Good morning …

Precious Metals

Gold was essentially unchanged to the mid-point of the London session on Friday, after which it took off and moved sharply higher to late morning, poking above $933 before sliding through the end of the Comex, only to perk up again on the Globex and rise to a finish at $930.90/oz., up $5.20. For the week, gold tacked on 1.6%.

Platinum peaked in the far East, slumped to the New York open, staged a very tepid rally, then slid again to end near its intraday low at $1101, down $10. For the week, platinum shed 4%.

Silver was down from late Hong Kong trading to the New York open, climbed to its high for the day, of $14.15, in the late morning, then slowly keeled over through the Globex to close at $13.95, down 10 cents. For the week, silver was off a miniscule 3/10 of one percent.

It was a second straight day of minor change for the precious metals, with silver and platinum submitting losses, while gold somehow managed to eke out a modest finish in the green.

However, gold aficionados had to be satisfied with the results, given that the usual suspects were line up in opposition, with oil selling off and the dollar moving strongly against the euro.

Gold likely got a lift from declining equities.

“For gold and silver, we are going into a win-win situation,” said Ashraf Laidi, the chief market strategist at CMC Markets in London. “When we will have a retreat in the financials and the rest of the stocks, we will have some rotation into metals.”

In addition, “The core inflation number helped stabilize gold and helped gold up $930,” said George Gero, of RBC Capital Markets.

That could be meaningful heading into next week, according to Ralph Preston, of Heritage West Futures in San Diego, who predicted that, “A close above $930 could be explosive.”

Yet more positive statements came from Tom Pawlicki, of MF Global, who noted that, “Gold has been the object of affection for hedge funds and also has paid increasing attention to the dollar lately … That helps explain why gold has rallied both when stocks have risen and fallen.”

If the funds are moving back into the yellow metal, that bodes very well indeed.

Currencies and Economic News

In the currency market, the dollar was sharply higher against the euro. Late Friday, the euro was trading at $1.3471 vs. $1.3633 on Thursday.

The data parade was led yesterday by the Labor Department, which reported that consumer prices were unchanged in April, led by a decline in energy prices. That represented stabilization, following a 0.7% slide in the past 12 months, the largest in 54 years.

Core inflation - excluding food and energy prices - has actually accelerated in the past four months, rising 0.3% in April, the biggest increase since last July. But that’s a tad misleading, as core CPI was boosted in April by a 9.3% increase in tobacco prices as a new federal excise tax was implemented. Minus tobacco, the CPI fell 0.1% in April and the core CPI rose only 0.1%.

Many still see deflation in the cards. Core inflation will sink below 1% on a year-over-year basis by early next year, says David Greenlaw, an economist for Morgan Stanley, “reflecting the enormous further slack we expect to build up in the economy through year end.”

Meanwhile, consumer sentiment inched higher, according to the University of Michigan/Reuters survey. Its index rose to 67.9, the highest reading since September, from 65.1 in April.

Tossing a wet towel on that, Ian Pollick, economics strategist with TD Securities, wrote that Americans “don't feel that great about the present … Rather, it is the future that they are more hopeful for...Likely, this is a function of equity market strength coupled with 'green shoot' stories seen during the month.”

Energy

In the energy market on Friday, crude for June delivery fell back, closing at $56.34/barrel, down $2.28. June reformulated gasoline dropped 4.31 cents, to $1.6806/gallon.

Friday’s result left crude down by 3.9% on the week, following a 10% rally the week before.

After reports that OPEC ratcheted up oil production in April, the first month in eight in which the cartel has increased output, Commerzbank analysts commented that, “Rising oil prices increase the incentive to expand production at the expense of other oil producers, in order to benefit from higher oil prices.”

“A weaker demand and higher OPEC supply may explain why oil stocks have been rising until recently,” the bank’s analysts added. “This also confirms our conviction that the oil price increase during the last weeks was overdone and a price correction toward $55 a barrel had to be expected.”

And natgas followed last week’s sharp gains with equally sharp losses, ending Friday at $4.098 per million British thermal units, down 5.2% for the week.

Base Metals

The base metals were mostly lower on Friday. Copper sank from the pre-dawn hours to the New York open, bottoming at $1.96, rallied back to $2.02 by late morning, but then sagged again to finish at $1.9969/lb., down nearly 2 cents. Nickel followed much the same pattern, eventually closing little changed at $5.5444/lb., down 2 1/4 cents. Zinc fell precipitously around the noon hour, ending near its intraday low at $0.6579/lb., down a penny. Aluminum posted a modest loss, shedding a quarter of a cent, to $0.6743/lb., while lead bucked the trend, adding almost a penny and a quarter, to $0.6634/lb.

Copper led the industrial metals through a day of relatively modest changes, giving ground late in the day as, according to Reuters, “mixed economic data from Europe and the U.S. underscored concerns about the health of the global economy and fed a price correction from over-heated levels that may extend into the coming week, analysts said.”

Offering a technical look at copper, which now portends a rising price, Bloomberg wrote: “Copper may rise to levels not seen since October in the month ahead, as the metal forms a U-shaped base, Standard Chartered Bank said, citing trading patterns.

“The 50-week momentum indicator continues to turn higher and supports a rising copper market, as does the sustained push above the 13-week moving average, London-based David Barclay, the bank’s commodity strategist, wrote … The 14-day stochastic indicator and MACD lines are also signaling a ‘buy,’ he said …

“ ‘Copper prices are still struggling to clear resistance at $4,925 a ton, but a climb to $5,156 a ton remains favored over the coming month,’ wrote Barclay. This is a 38.2 percent retracement of the fall from the 2008 high, he said, based on a series of numbers known as the Fibonacci sequence. After this, copper may target the 50 percent retracement objective of $5,878 a ton, he added.

“Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of a so-called ‘level of resistance’ indicates a price may move to the next level, while a failure indicates a trend may stall. Sell orders may be clustered at resistance levels.”

Well, if they say so.

Meanwhile, stockpile data was strongly positive. Copper inventories monitored by the LME plummeted by a huge 12,850 metric tons yesterday, to 357,800 tons.

That’s what’s happening … have a great weekend and see you Tuesday!


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