour, but managed to fight its way back to a close at $16.74, down 27 cents. Overnight, silver is trending lower.
It wasn't a bloodbath, but the cumulative effects of the past few days of downward-trending trading are fraying the nerves of those long the precious metals.
Yesterday's losses were undoubtedly exacerbated by a sharply strengthening dollar and easing oil prices. And with equities also enjoying a solid day, attracting money away from other sectors, a triple whammy was laid on gold and silver.
While acknowledging the influence of the dollar and oil, Kitco's Jon Nadler adds that, in his opinion, Gold investors are also beginning to see several pivot points taking shape in currencies, the credit crisis, and the official sector's thus far only verbal commitment to stability, and they are lightening up on metals positions as a result.
But the London-based precious metals consultancy GFMS offered its own bullish view, particularly with regard to platinum, which the company sees as soaring as high as $2400/oz.
GFMS said it expects considerable volatility in the prices of both platinum and palladium in 2008, and forecast a platinum trading range between $1,700 and $2,400.
We would expect the higher end of these ranges to coincide either with further difficulties in South Africa or gold prices breaking strongly through the $1,000 level, GFMS said in its Platinum and Palladium Survey yesterday.
We remain positive for gold also and see this as a real possibility in 2008, GFMS added, noting that that world platinum production fell 6% last year mainly due to production problems in South Africa. Production in the U.S. and Canada also fell last year, by 13% and 10% respectively.
Currencies and Economic News
In the currency market, the dollar was sharply higher against the euro for the second straight day. Late Thursday, the euro was trading at $1.5682 vs. $1.5881 on Wednesday.
The euro was hammered by a much weaker-than-expected German business sentiment reading. The closely-watched Ifo Institute's index posted an April reading of 102.4, down from 104.8 in March, far below expectations for a dip to 104.3. The index is at its lowest point since January 2006.
European monetary officials subtly backtracked on interest rates Thursday, with ECB President Jean-Claude Trichet, ECB executive board member Juergen Stark and ECB governing council member Michael Bonello all suggesting a rate hike is not in the cards.
The buck quickly responded to this looming potential of a narrowing in gap between the monetary policy stance of the Fed and the ECB, wrote David Watt, of RBC Capital Markets.
On this side of the pond, more dismal housing numbers rolled in. Despite price-slashing by builders, new-home sales still plunged by 8.5% to a 17-year low in March, the Commerce Department said. New-home sales are down 36.6% compared with a year ago and are off 62% from the peak in July 2005.
And even those numbers may be optimistic, because they don't account for canceled sales, which have ballooned. The report is based on contracts signed, not sales closed.
Finally, Commerce also said that orders for durable goods slipped 0.3% in March, marking the third monthly decline in a row, in line with expectations.
In the energy market Wednesday, crude for June delivery plummeted, closing at $116.06/barrel, down $2.24. June reformulated gasoline lost 3.31 cents, to $3.0093/gallon.
The oil market was affected by the grim housing data, which suggested a potential drop in demand for crude.
The strong dollar also played in. A substantial and sustained dollar rebound should be accompanied by a renewed affinity for other asset classes, further hastening a deflation of the commodity bubble, said John Kilduff, of MF Global.
The base metals were nearly all in the red on Thursday. Copper traded beyond $3.98 in the pre-dawn hours but it was downhill from there during the trading day with each push higher knocked down into a finish at $3.9162/lb., down more than 2 cents. Nickel made its lows around mid-morning, then pushed back over the $13 mark where it held, just barely, closing at $13.0045/lb., up better than 14 cents. Zinc traded jaggedly around the $1 mark but couldn't hold it, ending at $0.9987/lb., down just under a half-cent. Aluminum was off sharply through the whole day, barely coming off its intraday low to $1.333/lb., down more than 4 cents, while lead also plummeted, shedding nearly 4 cents to its intraday low of $1.2293/lb.
Copper sagged as the appreciating dollar made commodities less attractive for hedging purposes.
In addition, the market could not ignore the dismal new home sales numbers. Richard Adkerson, CEO of Freeport-McMoRan Copper & Gold Inc., the world's second-leading producer, said that, Economic conditions in the U.S. are affecting copper consumption.
U.S. consumption of the metal was off 3.3% last year, according to data from the International Copper Study Group.
Still, miners are struggling to produce at full capacity, said Evy Hambro, managing director of BlackRock Investment Management's World Mining Fund, and the supply-side has been heavily disrupted this year.
Emblematic of those disruptions is the Chilean standoff between a subcontractor's union and state-owned Codelco. Yesterday, the company halted work at Teniente, the world's biggest underground copper mine, after permanent workers vowed to stay away until it halts violent protests by their subcontract colleagues.
Subcontractors at Teniente hurled stones at buses transporting permanent workers, injuring two people. Codelco said Teniente would stay shut at least until today, while the Andina and Salvador operations have been closed for nine days.
In company news, Freeport McMoRan announced stellar results for the first quarter of 2008. Revenue surged from $2.25 billion to $5.67 billion, year-over-year, while net income soared to $1.1 billion from $476 million.
And Russian aluminum giant Rusal announced that it has acquired a 25% stake in Norilsk Nickel. Analysts believe Rusal is aiming to eventually gain a controlling interest in Norilsk. That would create one of the world's largest metals and mining conglomerates, a mega-business with a market cap of more than $100 billion.
That's what's happening ... see you tomorrow!
NEWS YOU CAN USE
MPH Ventures Corp (TSX-V: MPS) is a gold, silver, and molybdenum exploration company focused on mineral development within Canada and Latin America.
The company announced it has acquired a significant molybdenum (Mo) deposit with a historical (non NI 43-101 compliant) drill indicated and inferred resource. MPH Ventures has commissioned Wardrop Engineering Inc, to complete a National Instrument 43-101 compliant report on the deposit. The project, the Pidgeon Molybdenum Deposit, is located in the Echo Township, Kenora, Northwestern Ontario.
The Daily Resource has been brought to you by our friend's at Casey Research.
For a great overview of the commodity sector we offer the 'Casey's Daily Resource Plus'.