Good morning ...
Gold was steady to higher through the first hour of the New York session on Friday, then declined sharply to lose nearly $15, but then turned around and regained all the lost ground, before cruising sideways through the Globex to finish at $884.00, up $1.00. For the week, gold rebounded from the previous week's bloodbath to gain 3.3%.
Platinum traded within a closely-defined $50 range, but finished near the top of it, ending just off its intraday high at $2087/oz., up $66. For the week, platinum shot up 9.8%.
Silver's early fall was even steeper than gold's, from $17.08 in London all the way down to $16.50 at mid-morning, after which it rallied back to $16.79, off just 4 cents. For the week, silver tacked on 2.6%.
It was nice to see the precious metals consolidate the week's gains, even though some may have wished for a better showing on the back of a declining dollar and oil pushing to record heights.
Gold has of course underperformed crude and the euro over the past two months, and whether that is slowly beginning to change remains to be seen.
Many are just expecting sideways trading for a bit.
We're going to continue to go back and forth for a while yet, said Adrian Day, of Adrian Day's Asset Management in Annapolis, Maryland. I'm holding, given my expectation of long-term appreciation. I don't cancel my house insurance if I don't expect a problem in the next few months, so I'm not selling my gold either.
Peter Spina, of GoldSeek.com, contends that, There are too many bullish drivers in gold to keep it subdued over the short term.
The U.S. dollar has failed to sustain its rally off recent lows and with the gold-oil ratio now around the 7 level, the value gold presents during this inflationary environment has brought out the bargain hunters, Spina wrote.
And he concluded that, Gold looks ready to march back above the $900 level over the coming weeks with present conditions sustaining.
Meanwhile, platinum fanciers (and bears, too) have a paper way to play the metal with yesterday's debut of exchange traded notes (ETNs) on the NYSE. E-Tracs UBS Long Platinum ETN will trade under the ticker PTM, and E-Tracs UBS Short Platinum ETN under PTD. The ETNs will be based on futures contracts and not hold the actual metal.
Currencies and Economic News
In the currency market, the dollar continued to backtrack after its recent runup against the euro. Late Friday, the euro was trading at $1.5473 vs. $1.5396 on Thursday.
The dollar rallied marginally in morning New York trade, as a narrower than expected March trade deficit supported the unit, wrote currency strategists at Action Economics. New record high oil prices, along with a fairly severe sell-off in U.S. equities, however, saw the greenback give back its gains in afternoon trade, and into the weekend.
The Commerce Department reported both imports and exports fell sharply in March, pushing the U.S. trade deficit down to $58.2 billion. Inflation-adjusted, the nation's real trade gap for March was the lowest since November 2003.
The import/export data bucked some firm trends. Nominal imports plummeted 2.9% to $206.7 billion, marking the largest decline in more than six years, and in the face of record oil prices. Nominal exports fell by 1.7% to $148.5 billion, the biggest drop in nearly three years, in spite of higher prices for U.S. farm products.
In the energy market Friday, crude for June delivery capped a week in which it rose 8.3% by smashing its closing record once again at $125.96/barrel, up $2.27. June reformulated gasoline gained 6.22 cents, to $3.20/gallon.
There is this overwhelming reluctance to admit that we're simply in a new paradigm for prices and short of a wholesale collapse of the global economy, prices just aren't going to pull back to a $75 level for oil, wrote Neal Ryan, of Ryan Oil & Gas Partners.
Crude demand is outstripping supply at a drastic rate in the global picture, so despite a few weeks of positive reports via the U.S. EIA data, there is a general shift in attitudes.
A year or two down the road, we're staring at a supply/demand paradigm that is just ugly, no matter how it gets spun by pundits and policy wonks, in Ryan's grim assessment.
Too little drilling, too many restrictions, too little conservation and alternative energy efforts combined with skyrocketing global demand are going to make things look bleak 1-2 years out on the price curve, he concluded.
The base metals were down again on Friday. Copper plummeted for a third straight day, dropping from the open to past noon, after which it did bump up at the end to finish at $3.7796/lb., down 6 1/2 cents. Nickel was also off sharply, falling to the $12 level but bouncing off of it several times to close at $12.0508/lb., down 28 1/2 cents. Zinc plunged, just coming off its intraday low to end at $0.9637/lb., down 2 2/3 cents. Aluminum had a day of big ups and downs to little effect as it added less than a quarter of a cent, to $1.2843/lb., while lead continued to crater, falling below $1 at one point before crawling back barely above it at $1.0013/lb., down 4 3/4 cents.
The bears remained firmly in control of the industrial metals, as concerns about declining demand take hold with a vengeance.
Zinc now sits at a 6-month low, but lead in particular is a battered and fallen angel. It had soared on supply worries to $1.75/lb. last October. Yesterday, it plunged below the $1 mark for the first time since May of 2007, on advancing inventories in the midst of seasonally low demand for batteries.
After the poor technical close Thursday, there was continued technical selling on Friday, said one LME trader. Sentiment has turned negative with inventory rises recently for many of the metals, he explained. Copper inventories monitored by the LME were up by a massive 11,150 metric tons yesterday, to 121,275 tons.
The China factor is big. The path of least resistance in LME copper in the next month or so is lower, said JP Morgan analyst Michael Jansen. He expects to be able to buy copper around $7,800/ton-$8,000/ton (vs. $8,195 yesterday) before it makes its next move up towards $8,800/ton-$9,000/ton.
This is because Chinese buyers right now are relatively well supplied, Jansen said, noting an increase in Shanghai Futures Exchange inventory levels this past week.
Ron Goodis, a futures-trading director at Equidex Brokerage Group, is very cautious going forward. Things have been much more volatile than usual, Goodis said. Prices have stretched to such extremes, it's beyond reasonable limits. You have to be long at your own peril.
A potential supply side development, though, is a strike at Namibia's largest zinc mine, scheduled to have started last midnight. The Skorpion Zinc mine annually produces 150,000 tons of special high grade zinc for the Asian, European and North American markets.
And though we don't normally cover rare earth minerals, the mining situation with regard to them is critical, with dire implications for the U.S. if nothing changes. For a chilling report on the situation, click here.
That's what's happening ... have a great weekend and see you Tuesday!
NEWS YOU CAN USE
First Majestic Silver Corp is committed to building a senior Silver producing mining company based on an aggressive acquisition and development plan with a focus on Mexico.
The Company presently owns or operates three silver mines in Mexico: The La Parrilla Silver Mine; The San Martin Silver Mine and the La Encantada Silver Mine. Annual production from these three mines is anticipated to be 5 million ounces in 2007.
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