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Precious Metals

Gold had a lackluster but still positive day, rarely straying out of the $895-900 range all the way from Hong Kong through the Globex, and finishing at $898.30/oz., up $5.00. Overnight, gold has fallen off.

Platinum was also tightly rangebound, between $1080 and $1100, but managed to end at the high end, adding $4, to $1095. Overnight, platinum is trending higher.

Silver was dead flat until the mid-point of the London session, then pushed slowly and steadily higher through the Comex and first hour of the Globex, before easing slightly into a close at $12.80/oz., up 31 cents. Overnight, silver is sharply lower.

The precious metals all staged a comeback yesterday, with silver performing especially well and the usual suspects providing a bit of lift, with oil rising and the dollar falling against the common currency.

Also factoring in was the GDP number released yesterday.

The abysmal GDP data for the first quarter dented the dollar and sent a fresh platoon of safe-haven buyers toward the shining shelter offered by gold, said Kitco's Jon Nadler.

Some participants feel that the GDP numbers may elicit fresh actions by the Fed, Nadler said before the bank's pronouncement of the day (it didn't). Maintenance of the $900 level is still critical for gold in light of the rather anemic performance it has exhibited prior to recent days.

It may be that the GDP report proves to be the catalyst which moves the dollar lower and gold higher, in the words of Brian Kelly, of Kanundrum Research.

But the technicians remain skeptical, as the metal is expected to run into further technical resistance, with a break above $916 still required to break the current down-trend, according to James Moore, of TheBullionDesk.com.

In company news, Barrick Gold, the world's largest producer, said first-quarter profit fell 28% as costs rose and prices for the precious metal declined. The company said it produced 1.76 million ounces of gold in the first quarter at a total cash cost of $484 an ounce, up from $395 a year earlier. That compares with fourth-quarter output of 2.11 million ounces at costs of $471.

[Barrick is] moving into higher-grade material and looking to start production at lower-cost mines that will help bring down costs per ounce, said Kerry Smith, an analyst at Haywood Securities in Toronto.

Currencies and Economic News

In the currency market, the dollar continued to fall against the euro. Late Wednesday, the euro was trading at $1.3264 vs. $1.3141 on Tuesday.

The two big events of the day were release of GDP figures and the FOMC meeting. The former was wretched, to say the least. The Commerce Department said inflation-adjusted, seasonally-adjusted GDP fell at a 6.1% annualized rate in the first quarter, following a 6.3% decline in 4Q08.

Taken together, that represented the worst showing in six decades. Since 1947, the economy had never contracted by more than 5% for two consecutive quarters.

However, as Marketwatch reported, Buried in details of the U.S. GDP report, a [2.2%] rebound in consumer spending and a drop in inventories bolstered optimism that the U.S. economy was on the track to recovery after a brutal first quarter. Those bright spots, combined with surprise rise in eurozone sentiment, pushed the euro higher against the dollar.

Meanwhile, the Fed kept its target interest rate unchanged at an ultra-low 0%-to-0.25% range, and said the U.S. economic outlook has improved modestly. There were no changes to plans to buy Treasurys and other securities to support the flow of credit to the economy. Thus some of the fear of additional quantitative easing anytime soon quickly abated, said Dan Cook of IG Markets in Chicago.

The only major difference between [yesterday's] statement and the previous one on March 18 is that [yesterday's] cited the fact that most evidence points to a slowing rate of economic decline. Anyone with two eyes and a brain knows this to be the case, wrote Josh Shapiro, of MFR, Inc.

The Blue Chip survey of economists forecasts a 2% annual pace of decline in growth in the current quarter, a small positive growth rate in the third quarter, and a stronger economy by the end of the year.

Energy

In the energy market on Wednesday, crude for June delivery rose, closing at $50.97/barrel, up $1.05. May reformulated gasoline gained 4.68 cents, to $1.4463/gallon.

In its weekly inventory report the Energy Information Administration said that crude stockpiles increased 4.1 million barrels for the week ended April 24, much higher than expected, raising them to their highest level since September of 1990.

Gasoline supplies were off 4.7 million barrels vs. expectations for a slight increase, and distillates added 1.8 million barrels. Refineries were operating at 82.7% of capacity, compared with 83.4% a week earlier.

The refinery dropoff was reflected in gasoline production, which decreased to 8.8 million barrels a day from 9.1 million the previous week.

While crude stocks were up the market is apparently reacting to ... gasoline stocks, said James Williams, of WTRG Economics. But he added that, from a big picture view it is difficult to see prices going anywhere but lower ... Inventories of everything remain well above normal.

Base Metals

The base metals were all propelled back into the green on Wednesday. Copper pushed higher straight through with little interruption and fell just short of the $2 mark, finishing at its intraday high of $1.9919/lb., up 10 cents. Nickel had a few more fits and starts, but also surged to its intraday high of $4.867/lb., up nearly 24 cents. Zinc followed the same path, ending at $0.6254/lb., up almost 3 1/4 cents. Aluminum moved up modestly, ending at $0.6425/lb., up better than three-quarters of a cent, while lead had a solid day, tacking on more than a penny and three-quarters, to $0.6006/lb.

Copper led the industrial metals higher, advancing for the first day in a week as traders responded to easing fears of a swine flu pandemic, as well as words out of the Fed that the deterioration of the economy appears to be slowing.

I think it's a great sign for copper, said Tom Pawlicki, precious metals and energy analyst with MF Global. I think the outlook in copper is relatively favorable right now.

Stockpile data continued to be highly supportive. Inventories monitored by the LME plummeted again yesterday, falling by 8,825 metric tons to 411,450 tons, the lowest level since January 20.

Canceled warrants -- material earmarked for delivery - also factored in. At 16.9%, the ratio of canceled warrants to total tonnage stands at its highest level since early April 2008.

Base metals are bouncing, helped by the resilience of the global stock markets, said Jesper Dannesboe, of Societe Generale in London. The MSCI World Index of shares added as much as 2.5% yesterday.

Among other metals, zinc is moving higher as stocks dwindle to their lowest level in 3 months. Belgium's Nyrstar, the world's biggest producer of zinc, said its output dropped 30% in the first quarter from the fourth, and has previously said it will cut zinc production by 190,000 tonnes in the first half of 2009.

But aluminum continues to languish, with inventories at 3.8 million metric tons, a record level. What's most concerning is that inventories are still rising sizably despite the fact that there are big production cutbacks, says analyst Gayle Berry of Barclays Capital.

That's what's happening ... see you tomorrow!



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