Good morning …

Precious Metals

Gold was rangebound again, all the way from the far East through the Globex on Thursday, stuck between $922 and $928, before finishing a very desultory day at $925.70/oz., down 40 cents. Overnight, gold is little changed.

Platinum also had an all-day blah session, only barely edging out of a $10 range and ending where it started at $1111, down $1. Overnight, platinum is slightly lower.

Silver hit the skids in Hong Kong, falling as low as $13.70, but then climbed slowly but steadily through London and the Comex session, leveling off on the Globex to close at $14.05, up 9 cents. Overnight, silver is trending lower.

It’d be tough to come up with a more uninteresting day’s action than yesterday’s for the precious metals, as silver rose slightly, gold was marginally lower, and platinum did nothing at all.

The usual suspects provided little by way of direction, as equities moved up modestly along with oil, while the dollar was off slightly.

That gold seems to be consolidating is good news for some.

“There is some rotation from other markets into gold, mainly because of safe-heaven demand,” said Stephen Platt, of Archer Financial Services in Chicago. “The market could certainly work itself higher.”

But most seem to believe that gold will remain pretty much rangebound, at least for the near term.

“Gold prices have been stabilising at relatively high levels, slowing fresh investment,” said one trader. “For gold prices to break above recent ranges, there has to be some fresh news about economic turmoil.”

Weighing in on the negative side, Edward Meir, of MF Global, wrote that, “The recent declines are putting some of the metals in a position where they could shortly take out their most recent up channels, resulting in a marked deterioration in their charts.”

For the first time in a month, the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, pushed higher, rising to 1,105.62 metric tons (35.55 million ounces), up 1.53 tons (49,000 ounces).

And in Vietnam, gold traders have sought permission from the central bank to import up to $600 million worth of gold, calling for an end to a year-long ban.

Currencies and Economic News

In the currency market, the dollar slipped against the euro. Late Thursday, the euro was trading at $1.3633 vs. $1.3597 on Wednesday.

The number of the day came from the Labor Department, which reported that initial jobless claims rose 32,000 to a seasonally adjusted 637,000 in the week ended May 9. That was the highest level since mid-April.

Labor also said the four-week average of new claims rose by 6,000 to 630,500, also the highest level since April 18. The four-week average is considered a more reliable figure because it smoothes out distortions caused by anomalies.

Obviously, “the labor market is not responding to the so called ‘Green Shoots’,” wrote Steve Ricchiuto, chief economist at Mizuho Securities. And the layoffs at Chrysler are likely not even factored in yet.

April wholesale inflation data were in line with expectations. The figures showed a 0.3% monthly rise in the producer price index. Core PPI, which excludes food and energy prices, rose 0.1%.

“Concern over U.S. data quickly faded as market sentiment quickly reasserted its dominance over fundamentals,” wrote Michael Woolfolk, of the Bank of New York Mellon.

Energy

In the energy market on Thursday, crude for June delivery edged higher, closing at $58.62/barrel, up 60 cents. June reformulated gasoline rose 3.49 cents, to $1.7237/gallon.

Traders ignored the jobs data, focusing on rallying stocks in the U.S. equity indexes, along with surprisingly steady results from major retailers.

Crude’s rebound came after morning trading influenced by the International Energy Agency, which said it now expects demand to fall 2.6 million barrels a day from 2008 levels. That’s 200,000 barrels more than the IEA had projected a month ago.

“Continued oil demand weakness is premised on strong economic recovery later this year remaining elusive,” the IEA wrote, with demand is expected to stand at 83.6 million barrels a day this year.

Oil, along with other commodities and stocks, has benefited from the market's “vote of confidence” for the economy over the past eight weeks, said Ashraf Laidi, of CMC Markets. But “while both oil and equity indices reveal preliminary signs of a consolidation, downward momentum is particularly expected to weigh on oil,” Laidi wrote.

Base Metals

The base metals were mostly higher on Thursday. Copper sank from the pre-dawn hours to mid-morning, falling almost to $1.95, but then turned dramatically, retaking all the lost ground and finishing at its intraday high of $2.0155/lb., up a half-cent. Nickel started up at the New York open and climbed for most of the day, closing at $5.56268/lb., up 4 cents. Zinc also rebounded from its pre-dawn lows to climb to its intraday high of $0.6678/lb., up just over a penny. Aluminum posted a modest gain, adding over three-quarters of a cent, to $0.6769/lb., while lead was down and up to no avail, ending at $0.6517/lb., unchanged.

Copper led the industrial metals’ rebound off their European lows, following the strengthening of the equities markets.

“The copper market turned right around the same time as the S&P (stock index) started to move into positive territory and the stock market started to do better,” said Sterling Smith, vice president with FuturesOne in Chicago.

Smith commented on news the U.S. administration plans to oversee over-the-counter derivatives markets, seeing the move as copper supportive, since it should eventually restore investor confidence.

“When they get that in place, copper will directly benefit because it is the raw metal of the economy,” said Smith.

Elsewhere, Macquarie Bank predicted that the global copper surplus will total about 500,000 metric tons this year, 44% lower than previously forecast, on higher demand from China and supply problems at some mines.

“The apparent consumption in China in the first four months was up 40 percent year-on-year,” said Macquarie’s Jim Lennon. Macquarie had previously targeted a surplus of 900,000 tons.

And stockpile data continued to be supportive. Copper inventories monitored by the LME fell by 3,100 metric tons yesterday, to 370,650 tons.

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


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