Good morning ...

Precious Metals

Gold made no sudden moves on Friday, but just moved steadily higher from the London open straight through the Globex, pushing back over $900 late in the day and finishing at $902.20/oz., up $24.20. For the week, gold gained 1.8%.

Platinum was strongly higher, peaking at $2090 near the noon hour before easing in late trading to end at $2069/oz., up $63. For the week, platinum tacked on 3.1%.

Silver was near flat until mid-morning, but then it caught fire and pushed upward for the rest of the day, closing just off its intraday high at $17.50/oz., up 35 cents for the second straight day. For the week, silver added 3.7%.

It was of course an expectedly big day for the precious metals, what with skyrocketing oil prices, a cratering stock market, and a sledgehammer attack on the dollar. The news was so bad fanciers might have been hoping for even bigger moves, but couldn't have been very dissatisfied with what they got.

Gold's gain was the biggest in six months, and it closed at its highest level since May 28. At least for now, the metals' strong underlying fundamentals seem to have merged with the kinds of unforeseen shocks that can ignite a mania.

The prospects for an even-further slowing economy are being ignored as gold's traditional flight-to-quality status is affirmed.

Mark O'Byrne, of Gold and Silver Investments Ltd., summed up the situation by writing that the surprisingly bad jobs data has reversed recent short-term trends in markets ... Risk aversion was witnessed immediately after the report, with the dollar and international equity markets selling off and gold immediately rallying strongly.

Is the perfect storm brewing? That's unknowable, but Peter Spina, an analyst at is a believer that the elements of the next big upmove may be coming together.

Conditions remain excellent for gold to rally with further fading of this fantasy that all is OK -- monetary wise, Spina wrote.

When you look at all the factors going against the value of the U.S. dollar, there is a list and it is a lot longer than what the dollar has going for it, he added.

Going forward, Spina concluded that a low- to mid-$900s gold price looks favorable in the short term [and] $850-$875 is gold's first strong support floor on pullbacks.

Currencies and Economic News

In the currency market, the dollar was shoved down mercilessly against the euro. Late Friday, the euro was trading at $1.5777 vs. $1.5568 on Thursday.

The stunner of the day was administered by the report from the Labor Department showing that the unemployment rate in May rose to 5.5%, the highest since October 2004. The 0.5% jump was the steepest in seasonally adjusted unemployment in 33 1/2 years, and far exceeded economists' projections for rise to just 5.1%.

Nonfarm payrolls fell by 49,000 last month. It was the fifth consecutive decline and was in line with expectations. Of course, even that negative number may be optimistic, as the Bureau of Labor Statistics net birth/death adjustment added 217,000 phantom jobs to May's data.

Those trying desperately to spin the data, such as commentators on CNBC, argued that the huge jump in unemployment was seasonal, and due to teenagers and students entering the job market for summer work. But realists pointed out that the same thing happens every year, and that this spike was singularly big.

The implications are clear.

As Sal Guatieri, an economist at BMO Capital Markets, wrote: The U.S. is in recession. Job losses, along with a plethora of other headwinds, should ensure that the rebate boost to spending is short-lived, and that the Fed refrains from tightening in '08.


In the energy market Thursday, crude for July delivery headed for the moon, rocketing heavenward to close at a record $138.54/barrel, up $10.75. July reformulated gasoline shot 21.8 cents higher, to $3.548/gallon, marking a two-day gain of nearly 11%.

Traders cited the cratering dollar, combined with international tensions stoked by rumors that Israel might be planning an attack on Iran.

Kevin Kerr, editor of Global Resources Trader said that fear by far is the biggest driver right now ... Shorts were certain earlier in the week that oil would freefall and with [Thursday's] rally and then [yesterday's] event, even hardened traders are left shaking their heads.

That flame of fear was fanned by Israel's Transport Minister Shaul Mofaz, a close adviser to Prime Minister Ehud Olmert, who was quoted in a local newspaper as saying that if Iran continues with its program for developing nuclear weapons, an Israeli attack on that country's nuclear sites is unavoidable.

Morgan Stanley analysts wrote that they expect to see a short-term spike in oil prices, with crude-oil shipping patterns suggesting that prices for West Texas Intermediate crude will reach $150 a barrel by July 4.

Distribution patterns of crude oil out of the Middle East are mimicking those of last year as we exited 3Q07, when we predicted an oil price spike into year-end based on our projections of sharp inventory draws in the Atlantic basin, the analysts wrote. That same pattern is now again upon us, and we are making an identical call, only this time we are starting from a much tighter Atlantic Basin inventory backdrop.

Base Metals

The base metals were mostly higher on Friday. Copper rose during the pre-dawn hours, peaking at $3.73 near the New York open, then slid for most of the rest of the day, finishing at $3.6965/lb., up 9 cents. Nickel plunged from the pre-dawn hours straight through the morning, only coming off its lows late to close at $9.939/lb., down more than 32 cents. Zinc was up and down all day with a slight upside bias, ending at $0.8818/lb., up three-quarters of a cent. Aluminum also pushed higher, adding a penny and two-thirds, to $1.3166/lb., up a penny and a quarter, while lead inched higher, adding a bit less than a penny, to $0.8769/lb.

It was a surprisingly good day for the industrial metals, modestly up though it may have been, considering that the economic numbers point definitively to recession and the decrease in demand that that will bring with it.

However, the upside for the metals is that the plunging dollar makes them cheaper for holders of other currencies, and that provoked a bit of buying in the markets.

On the supply side, copper inventories monitored by the LME were depleted for a change, dropping by 950 metric tons, to 122,550 tons, on Friday That came after they had risen by about 10% since the start of May.

Copper inventories monitored by the Shanghai Futures Exchange were also down, falling 13% to 38,829 metric tons in the week ended Thursday.

From a technical viewpoint, chartists say that copper holding at the key support level of $3.50 is a good sign, and they expect a test of the next level of resistance, $3.75.

And in the latest of a spate of labor problems, BHP Billiton reported that operations at its smallest copper mine in Chile, Cerro Colorado, had been hit by a truckers' strike. Its larger mines have been unaffected as yet, Billiton said.

That's what's happening ... have a great weekend and see you Tuesday!


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