Good morning …

Precious Metals

Gold dipped as low as $963 at the open of New York trading on Thursday, but that proved to be the ignition point for lift-off, as the metal soared through the Comex day before leveling off through the Globex to finish at $980.40/oz., up $17.80. Overnight, gold has slipped lower.

Platinum took flight at the same point, and posted a stellar day, nearly reaching the $1300 mark before it flattened to end at $1291, up $56. Overnight, platinum has fallen off.

Silver wrapped up the trifecta in fine style, as it fell nearly to $15.00 just before the Comex open, then rocketed almost to $15.90 and cruised to a close at $15.88, up 57 cents. Overnight, silver is sharply lower.

The precious metals sloughed off the whipping they took on Wednesday, and yesterday recaptured virtually all of the lost ground, as crude rallied and the dollar declined. Actually, as the buck wasn’t off all that much, aficionados had to be very pleased with the outcome of the day’s trading.

In words we haven’t heard for a while, “Gold is rising on demand for a safe harbor,” said Philip Gotthelf, the president of Equidex Brokerage Group in Closter, New Jersey. “We still have considerable uncertainty about the dollar.”

The resumption of the dollar’s decline was clearly critical. In May, the dollar fell 6.4% against a basket of major currencies, the biggest drop in 24 years. And yesterday’s drop ignited a general commodities rally, with the Reuters/Jefferies CRB Index of 19 raw materials rising 2.1%.

The market mood was decidedly upbeat, as evidenced by comments like the one from James Moore, of TheBullionDesk.com, who said that, “Given background fears of inflation and fiat currency devaluation, the metal will continue to be viewed favorably by investors … We doubt it will be long before gold tests the high from February.”

There was no change in GLD, the major gold-backed ETF, after it sold off sharply the previous session. On Wednesday, GLD’s holdings totaled 1,132.5 metric tons (36.4 million ounces), down 1.53 tons (49,190 ounces) from Tuesday.

The day’s star performer was platinum, up 4 1/2%. It’s been a very good year for the other silver metal so far, as rightly or wrongly, traders have been figuring the auto industry may have bottomed. Platinum is up 37%, while holdings in ETF Securities Ltd.’s exchange-traded fund backed by the metal have jumped 74% in 2009.

Currencies and Economic News

In the currency market, the dollar dipped a bit against the euro. Late Thursday, the euro was trading at $1.4171 vs. $1.4138 on Wednesday.

According to Marketwatch.com, “News from Europe, a lack of major changes from policymakers in England and Canada, and an inkling of positive data out of the U.S. added up to more investor confidence about the possibility of a global economic recovery, reducing the desire for the relative safety of the U.S. currency.”

Or, as Marc Chandler of Brown Brothers Harriman pronounced: “Now that the world economy has been taken away from the edge of the abyss, people don't need a safe haven.”

The euro was boosted as the European Central Bank left its key lending rate at 1%, as expected, with President Jean-Claude Trichet saying he finds that “appropriate.” Analysts said he doesn’t appear to see the need for more monetary stimulus.

Trichet said the ECB will commence covered-bond purchases next month. They are expected to total €60 billion ($84.9 billion), matching the level he outlined last month.

Back home, the day’s number was the report from the Labor Department, saying that first-time applications for jobless benefits fell 4,000 to 621,000 in the week ended May 30. Continuing claims also decreased, by 15,000, to 6.74 million in the week ended May 23. The data were slightly better than economists’ expectations.

“The downshift in claims continues but progress is painfully slow and claims at their current level are still consistent with massive declines in payrolls,” wrote Ian Shepherdson, of High Frequency Economics. “Feeble green shoots don't stop companies laying off staff, still less actually starting to hire again.”

Energy

In the energy market on Thursday, crude for July delivery shot higher, closing at $69.15/barrel, up $3.03. July reformulated gasoline rose 7.19 cents, edging ever closer to the $2 mark, at $1.9735/gallon.

Traders reacted positively to the claims report, although the real jobless number comes today with the latest unemployment figures.

In addition, traders took a cue from Goldman Sachs, which increased its 2009 oil price forecast to $85 a barrel, up from $65/barrel previously. Goldman analysts wrote that the recent rally in crude prices is likely to be the first stage in a rally for oil prices that they anticipate will coincide with an economic recovery.

Looking shorter term, analysts at Commerzbank said that a further price correction is likely soon, perhaps even to a range of $50 to $55 a barrel. “We think that the recent optimism about an imminent rise in oil demand was overdone and that oil inventories remain at a very high level,” they said.

Meanwhile, many continue to search for the break point, where fundamentals will kick in. “The market probably has a little bit more left in it to mount a push to $72 resistance before more substantial setback sets in,” wrote Edward Meir, of MF Global.

Base Metals

The base metals were all flying high on Thursday. Copper was flat until just after the New York open, but then took off and rose nearly unbroken straight through the day to finish barely off its intraday highs at $2.2733/lb., up nearly 9 cents. Nickel followed copper closely, nearly ending its intraday high at $6.5726/lb., up 33 cents. Zinc’s path, too, was similar, as it closed at $0.7059/lb., up almost 3 cents. Aluminum went vertical in the afternoon, adding 5 1/2 cents, to $0.6464/lb., while lead completed the comeback day by tacking on nearly 3 1/4 cents, to $0.748/lb.

The rout suffered by the base metals on Wednesday was completely turned around a day later, as copper led the sector in a retracement that erased all of their losses, and then some.

“Copper was driven higher by outside market support -- renewed dollar weakness, rally in crude oil futures, and a quietly higher stock market,” said Rob Kurzatkowski, futures analyst with OptionsXpress in Chicago.

Analysts also cited the encouraging jobless benefits claims report, which served to rekindle some optimism about the economy. “We are continuing to see the labor market show some signs of life,” Kurzatkowski said. “[Wednesday’s] ADP number was worse than expected and more importantly there was a downward revision to last month's figure, but then we saw some sense of normalcy in [Thursday’s] initial claims numbers coming in pretty much in line with expectations, so that kind of eased some of the worries.”

Stockpile data also did their part to provide support. Copper inventories monitored by the LME fell by another 3,325 metric tons yesterday, to 303,200 tons.

But Freeport-McMoRan provided a little rain for the parade. The company said it sees no sign of recovery in the developed world that would lead to a restart of its idled U.S. copper operations, despite a pick-up in Chinese buying.

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


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