Good morning ...
Gold fell to $915 in Hong Kong, but that would prove to be the low for the day, as it edged steadily higher to the mid-point of the NYMEX on Friday, nearly touching $929 before easing into a close on the Globex at $924.20/oz., up $3.80. For the week, gold added 2.5%.
Except for a couple of short, sharp dips in the far East, platinum was tightly rangebound between $2160 and $2180, ending in the middle at $2170/oz., down $3. For the week, platinum was up 2%.
Silver also bottomed in Hong Kong, pushed higher until the second hour of NYMEX trading, when it fell steeply into the noon hour, but then recovered and forged a nicely positive afternoon, closing at $18.19/oz., up 23 cents. For the week, silver rose 7.4%.
It was a strong finish to the week for all of the precious metals, as they headed into the holidays with an uptrend interrupted by only one day of profit taking.
Support was added yesterday by the usual suspects, as oil rebounded from Thursday and the dollar fell again, but the action was muted as the trading crowd thinned out and as few participants were willing to add substantial positions to logbooks at this juncture, wrote Kitco's Jon Nadler.
As gold climbs, while most shares in the companies who mine the stuff continue to languish, many investors are wondering why. There's probably no simple answer, but Bill Murphy, of LemetropoleCafe.com, hazards a guess:
At times like this, Murphy writes, when The Gold Cartel is going all out, it is critical to keep the big picture in focus. Gold is on pace to finish the year up again. This will make it 8 years in a row ... and still Planet Wall Street pays it scant attention and only when it has to. The likely upside potential for gold and silver is staggering ... as future demand for both will probably go off the charts, while mine supply is declining and available central bank gold supply dries up (already it seems the ECB banks are now inclined to keep most of what they have left).
Yet, while gold will rise for the 8th year in a row, the shares of most of the gold/silver companies have been brutalized for the last couple of years, and gone in a complete tailspin vis-a-vis the bullion prices. It is a strange phenomenon which is somewhat difficult to explain. I attribute most of it to the market analysts. VERY FEW are bullish ... most are neutral to bearish at these prices. FEW out there are telling Joe and Jane investor to buy, which means there is little demand ... with all rallies sold before the coming price plunge.
As a result, many share prices of the quality junior/exploration companies are at bargain basement prices. They present an extraordinary opportunity for investors with cash to put in play. At this point I have no idea when this demoralized sector will spring to life, except to say it ought to be sooner rather than later.
Currencies and Economic News
In the currency market, the dollar eased slightly against the euro. Late Friday, the euro was trading at $1.5763 vs. $1.5727 on Thursday.
Trade was relatively quiet on Friday, as both U.K. and U.S. dealers prepared for a long holiday weekend, wrote currency analysts at Action Economics.
This said, the dollar slipped through the N.Y. session, weighed down by still strong oil prices, a slumping stock market, and general concerns over the economic outlook, they added.
In the day's only hard number, the National Association of Realtors reported that resales of U.S. houses and condos fell 1% to a seasonally adjusted annualized rate of 4.89 million from 4.94 million in March. Bad enough, but in today's coulda-been-worse environment, it nearly passed for good since it beat economists' expectations for a drop to 4.83 million.
Poor home sales and inventory data continued to weigh on the greenback as they underscore that however shallow this contraction may be, the U.S. is now in its 27th month of the rout in housing, with another possible six to twelve to go, Nadler wrote.
In the energy market Thursday, crude for July delivery moved higher after the one-day pullback, closing at $132.19/barrel, up $1.38. July reformulated gasoline gained back 6 cents, to $3.396/gallon.
As we head into the Memorial Day weekend, Tom Kloza, chief oil analyst at the Oil Price Information Service, toted up the cost: It looks as though we'll pay about $1.5 billion to $1.6 billion each day during the four-day Memorial Day weekend, and that adds up to $6 billion to $6.4 billion in U.S. motor fuel expense, he said. That compares with about $2 billion for the total Memorial Day weekend six years ago.
With consumers paying about $1 billion more each day for gasoline than they did six years ago, Kloza said, You really wonder how much the U.S. consumer can take. And he added that the more insidious increases are in the diesel segment ... A back-of-the-envelope extrapolation would put diesel and heating-oil costs at about $807 million per day currently vs. about $217 million six years ago.
Net result: We are seeing numerous bankruptcies among small and mid-sized trucking firms with more to come, Kloza forecast grimly.
The base metals were mostly in the black on Friday. Copper bottomed out at $3.72 in the pre-dawn hours, but rallied straight through from there to finish at its intraday high of $3.8099/lb., up 6 cents. Nickel finally found some buyers as it dipped below $10.25 and it pushed back over the $11 mark and held there, barely, at $11.0011/lb., up 42 cents. Zinc had a rollercoaster chart but with an up bias to close at $0.977/lb., up nearly 2 3/4 cents. Aluminum was higher for most of the day to end at $1.3458/lb., up a penny and a half, while lead fell below 90 cents on several occasions before scratching back to $0.9027/lb., down more than a penny.
Copper advanced on renewed optimism about the demand profile, long-term supply concerns, and a sinking dollar that makes it cheaper for holders of other currencies.
The market tried to make new lows, but it seems like we are getting some profit-taking and some modest support at the bottom, said Steve Platt, futures analyst with Archer Financial Services in Chicago. We could be due for a little bit of a bounce after absorbing some of the negative news over the past week.
Copper has to be a buy here, Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey, stated firmly.
Aluminum was strong, even after worries raised by rising inventories, up more than 10% this month.
But analysts reasoned that prices should be supported by escalating energy costs, since electricity accounts for one-third of the cost of smelting aluminum. And an increasingly strained power grid in China was seen as capping future growth in aluminum output in the world's biggest producer and consumer.
And in company news, the Sydney Morning Herald reported that, BHP Billiton does not foresee any 'insurmountable' operating constraints as it works to ramp up its new $US2.2 billion (A$2.3 billion) Ravensthorpe nickel laterite mine to full production by the first half of 2010.
After the official opening of the West Australian mine [on Thursday], BHP's stainless steel materials president, Jimmy Wilson, told media it was running at about 35 per cent of its full production capacity of 50,000 tonnes a year.
The technically challenging project - expected to cost $US1.05 billion when it was approved in 2004 - had been emblematic of the cost blow-outs and delays the resources industry has suffered during boom times.
That's what's happening ... have a wonderful holiday weekend, remember the meaning of the day, and see you on Wednesday!
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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