Good morning …

Precious Metals

Gold traded within a $4 range well into New York on Thursday, hitting a peak of $940 once in Hong Kong and again at mid-morning, but then, as it has of late, sold off through the rest of the Comex, before taking back a little lost ground on the Globex to close at $932.30/oz., down $6.50. Overnight, gold has been flat.

Platinum was locked in between $1200 and $1210 all day long, ending at the bottom of the range at $1201/oz., down $2. Overnight, platinum has edged higher.

Silver really had nothing to recommend it, reaching its high for the day at $14.38 in late Hong Kong trading, then gliding slowly but surely southward throughout the day and closing at $14.19/oz., down 13 cents. Overnight, silver is trending higher.

It was a day of no sharp moves for the precious metals, albeit with a modest down bias. The usual suspects were mixed, with crude pushing slightly higher but the dollar strengthening.

Even the Hightower Report had little to say, writing that, “The gold market traded on both sides of unchanged today but stayed weaker for most of the afternoon. A better than expected unemployment report did little to support the market today, which is contrary to recent trends, when strong economic data has lent support to equities and precious metals. The equities rallied today, but so did the dollar, and this kept a limit on gold. More talk of potential strike action in South Africa also failed to provide a lift to the market.”

Many analysts are now thinking that gold may have found a floor.

Among them, Russell Browne, strategist at ScotiaMocatta, said that gold “has found support” near $927 an ounce, which marks a 50 percent retracement of its rally from $865 in mid-April to $990 this month. Browne cited Fibonacci analysis. Gold traded as low as $925.80 on June 15, but has generally honored its 100-day moving average, currently at $926.41.

That “100-day moving average near $925 has held firm despite a bearish move in gold from $990 to $927,” said Browne.

Fibonacci analysis, according to Bloomberg, “uses a mathematical formula based on the theory that prices may rise or fall by certain percentages after reaching a high or low. A break of one level indicates an asset may move to the next, while a failure suggests a trend may stall.”

Currencies and Economic News

In the currency market, the dollar rose against the euro. Late Thursday, the euro was trading at $1.3895 vs. $1.3895 on Wednesday.

Among the day’s numbers, the Labor Department reported that continuing jobless claims fell by 148,000 to 6.68 million during the week ended June 6. That’s the lowest level in about a month, and marks the first time continuing claims have fallen since early January. The four-week average of continuing claims rose, however, by 2,250 to 6.75 million.

The decline “convincingly ended the 19-week string of new all-time highs, and may suggest that the more general rate of gain for these figures is diminishing,” said analysts at Action Economics. “This slower rate of climb may signal that the uptrend in the jobless rate may soon slow as well.”

At the same time, in another ‘green shoot,’ the recession is “losing steam” and a slow U.S. recovery should begin by the end of the year, the Conference Board said yesterday as it announced that the index of leading economic indicators rose 1.2% in May, the second straight monthly increase.

“Confidence is building and financial market volatility is abating. Even the housing market appears to be stabilizing,” said the Board’s Ken Goldstein. “If these trends continue, expect a slow recovery beginning before the end of the year … However, employment will take longer to turn around.”

Finally, manufacturing firms in the Philadelphia region reported the best business conditions since September, the Federal Reserve Bank of Philadelphia reported. The Philly Fed index improved to negative 2.2 in June from negative 22.6 in May. Readings below zero indicate contraction.

On the other hand, only 30% of firms said business was improving in June, while 32% said business was still worsening, and 35% reported no change.

Energy

In the energy market on Wednesday, crude for July delivery advanced, closing at $71.37/barrel, up 34 cents. July reformulated gasoline was off fractionally, to $2.0295/gallon.

In general, traders responded to the perceived good economic news out of Washington.

Additionally, China's oil consumption rose in May for the second straight month, raising hopes that oil demand from the world's second-largest consumer is recovering. China consumed 32.23 million metric tons of oil in May, or 7.6 million barrels a day, according to Platts. That's up 6% from the same month a year ago.

“Another green shoot, another rally,” Phil Flynn of Alaron Trading commented sarcastically. “Oil continues to look at the news through bullish-colored glasses.”

Meanwhile, U.S. proved natural-gas reserves have jumped 35% in the past two years to a level that could support the country's consumption for nearly 90 years, according to an industry group, the Colorado-based Potential Gas Committee. Total gas reserves stand at 2,074 trillion cubic feet as of 2008, up from 2006's 1,532 trillion cubic feet.

Base Metals

The base metals recorded very little movement on Thursday. Copper fell steeply from the pre-dawn hours to early New York trading, but abruptly reversed course and surged higher through the rest of the day, finishing where it began, at $2.2504/lb., unchanged. Nickel also rallied off its early lows, pushing into the green to end at $6.7789/lb., up more than 5 cents. Zinc was little changed, dropping just a tenth of a cent, to $0.6942/lb. Aluminum rose slightly, adding a quarter-cent, to $0.7267/lb., while lead was also up about a quarter-cent, at $0.7508/lb.

Copper was dead flat on a day when none of the industrial metals did much, as the economic optimists and pessimists fought to a draw.

Analysts at Barclays Capital clearly caught the market mood when they wrote that, “On the one hand, a brightening macro picture is cause for optimism, while on the other, speculation over a pending slowdown in Chinese demand is cause for concern.” They added, perhaps unnecessarily, that, “Until there is a clear signal, one way or the other, prices will most likely be range-bound.”

But in the end, Barclays sounded a positive note, saying: “For copper in particular, we believe that we will have to see inventories rise before prices come under any significant downside pressure … Even then the downside is likely to be more limited than for some other metals, given keen investor interest and consumer buying.”

Stockpile data support Barclays’ outlook. Copper inventories monitored by the LME fell by 1,575 metric tons yesterday, to 281,600 tons. But canceled warrants -- metal set for delivery -- continued to drop, receding to 17,125 metric tons Wednesday, or just 6% of total warehouse inventories.

“While copper is widely perceived to have the strongest fundamentals of any of the base metals on a one- to two-year view, in the short term, we have concerns that the market could face a significant pullback,” Macquarie Bank Group analysts wrote. “The key concern centers around the scale of Chinese buying.”

And that’s unpredictable. While the massive stimulus spending program undertaken by the country will keep China growing at a respectable clip, a rapid rebound is unlikely, the World Bank said.

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


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