Good morning ...
Gold had about as blah a day as it could have on Monday, rising early in the Hong Kong session, then falling off to just after London opened, then trading inside a very tight $5 range for the rest of the day, finishing at $950.70/oz., down $3.90. Overnight, gold is little changed.
Platinum fell off $40 during Hong Kong trading, then regained half the lost ground before going flat from late morning through the Globex, and ending at $1242, down $21. Overnight, platinum has drifted lower.
Silver plunged through Hong Kong, falling below the $15 mark, then it too went rangebound through the day, tight between $14.80 and $15, closing at $14.89, down 38 cents. Overnight, silver is edging higher.
The precious metals opened the week with a very desultory day, in which early losses were locked in for all of them by sideways trading. Overall the results weren't that bad, however, since the usual suspects provided no support, with the dollar continuing to rally and oil slipping lower.
The metal traded lower as the dollar staged a strong rally, wrote James Moore, an analyst at TheBullionDesk.com. Given overbought chart indicators and the slight decline in SPDR holdings Friday, gold will continue to run into overhead resistance above the $980 level.
GLD holdings dropped just over 11,000 ounces on Friday.
Some analysts are predicting a slow slide for gold, near-term.
Gold prices could eventually fall toward $930 before rebounding back toward last week's high at $990, wrote Tom Pawlicki, an analyst at MF Global in Chicago. Silver prices could fall toward $14.60 support before rebounding back toward $16.
Pawlicki lowered his recommended buy price for gold to $930 an ounce from $950, but maintained a target of $1,033. Silver may appear attractive from the long side upon bullish action near the $14.60 level, he wrote.
One manager looking long term is Jean-Marie Eveillard, the senior investment adviser for the $7 billion First Eagle Global Fund, who says the fund is 10-12% invested in gold and gold-mining securities.
It's insurance to protect against the fact that current policies by the American government and the Fed are potentially wildly inflationary, Eveillard says, rather sensibly.
Currencies and Economic News
In the currency market, the dollar gained further ground on the euro. Late Monday, the euro was trading at $1.3883 vs. $1.3968 on Friday.
The dollar has probably seen its worst levels for a while, and now we can expect a sideways-to-higher trend over the next month, said Ron Simpson, currency strategist at Action Economics.
With no big numbers due out until tomorrow, traders focused on other factors.
The smaller-than-expected job losses reported on Friday helped reinforce the idea among investors that the U.S. economy will be the first in, first out of recession, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange.
However, Gallo added that he's skeptical of that scenario, while conceding that the dollar could continue to rise in the near term.
In addition, the euro took a hit after Standard & Poor's downgraded Ireland's long-term sovereign credit rating to AA from AA+. Ireland's credit outlook remains negative, S&P said, as the country is burdened by the fiscal costs of supporting its crippled banking system.
Ireland is in an especially difficult place, said analysts at Brown Brothers Harriman. The cost of the financial bailout, coupled with the loss of tax revenue due to the severe contraction and counter-cyclical spending, is proving to be overwhelming.
And across the Pacific, Japan's current-account surplus plunged in April, coming in more than 20% below projections. Exports have fallen 40.6% on the year, while imports are down 37.8%.
In the energy market on Monday, crude for July delivery slipped slightly lower, closing at $68.09/barrel, down 35 cents. July reformulated gasoline fell a penny and a half, to $1.94/gallon.
Market watchers continue to line up almost unanimously behind the notion that the recent rally in crude is overdone.
From a fundamental point of view, the outlook remains subdued, said analysts at Commerzbank. Oil demand remains weak, while supply is being expanded at present, leading to rising oil inventories.
Zachary Oxman, managing director at TrendMax Futures, concurred, saying that, I think it's time for a bit of a respite for both crude and stocks ... Gas prices at the pump are becoming more of an issue again and if we see the averages move into the low $3 per gallon, I think that you will continue to see big supply builds as people stay home and drive less.
And Credit Suisse analysts opined that the oil market on Friday was torn between the negative effects of a stronger U.S. dollar and the positive effects from better-than-expected U.S. non-farm payrolls.
They further wrote that, The strong influence of currency movements on the oil prices is ... a sign that the market is currently dominated by speculation. Oil prices have moved ahead of fundamentals, but further price declines are possible as actual demand remains weak.
The base metals were mostly lower on Monday. Copper declined through the pre-dawn hours, perked up in New York but failed to escape the red, finishing at $2.2349/lb., down a penny and a half. Nickel followed copper, though it had a sharper late-day selloff, ending at $6.3722/lb., down 15 1/2 cents. Zinc was weak, closing at $0.6852/lb., down more than a penny and a half. Aluminum had a good day, adding more than 2 cents, to $0.7194/lb., while lead was lower, dropping more than a penny, to $0.7437/lb.
Copper led the industrial metals generally lower, although aluminum was an exception, as traders reacted primarily to the dollar's rally.
However, some analysts believe that decent underlying support kept copper from falling even farther.
Copper's downside was limited with investors choosing to focus on the positives -- most notably the surprisingly strong U.S. unemployment data on Friday and strong Chinese demand signals, said Michael Gross, a futures analyst with Optionsellers.com in Tampa, Florida..
Gross added that, You may be getting a little pressure from the dollar, but a lot of traders seem to be looking at the glass as more half full right now.
Stockpiles prolonged their freefall. Copper inventories monitored by the LME dropped by another 2,125 metric tons yesterday, to 297,050 tons.
In company news, OZ Minerals, the Australian mining company seeking to refinance A$1.1 billion ($865 million) of debt, said two unsolicited recapitalization proposals-from institutions including RFC Group and Royal Bank of Canada--were inferior to an offer from China's Minmetals Group..
In the Minmetals transaction, we have a proposal to resolve OZ Minerals' refinancing issues that is both highly certain and offers value to our shareholders, Chairman Barry Cusack wrote in a statement. The alternatives don't offer a complete solution, Cusack said.
That's what's happening ... see you tomorrow!
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