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Precious Metals

Gold rose in Hong Kong, leveled off in London, and traded rangebound through the NYMEX and Globex sessions on Friday, although it held above $900, finishing at $901.30/oz., up $3.30. For the week, gold added 3.5%.

Platinum also traded flat for most of the day, ending at $2051/oz., up $10. For the week, platinum gained 1%.

Silver rose to $17.60 at the New York open, but then declined steadily through the day, closing at $17.32/oz., unchanged. For the week, silver shot up 5%.

It was, perhaps, another mildly disappointing day for the precious metals, as they showed only a little life despite the support offered by a sinking dollar, rising oil, and weakness in the equities markets.

Peter Spina, an analyst at, concurs, writing that the price is not reacting as strong as one would expect as some overhead resistance around $900 is keeping a bit of a lid on an extended rally.

Julian Phillips of summarized the market thusly: It was New York and COMEX that took the gold price back over $900, so long and short-term investors are behind gold's price rise today. With their eyes on the $ and oil they took it higher. Despite the oil producers conference this Sunday and despite the removal of subsidies on oil in China, the oil price has risen $3. On top of that the $ itself became anemic and fell back over $1.56 sending gold up as it fell.

If good news for oil doesn't push it down what will? It seems the market doesn't want talk, it wants action! Until it gets it, the prospects are good for gold and silver.

$900 is obviously a resistance point for many buyers, as gold has been toying with the mark for a while now, with no sign it's going to be decisively taken out. But some think the time may be near, and are raising their buy-in levels.

I bought some last week and would buy again under $880, said Adrian Day, president of Adrian Day's Asset Management.

However, a third-quarter rally in gold may be limited by a relatively high level of net speculative length, wrote analysts at Deutsche Bank. Speculative long positions in Comex gold have doubled in the past year, according to the Commodity Futures Trading Commission.

Currencies and Economic News

In the currency market, the dollar sank against the euro. Late Friday, the euro was trading at $1.5622 vs. $1.5503 on Thursday.

The buck sagged as the banking sector was swamped with negative sentiment about earnings, driving down stocks and stoking worry that the Fed will be unable to raise interest rates anytime soon.

The situation is so bad that, as Dow Jones MarketWatch wrote, Analysts at Merrill Lynch on Friday said investors appear to be capitulating with regards to banks stocks, frustrated into selling them down to levels below their real values as the credit crisis continues to wreck balance sheets. The analysts also slashed their earnings outlooks for several large regional banks and said they will continue boost loss reserves and cut dividends.

In some instances, banks' book values now exceed their market caps.

For its part, the euro was buoyed by a report from Germany's statistical agency showing that producer price inflation rose 1% in May, yielding 6% annual growth, stronger than expectations.

That data will help cement the view that the European Central Bank almost certainly will move to raise rates when policymakers meet July 3, wrote economists at Lloyds TSB.


In the energy market Friday, crude for July delivery rebounded, closing at $134.62/barrel on its final day as the front-month contract, up $2.69. July reformulated gasoline rose 8.7 cents, to $3.4392/gallon.

A softer dollar along with reports that Israel's air force conducted a dry run of an attack on Iran nuclear facilities earlier in June have supported prices, said analysts at Action Economics

Zachary Oxman, of Wisdom Financial, believes the bullish trend is here to stay, noting that yesterday you could see a bit of new buying interest coming in on top of some short covering as we continue our extension toward $150, which I think we'll see inside of one month.

Meanwhile, traders were awaiting the results of this weekend's meeting in Jeddah, Saudi Arabia, which brings together members of OPEC and representatives from the world's oil-consuming countries.

In anticipation, Edward Meir of MF Global said that, We would be very surprised to see the Saudis send participants home without sending the markets a clear signal that more crude is on the way.

Base Metals

The base metals were mostly in the black on Friday. Copper started up in the pre-dawn hours and kept pushing higher during most of the trading day, finishing barely off its intraday high at $3.8965/lb., up 5 cents. Nickel had some sharp ups and downs before closing in positive territory at $10.0939/lb., up 8 3/4 cents. Zinc had a long series of ups and downs before ending where it started at $0.8584/lb., unchanged. Aluminum shot higher during the pre-dawn hours then traded sideways, eventually adding a penny and two-thirds, at $1.3957/lb., while lead finally had a good day, advancing 2 3/4 cents, to $0.8323/lb.

Copper pushed higher on supply concerns and a declining dollar that makes the metal cheaper for holders of foreign currencies.

Inventories monitored by the LME were down 225 metric tons, to 124,000 tons, yesterday. Stockpiles monitored by the Shanghai Futures Exchange fell by 575 tons, to 33,417 tons, in the week ended Thursday.

The advance came despite reports of the end of strike action at Southern Copper's Cuajone mine in Moquegua province, Peru.

Edward Meir, of MF Global, sees conflicting tendencies. Technically, Meir said, look for two days of closes above $8,350 a ton to set up an advance to the old highs, but fundamentals argue otherwise, and suggest we are quite overextended here. Yesterday's close was $8,388/ton.

Aluminum vaulted to a three-month high on supply concerns. Alcoa said on Thursday it would temporarily idle half the production at its Rockdale, Texas, smelter because of local power supply problems.

Three of the plant's six operating potlines - which produce about 120,000 tons per year - have been shut down as a result of the electricity supply interruptions.

The Alcoa news has reminded the market of the highly dependent nature of aluminium supply on both the price and supply of power, said David Thurtell, analyst at BNP Paribas.

Some are unconvinced by the rally. We argue that the recent strength in aluminum and copper is unjustified by fundamentals and that investors should not get carried away (or out) and buy these moves, wrote analyst John Reade. There will be tactical opportunities to buy both metals this year, but not here.

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


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