Good morning ...
Gold turned in a tepid performance during the New York session on Tuesday, rising well until nearly noon, where it peaked at $883, but then declining from there through the Globex and finishing weakly at $875.60, up $1.60. Overnight, gold has fallen off in London.
Platinum did much better, pushing higher through the NYMEX session and trading sideways during the afternoon, to end just off its intraday high at $1960/oz., up $33. Overnight, platinum is sharply lower.
Silver ran all the way to $17 at mid-morning, before determined afternoon selling took it back to a close at $16.84, up 15 cents. Overnight, silver is trending lower.
A pretty lackluster day for gold, although its sister metals performed well, as buyers are trying hard to put the 'correction,' if that's what it was, behind them.
It didn't hurt that it was a very supportive day on the part of the usual suspects, surging energy prices and a dollar that continues to tank, although gold bulls had to be disappointed that the metals market didn't react more dramatically.
Clearly, traders are not throwing their arms entirely around the factors that are breaking so much in their favor. It is also likely that some see the bounce of recent days as an opportunity to take some cash off the table. And others may be watching as the first quarter reports from the gold miners flood in.
Most influential, though, is probably the dollar. Many are wary after it had such a run-up against the euro, and are biding their time until they become convinced that the buck has truly turned down again.
Jim Sinclair, of jsmineset.com, isn't mincing his words on the subject. Keep in mind, he writes, that the fundamental reason for gold's normal violent reaction was the euro coming off the $1.60 level, seen by some as a top. It is NOT!
He goes on to say that it is unlikely that the ECB will join the Fed in the race to 0%. Considering inflation even at the manufactured rate the PPI and CPI show, the Fed is giving away money in exchange for garbage paper at ZERO percent.
Sinclair concludes: I dare to say the bottom in gold has occurred this week. Gold will take out $1024 on the third try. Now the magnet is at $980 to $985.
Currencies and Economic News
In the currency market, the dollar slipped some more against the euro. Late Tuesday, the euro was trading at $1.5525 vs. $1.5491 on Monday.
The buck declined even more against the Canadian loonie, which appreciated better than 1% against its neighbor currency. Canada's dollar is perceived as backed by more in the way of natural resources and therefore my be sounder than the U.S. version.
Some grim earnings reports helped deflate the buck. First, Fannie Mae reported a much wider-than-expected first-quarter loss of $2.2 billion, as credit-related problems hit it hard. The mortgage giant also said it needs to raise $6 billion in new capital.
Then, D. R. Horton, one of the nation's largest home builders, reported a $1.3 billion quarterly loss as housing weakness and turmoil in mortgage markets continued to hammer its bottom line.
Additionally, Big Ben Bernanke made the news when in a speech he issued a warning that increasing home foreclosures could further harm the economy. Um, could?
Assessing the economic impact of foreclosures, Bernanke said that, It is important to recognize that the costs of foreclosure may extend well beyond those borne directly by the borrower and the lender. Wow, didn't know that.
In the energy market Tuesday, crude for June delivery roared to new intraday and closing records, finishing at $121.84/barrel, up $1.87, after an intraday peak of $122.73. June reformulated gasoline gained 6 cents, to $3.12/gallon.
The causes of rising oil prices have been chronicled repeatedly here -- demand from China and India, the falling dollar making oil an inflation hedge, speculation, OPEC supply restraints, supply threats in Iran, Iraq and Nigeria, and refinery bottlenecks in the U.S., summarized John Kilduff, of MF Global.
Unlike gold, which has yet even to approach its alltime inflation-adjusted high, oil is now well above the $101.70 peak hit in April 1980, the year after the Iranian revolution, said Kilduff.
Now we are in unexplored territory, Kilduff said. Add to it, the significant recent supply disruptions in Nigeria and additional inflationary pressures that surely must be the result of a loose monetary policy and the path of least resistance is higher still for energy markets.
Spare oil capacity is also a large factor for the rise in prices, wrote James Williams, of WTRG Economics. Spare capacity is limited -- under 2 million barrels per day, which means the oil production industry is at about 97% utilization.
The base metals were mostly in positive territory on Tuesday. Copper revved up after the LME holiday, meandering up and down through about a 4-cent range yesterday, before settling with a nice gain at $3.9316/lb., up nearly 6 cents from Friday. Nickel also rallied, turning in a solid day to close at $12.8767/lb., up nearly 15 1/2 cents. Zinc muscled its way back over the $1 mark, finishing at $1.0157/lb., up 3 1/3 cents. Aluminum had a decent day, adding just under 2 cents to $1.3187/lb., while lead bucked the positive trend by dropping a penny, to $1.149/lb.
Buyers were out in force yesterday, despite a drop in supply worries.
The base and precious metals are rebounding strongly ... buoyed by a combination of a down turn in the value of the dollar and a sharp move higher in crude ..., said JP Morgan analyst Michael Jansen. This has pushed copper up towards the $8,520/mt area, which is a little surprising in light of the end of the Codelco subcontractors strike, and might indeed reflect some of the price action on Monday in New York when Comex was sharply higher, up around 11 percent at one stage.
The settlement in Chile was the day's biggest consideration. The country's state-owned copper miner, Codelco, said that employees of contractors have voted to end their 3-week strike. Andina and El Teniente, Codelco's second biggest project, have been re-opened.
The last remaining shuttered mine, El Salvador, is due to come back on line later this week.
Strike's end left more than a few analysts scratching their heads. The strike was the main support to copper prices and everyone expected prices would come down after it ended, said Catherine Virga, of CPM Group in New York. Now that this short-term supply shock has been taken out, people have to reevaluate their outlook for the market, she offered.
Virga was among those still unable to explain Monday's sudden huge jump, and equally quick fall, in the copper price.
Noting that neither London nor Shanghai had anything similar today, it signals that yesterday's move was only something that happened with a few traders in New York, she said, adding that, I can't imagine what would have driven prices up that high.
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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