Good morning ...
Gold was up from the far East through the first half of the London market on Monday, declined in New York from the open to the noon hour, but then bounced decisively off of $900, and registered a gain for the day at $905.40/oz., up $3.80. Overnight, gold is little changed.
Platinum seesawed through a $40 range, winding up in the middle of it to end at $2151/oz., up $23. Overnight, platinum has been flat.
Silver peaked at $17.25 shortly before the New York open, was off precipitously from there until late morning, then rallied back to the $17 mark before being knocked lower in the Globex to close at $16.95/oz., up a penny. Overnight, silver has been trending higher.
Although silver disappointed, gold held onto its gains from late last week and added a bit more, while platinum continued to soar. Gold's rise to its highest point in three weeks was noteworthy in that it got no help from the U.S. dollar, which strengthened, although the rising price of crude was supportive.
There is a definite air of the 1970s in recent economic data and the reality of falling economic growth and rising inflation or stagflation, said Mark O'Byrne, of Gold and Silver Investments Ltd.
Because of that, With the dollar having strengthened against the euro, the prime reason for gold's early strength looks to have been inflation hedging buying due to oil going above $127 prior to a small sell off, O'Byrne wrote.
Gold may not hold above $900, said O'Byrne, as profit taking is to be expected. In the near term, Gold needs to consolidate between $885 and $915 before the next leg up in the bull market, he concluded.
Perennial skeptic Jon Nadler of Kitco chipped in by writing that gold may be on a possible route to tests of $915 and maybe $925, as speculative fund buying gives the metal a boost.
But Nadler added that, as gold prices firmed overnight, demand in India dipped once again and local prices went to a discount as buyers failed to materialize.
Meanwhile, global platinum supplies weren't enough to meet demand in 2007, platinum group metals refiner Johnson Matthey said yesterday. Demand climbed by 8.6% to 7.03 million ounces in 2007, but supply came in at only 6.55 million, leaving a deficit of 480,000 ounces.
Investment demand for platinum climbed 170,000 ounces in 2007, with the launch of two platinum-based exchange traded funds contributing 195,000 ounces to demand for the first time, Johnson Matthey said.
Currencies and Economic News
In the currency market, the dollar sank in early trading but then firmed up strongly against the euro. Late Monday, the euro was trading at $1.5507 vs. $1.5587 on Friday.
Traders responded positively to the Conference Board's index of leading economic indicators, which rose for a second straight month-up 0.1%, matching March's gain-after falling for the five previous months.
These data certainly reflect a weak economy, but not one in recession, said Conference Board labor economist Ken Goldstein. The small increases in March and April could be a signal that the economy may not weaken further.
The U.S. dollar rally looked increasingly at risk in overnight trading action. However, the unexpected reaction to this morning's leading indicators report indicates a willingness to continue buying greenbacks on positive U.S. news, said Michael Woolfolk, of the Bank of New York Mellon.
But Marc Chandler, currency strategist at Brown Brothers Harriman, disputed that interpretation of the reason for the buck's rise, saying that, we suspect it is more a question of positioning.
In the energy market Thursday, crude for June delivery rose to a new closing high, ending at $127.05/barrel, up 76 cents. June reformulated gasoline rose 2 cents, to $3.24/gallon.
The end of today's trading marks the expiration of the June crude contract, which could lend some extra volatility to the day's action.
As analysts cited large diesel purchases by China in the wake of the earthquake, Neal Ryan, of Ryan Oil & Gas Partners, wrote that the continued and seemingly relentless price increases we've had the last few weeks is the combination of global energy market news coupled with the begrudging realization that this isn't the 1980s again when OPEC can turn on another 4 million barrels of supply and satiate the market.
Ryan believes that, from current levels, we should see a spike followed by a decent-sized pullback, but that pullback is going to be back to the $110-$115 level, not the double-digit levels we were in just a few months ago.
The base metals were all mired in the red on Monday. Copper peaked during the pre-dawn hours and slid from there until the late morning, when it rallied slightly off its intraday lows to finish at $3.8245/lb., down 4 1/4 cents. Nickel had a couple of steep ups and downs, but eased off of both highs and lows, closing at $11.7291/lb., down 6 1/4 cents. Zinc fell from the pre-dawn hours until mid-morning, then came off its lows to end at $1.0222/lb., down 3 cents. Aluminum was down early but traded sideways for the New York day, eventually losing a penny and a quarter, to $1.338/lb., while lead was off straight through, barely edging above its intraday low at $1.0113/lb., down more than 3 3/4 cents.
Copper fell off primarily on stock increases. Inventories monitored by the LME gained a healthy 1,500 metric tons yesterday, to 122,725 tons.
Analysts believe that there has been some retracing of speculation as to how much extra demand will emerge from China for reconstruction efforts in the wake of last week's devastating earthquake.
Some are arguing that that copper demand may not take too much of a boost from reconstruction work, because the worst hit areas were largely suburban rather than industrial.
Likewise, traders were downplaying any effect that earthquake-related smelter closings would have on zinc supply. The shutdown may result in production suspension of 15 days or more, but affects less than 1% of China's annual output, according to a report from the Macquarie Group.
This minor cut in supply is unlikely to significantly reduce the surplus that we were forecasting for the zinc market for 2008, the Macquarie analysts said.
Backing up that view were the latest figures from the LME, which reported that its zinc inventories grew by 5,075 tons yesterday, to 128,575 tons. It was the biggest daily gain since January 18.
In company news, the website metalmarkets reports that Rio Tinto is facing a potential boycott of its iron ore by Chinese steelmakers.
Problems have arisen because, the report said, last year Rio made use of flexibility clauses in its contracts, that allowed the group to charge spot market prices for iron ore, at around 10% above the prices set in its contracts.
A dicey situation, the report concludes: While a joint action by the Chinese steel industry to boycott Rio's spot sales could be deeply damaging to the company it would also put China in breach of World Trade rules.
That's what's happening ... see you tomorrow!
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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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