Good morning ...
Gold was flat until the second hour of NYMEX trading, when it dropped off about $15, but afterward it recovered to regain most of the lost ground and finish at $885.30/oz., down $4.10. Overnight, gold has edged higher.
Platinum had a desultory day, trading rangebound between $2000 and $2010 before settling at $2003/oz., down $9. Overnight, platinum is sharply higher.
Silver bucked the trend, declining from the NYMEX open to the close but rallying through the Globex to end at $16.74/oz., up 9 cents. Overnight, silver is trending higher.
Another pretty blah day for the precious metals, which can't seem to gain any traction in current circumstances. Yesterday the usual suspects were mixed, with oil and the dollar both declining.
The dividing line yesterday was the Fed decision to hold rates steady, as expected, with gold falling prior to the decision and rising thereafter.
The Hightower Report summed up the action thusly: After a morning follow through washout the gold market managed to recover just ahead of mid session and surprisingly the market extended the recovery into and through the FOMC meeting results. However, the Dollar was weaker in the wake of the FOMC statement and that seemed to give the gold market the lift many traders were expecting early in the trading session in the wake of the scheduled US economic data. With the Dollar weakening and oil prices recovering slightly the outside environment for gold was gradually improved from the morning trade. However, with the US stock market remaining strong it is possible that some potential gold buyers decided to move toward the equity market instead.
Responding to Fed Day, Peter Spina, of GoldSeek.com commented that, The Fed knows they are stuck in a corner. They have strong inflationary pressures to contend with and a dangerously fragile economy.
Despite some recent rhetoric from the Fed, they have decided to sacrifice the dollar going forward and this will be the key driving force in the gold price in the coming months, years, Spina wrote.
Today's announcement confirms this opinion and gold will be a clear winner from this policy, he concluded.
Currencies and Economic News
In the currency market, the dollar slipped against the euro. Late Wednesday, the euro was trading at $1.5683 vs. $1.558 on Tuesday.
In holding interest rates steady, to no one's surprise, the FOMC said that although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.
That wasn't enough for many analysts. People were looking for a more hawkish tone, said Don Alexander, director of fixed income at Citigroup Global Wealth Management. Until the end of the year, it's pretty much steady as she goes with [interest] rates.
But some think that the jury is still out.
The Federal Reserve has time on their side at this point because the next fed meetings aren't until August, said Kathy Lien, chief strategist at DailyFX.com.
There's a lot of data that will be released from now until then, she added. Time is on their side, which is why rate hike expectations could change dramatically over the next few weeks.
The euro also got support from comments by European Central Bank President Jean-Claude Trichet.
Trichet told a European Parliament committee meeting that the threat of a wage-price spiral is acute and reiterated that his opinion following the ECB's June meeting -- in which he stated that the bank's 4% key interest rate could see a small increase -- hadn't changed.
In the energy market Tuesday, crude for August delivery came well off its intraday lows but still retreated, closing at $134.55/barrel, down $2.45. July reformulated gasoline fell 6.9 cents, to $3.3941/gallon.
U.S. crude supplies unexpectedly climbed, by 800,000 barrels, for the week ended June 20, according to the Energy Information Administration's weekly inventory report. It was the first reported rise since early May.
Gasoline supplies fell 100,000 barrels, according to the EIA, while distillate stocks were up 2.8 million barrels. Refinery utilization dropped to 88.6% of capacity, from 89.3% a week earlier.
However, The most pertinent bit of information in today's report is the sharp decline in U.S. petroleum demand, wrote Chris Lafakis, of Moody's Economy.com.
Total implied petroleum demand lodged its weakest weekly reading since January 2007, Lafakis said. It is now 3.2% lower than it was a year ago, and is consistent with summer 2003 levels of demand.
Regarding gasoline, Lafakis commented that, Exceptionally weak demand has depressed refiner operating margins and discouraged them from operating at historical levels ... Refinery utilization should be well over 90% at this time of year.
The base metals were mixed on Wednesday. Copper peaked in the first hour of New York trading, fell off sharply, but then rallied through the rest of the day to finish at $3.8682/lb., up 2 2/3 cents. Nickel skittered through a day littered with sharp ups and downs, eventually pushing into the black to close at $9.7968/lb., up 9 3/4 cents. Zinc sagged through most of the day, ending at $0.835/lb., down a penny and a quarter. Aluminum declined during the morning hours but rallied back to $1.3655/lb., down three-quarters of a cent, while lead dropped a penny and a third, to $0.7935/lb.
Analysts said copper followed crude lower, but didn't fall overly much, leading Ralph Preston, futures analyst with HeritageWestFutures.com to comment that the market looks to be building a base above the $3.75 to $3.80 level. Or, in other words, within striking distance of its alltime high.
The supply situation remains supportive, as well. Inventories monitored by the LME fell 525 metric tons, to 122,625 tons, yesterday.
Meanwhile lead, already the worst performer among the industrial metals this year, continued to crash as Ivernia prepared to re-open its Magellan mine in Australia, and likely add to burgeoning stockpiles. Magellan has been closed since April 2007, on environmental considerations.
Lead speculators have probably closed their positions and are now going short, in the opinion of RBS Sempra Metals analyst John Kemp.
This is the washout of some fairly hefty speculative plays in lead in 2007 and early 2008, Kemp said. There has been substantial investor interest in the market, one or more players were holding substantial stocks back.
Some investors may be using lead to hedge against bets on higher aluminum and copper prices, Kemp said, noting that, We're relatively bullish on copper and aluminum. If there's a global downturn, a short position in lead may reduce the volatility.
That's what's happening ... see you tomorrow!
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Garson Gold Corp. owns a 100% interest in the New Britannia Mine (NBM) and mill located in Snow Lake, Manitoba. The NBM assets include the New Britannia Mine, with associated plant, infrastructure and equipment including a fully permitted 2,150 tonne per day modern mill and tailings facility. The NBM property consists of approximately 3,900 hectares of mineral claims and leases containing measured, indicated and inferred resources at the main mine and more than one satellite deposit, as well as newly discovered mineralization, many known gold showings and a very high potential for further discoveries
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