Good morning ...
Gold moved steadily higher from the overseas markets straight through the New York NYMEX and Globex sessions on Monday, finishing at its intraday high of $874.00, up $17.20. Overnight, gold edged slightly higher in London.
Platinum climbed higher in small fits and starts, from a low of $1890 in the far East to end at its intraday high of $1927/oz., up $27. Overnight, platinum is slightly lower.
Silver leveled off after posting solid gains in the far East, shot higher to peak at $16.80 in the second hour of New York trading, but then slipped later in the day to close at $16.69, up 33 cents. Overnight, silver pushed higher in Hong Kong but has pulled back to flat.
The bargain hunters among precious metals traders surely came out of the woodwork yesterday, a welcome sign after the beatings absorbed last week. And all last month, for that matter, as gold fell by 6.1% in April, the biggest monthly drop in four years.
It was also a very supportive day on the part of the usual suspects, surging energy prices and a dollar that has begun collapsing again after its strength in the wake of the latest round of interest rate cuts.
Kitco's Jon Nadler tabbed the recovery as ultimately attributable to some bargain hunting offtake ahead of India's May 7 auspicious date, but more so to the ... rise in crude oil on the heels of Nigerian- and Iranian-driven apprehensions.
Nadler noted that May 7 marks the day of the Akshaya Tritiya Festival in India, the Golden Day of Eternal Success. It is probably South India's biggest gold-buying festival of the year, he said.
As the correction runs its course, it's well to remember that gold futures averaged just $701 an ounce in 2007. Expect that to ramp up to an average of $906/oz. this year, wrote Citigroup analyst John Hill.
Since jewelers account for some 60% of gold purchases, It will be important for damped fabrication demand to recover before gold can move higher, Hill said. The key will be downside support from fabrication, probably three to five months out.
Currencies and Economic News
In the currency market, the dollar slipped against the euro. Late Monday, the euro was trading at $1.5491 vs. $1.5424 on Friday.
The buck declined despite some upbeat news from the Institute for Supply Management. The ISM said nonmanufacturing sectors of the U.S. economy expanded during April after three months of contraction. Its services index rose to 52.0% from 49.6% in March. That handily beat economists' projections for a decline to 49.4%.
Analysts believe traders were locking in their gains from last week's rally, which was based on signals from the Federal Reserve that it is near the end of its interest-rate cuts. The dollar index, which charts the greenback against a basket of currencies, rose 2.5% last week.
Currency strategists at Brown Brothers Harriman are of the opinion that the pieces of the puzzle we believe will contribute to a U.S. dollar uptrend this year are beginning to fall into place, but more pieces are needed for a more significant U.S. dollar rally.
But the good feelings were diluted considerably by a report from the Federal Reserve on the credit crunch, which continues.
More than half of the banks surveyed by the Fed said they had tightened commercial and industrial loans, commercial real estate loans, residential mortgages, and home-equity lines of credit. Almost no banks eased credit terms for any type of loan, the Fed said in its quarterly senior loan officer survey.
The significant tightening of standards for consumer loans is probably the ugliest news of this report, wrote Harm Bandholz, of UniCredit Markets. Investment will continue to shrink, while private consumption growth will come to a halt or even turn negative in the second quarter.
In the energy market Monday, crude for June delivery attained record highs, rising to $119.97/barrel, up $3.65, after puncturing $120 in electronic trading. June reformulated gasoline gained 8.65 cents, to $3.0529/gallon.
Crude has now surged 6.6% in the past two days as international worries ruled. Nigerian oil off the market and increasing tensions with Iran seem to be the flavor of the day, said Phil Flynn, of Alaron Trading.
Royal Dutch Shell confirmed on Sunday that an oil flow station in southern Nigeria had been attacked by the rebel group, MEND, and that some production had closed down.
This market is pretty scary right now because it really does have the power and momentum to trade to $130 and beyond within the next 90 days, said John Person, president of National Futures Advisory Service. Add a supply disruption, refinery outage or more strikes and we will easily be at $130.
In an opposing view, reactions to Nigeria and the dollar are overreactions to relatively minor factors, said James Williams, of WTRG Economics.
With the LME closed for holiday, there was little trading to report on, and no hard closing numbers.
The day was marked by a bizarre occurrence in New York, however. Copper jumped as much as 44 cents, or 12 percent, to a record $4.2605 a pound, the highest ever, at about 8:30 a.m. on the Comex division of the New York Mercantile Exchange.
The Comex is a pretty illiquid market, said Joel Crane, a metals strategist at Deutsche Bank AG in New York.. With the London market closed, it would be easy to see that this move was overdone.
Overdone, for sure. But what did it mean? Traders were scratching their heads, mostly inclined to believe it was a mistake.
It seems like somebody did something they didn't mean to do, said Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey. You've got to have guts to go back in this market now and take a side.
But, It's hard to believe it's real, Goodis added. I've never seen anything quite like that ...
Could it have been a wrong way bet on copper? Perhaps. If somebody got caught short, it probably means they lost a lot of money, said Matthew Zeman, of LaSalle Futures Group in Chicago.
Meanwhile, life went on in the trenches. There were mixed signals from Chile concerning the continuation of the strike by subcontractors which has been costing Codelco, the world's largest copper miner, over $10 million a day.
Codelco re-opened its huge El Teniente mine over the weekend, only to be forced to close it again after strikers attacked busloads of workers. El Teniente has been closed and opened several times in recent days.
Of the other two mines closed by the strike, Codelco reports that limited production is being resumed at Andina, while El Salvador remains shut because strikers have blocked off all road access.
Both sides in the dispute are under pressure from the Chilean government to find a solution and local news reports suggest there is a feeling that the near 3-week-old strike may be nearing an end. But nothing concrete has emerged as yet.
That's what's happening ... see you tomorrow!
NEWS YOU CAN USE
Consolidated Abaddon Resources Inc. is a Canadian uranium exploration company developing properties in the Athabasca Basin of Northern Saskatchewan and the Sims Basin of Labrador. Property partners include Denison Mines Corp. and Triex Minerals Corp.
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