Good morning ...
Gold was very rangebound from the foreign markets through the New York session on Monday, with buyers emerging when it dropped below $880 and sellers equally present when it topped $885, and it stumbled into a finish at $882.20, down $1.80. Overnight, gold has slipped slightly lower in the overseas markets.
Platinum fell below $2040 at the New York open, but caught fire from there, moving steadily higher until a slight easing during the Globex, and ending at $2105/oz., up $18. Overnight, platinum has fallen sharply.
Silver enjoyed a steeper rise than gold's, leaping from a low of $16.70 at the open to nearly $17.30 at noon, before it too slipped in the afternoon hours to close at $17.13, up 34 cents. Overnight, silver has been flat to slightly lower.
A lackluster day for gold was somewhat compensated for by the positive action in platinum and solid strength in silver.
Gold was supported by a falling dollar but undermined by a step back in the crude price juggernaut.
Gold is watching while the dollar weakens ... and is battling to find direction, wrote Julian Phillips, of GoldForecaster.com, as he expressed disappointment that the market has not responded more strongly to recent record oil prices and to Monday's skidding dollar.
Additionally, Phillips added, We are headed into the quiet season for gold [May to the end of August] but at any moment, reports of another systemic fracture in the financial system could liven it up as happened last year when the sub-prime crisis emerged from the shadows.
Many of the factors that have supported the bull market for the precious metals remain in place, say analysts from Natixis Commodity Markets Ltd.
Inflationary pressures associated in part with the dramatic rise in commodity prices are continuing; uncertainty in the financial markets as the sub-prime crisis continues to unravel remains an issue ... [and there is] increasing acceptance of commodities as an asset class, they said.
Nevertheless, these positive fundamentals do not necessarily justify a straight progression for precious metals prices, the Natixis analysts said, adding that they expect prices for gold to average $875 in 2008.
Under that scenario, gold may already have peaked for the year. We doubt that.
Currencies and Economic News
In the currency market, the dollar continued to slide against the euro. Late Monday, the euro was trading at $1.5541 vs. $1.5473 on Friday.
While the buck rallied early, along with the Dow, it gave it all back, and then some.
Traders may have responded in a positive manner, initially, to a weekend report in the Wall Street Journal which said the Bush administration was leading an international effort to put a floor under the currency.
The Journal was reporting on a shift in the interpretation of the statement that followed last month's meeting of Group of Seven finance ministers and central bankers, which highlighted concerns over excess volatility in currency markets. That was a nuance traders saw at the time as coming at the behest of European officials worried about the weak dollar's impact on euro-zone exporters.
However, an unnamed U.S. Treasury official, told the Journal that it was actually pushed by the U.S. as part of an international effort to halt the dollar's slide.
The G-7 language was meant to direct attention beyond the short-term U.S. financial-market turmoil, the official was quoted as saying. He noted that the administration expects faster growth in the U.S. and slower growth in euro-zone countries in coming months, which would be expected to allow the dollar to gain against the euro.
In the energy market Monday, crude for June delivery finally took a breather, slipping to $124.23/barrel, down $1.73.
Traders responded to the potential for declining demand in the emerging markets. China's oil imports were reported to have fallen in April, and India's industrial production grew at the slowest pace since 2002.
If you have a continuation of that drop in Chinese imports, if that extends beyond a month, and if you have a slowdown in India, that obviously changes the dynamic for the oil market, said Kyle Cooper, of IAF Advisors in Houston.
The base metals were nearly all in the black on Monday. Copper was up from the open through to the noon hour, after which it traded sideways and finished at $3.7982/lb., up less than 2 cents. Nickel traded up and down within a 15-cent range, closing near the bottom of it at $12.0312/lb., down 3 cents. Zinc came well off its intraday highs, but managed to end in positive territory at $0.9764/lb., up a penny and a quarter. Aluminum rode a slow but steady updraught through the day, winding up with a gain of 2 1/2 cents, to $1.3093/lb., while lead finally had an up day, adding just over a penny, to $1.0123/lb.
A desultory day in industrial metals trading was marked by a slight gain for copper, which observers said had little to do with fundamentals.
After the large systematic selling seen last week, traders have started to buy back some of their short positions, causing prices to edge higher, said analysts at RBC Capital Markets.
However, Matt Zeman, of LaSalle Futures Group in Chicago, says it's all about the dollar. The copper market will continue to be shaky, Zeman said, as traders keep one eye on the buck. People are in a wait- and-see period and are looking to the currency market for direction, he said.
Meanwhile, Chinese demand continues strong. The country imported 246,119 metric tons of copper in April, the Beijing-based customs office said yesterday. That compares with 240,634 tons in March, although it's down from the 304,672 tons of a year earlier.
The lead price, which has been on a steep down trajectory for some time now, briefly fell below that of zinc in the morning hours, for the first time since August of last year, before recovering.
Analysts at BaseMetals.com attributed the dip to a loosening of the supply and demand balance for lead, and a market that is moving towards surplus.
But, Rising stocks and lacklustre demand are keeping prices under pressure, but given the vulnerability of the supply side of the lead market and the potential for a rebound in Chinese demand during the summer, we view this recent sell-off (in lead) as overdone, analysts at Barclays Capital wrote.
Among broad market measures, the Reuters/Jefferies CRB Index climbed to a record yesterday, and the UBS Bloomberg Constant Maturity Commodity Index is showing a 21% percent rise so far in 2008.
In the base metals and other commodities, the market still does not fully appreciate the underlying demand coming from a strong global economy, said Chip Hanlon, of Delta Global Advisors Inc. in Huntington Beach, California.
In labor news, Peru's Mining Federation, which represents 28,000 workers, said over the weekend it is suspending a planned strike to give the government time to pass legislation that would provide miners with the benefits they're seeking. However, workers did walk out at Namibia's biggest zinc producer, Skorpion Zinc, on Saturday.
That's what's happening ... have a great weekend and see you Tuesday!
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