Good morning …

Precious Metals

Gold was steady until near the end of Hong Kong trading on Thursday, when it fell about $10, leveled off until New York opened, then plummeted again, bottoming at $880 in the first few minutes, but turned things around from there and rose through the rest of the Comex before finally easing on the Globex to finish at $886.20/oz., down $12.10. Overnight, gold is trending lower.

Platinum was up through Hong Kong and Europe, keeled over in the first New York hour, but then clawed its way slowly upward for the rest of the day, ending at $1103, up $8. Overnight, platinum has fallen off.

Silver peaked at $12.80 in Hong Kong, then took a pounding through mid-morning, finally bottoming at $12.20 before a rebound and leveling off on the Globex into a close at $12.37/oz., down 43 cents. Overnight, silver is moving lower.

Platinum had a modest up day, but gold and silver failed to prolong Wednesday’s rally, with gold off sharply (and capping its worst month since last October) and silver taking a savage beating.

Among the usual suspects, oil was little changed, and the dollar rose against the euro, but nothing explains silver’s profound weakness.

The Hightower Report tried this: “A massive range down washout in silver prices was seen in the morning trade, which would suggest that initial weakness in the Dollar and rather impressive strength in equities was of little consolation to the bull camp. Clearly the silver market saw little if any support from news of a possible Mexican miners strike and that isn't surprising when one considers the recent lack of interest in classic supply side elements of the silver market. A slightly higher Dollar and weakness in platinum prices might also have served to under those trades that view silver as a physical or industrial commodity market.”

Also factoring in for gold was a month in which the stock market showed some signs of life, and jobless numbers that generated some optimism about the general economy going forward.

Gold is “facing more headwinds on better stocks, less haven buyers,” said George Gero, of RBC Capital Markets. However, “if there is a rally over $910, we could see a higher trading range.”

And, “Month-end book squaring is likely to keep the metal in range-trade mode for the time being,” added James Moore, of TheBullionDesk.com.

Currencies and Economic News

In the currency market, the dollar was up slightly against the euro. Late Thursday, the euro was trading at $1.3224 vs. $1.3264 on Wednesday.

Traders celebrated a Labor Department report showing that initial jobless claims fell 14,000 to 631,000 during the week ended April 25.

There was also a decline in risk aversion. “The dollar's safe-haven status is playing second fiddle to the market's demand for the greenback,” said Kathy Lien, director of currency research at GFT.

But lurking in the background, the World Health Organization decided to raise its alert level over swine flu to five on its six-point scale, indicating that the probability of a pandemic is high.

There was some leftover influence from the FOMC’s Wednesday release. While the statement was far from a glowing endorsement of the economy's prospects, currency markets tend to react more to perceived inflection points in the global economy rather than confirmation of news itself, wrote strategists at Standard Chartered Bank..

“Markets may need much more concrete signs of bad news in the near term to outweigh the quiet confidence that the Fed has expressed,” the analysts wrote.

Thus, “Risky currencies may well catch a bid in the coming days, to the detriment of 'safe-haven' currencies such as the U.S. dollar and the Japanese yen,” they concluded.

Energy

In the energy market on Thursday, crude for June delivery edged up, closing at $51.12/barrel, up 15 cents. May reformulated gasoline gained 4.68 cents, to $1.4463/gallon.

Analysts said the day represented the triumph of hope for an economic recovery over the reality of a supply glut.

“Crude is following the stock market again,” said James Williams, of WTRG Economics. However, “from a big picture view it is difficult to see prices going anywhere but lower,” he added.

Reflective of the glut, oil companies are storing a record volume of oil at sea, with estimates ranging as high as 100 million barrels of crude and perhaps 25 million barrels of refined products, wrote Michael Fitzpatrick, of MF Global.

“While it stays off the market it is supportive, but as prices rise it will become increasingly attractive to bring it to market, and if demand stays constricted, it can only result in falling prices,” Fitzpatrick said.

“We are still wary of this market until a significant sell-off, possibly to $40, occurs,” said Fitzpatrick.

Base Metals

The base metals were mostly higher on Thursday. Copper pushed back over $2 in the pre-dawn hours and stayed there for the day, trading within a 2-cent range in New York to finish at $2.0231/lb., up more than 3 cents. Nickel moved steadily higher, advancing after each bout of selling, to close just off its intraday high at $5.2541/lb., up 38 3/4 cents. Zinc followed the same path, ending at $0.6254/lb., up almost 3 1/4 cents. Aluminum muddled along until late morning, when it suddenly took off, rising to its intraday high of $0.6632/lb., up more than 2 cents, while lead bucked the trend, slipping a quarter-cent, to $0.5984/lb.

Copper led the way, closing out April with its fourth straight monthly rise, the longest since January of 2006, as falling stockpiles continued to create optimism. The price was up 11% for the month, after gaining 31% over the first quarter.

Inventories monitored by the LME were off again yesterday, dropping by 5,675 metric tons to 405,775 tons. It was the fourteenth straight session of declines, highlighted by a 19% fall in April.

In addition, “There’s a strengthening element in copper … provided by the higher stock market,” said Frank McGhee, of Integrated Brokerage Services in Chicago. “There have been some more positive signs” for the economy.

But McGhee added that the impending Chrysler bankruptcy likely put a firm lid on the day’s advance. “The Chrysler issues could have a fairly significant impact on the market,” he said.

And the ever-cautious Gijsbert Groenewegen, of Gold Arrow Capital Management in New York believes that copper’s gains this year have been overdone, given the condition of the global economy.

“If you look realistically at the figures coming out, you’ll see that growth is still very weak,” Groenewegen said. “Copper will have to fall from these higher levels.”

In company news, struggling Rusal said it will show no profit for the first quarter of 2009, after similar results for all of 2008. The leading aluminum producer is in talks to restructure debts with foreign lenders after last month securing a two-month freeze on the $7.4 billion it owes to more than 70 international banks.

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


NEWS YOU CAN USE:

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