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Precious Metals

Gold was dead flat until an hour before New York opened on Thursday, at which point it commenced a daylong rally that pushed it higher, albeit not very dramatically, as it plodded to a finish at $938.90/oz., up $6.80. Overnight, gold is trending higher.

Platinum finally constructed a solid day, adding $20 during the Comex session and ending at $1185/oz., up $27. Overnight, platinum is pushing higher.

Silver buyers kept appearing after every selling spell, slowly inching the metal higher, and it closed just off its intraday highs at $13.99/oz., up 16 cents. Overnight, silver is sharply.

A strong day for platinum, though hardly a banner one for the other precious metals. Nevertheless, gold and silver both finished comfortably in the green.

The day’s disappointment had to be that gold and silver didn’t do even better, considering that the usual suspects were leaning in their favor, with the dollar declining against the euro and oil sharply higher.

Analysts also suggested that there was some speculation that record low interest rates—left in place by the Federal Reserve on Wednesday—will spark some demand for the metal as an alternative investment. The Fed said that rates are likely to remain at “exceptionally low levels” for an “extended period.”

Kitco’s Jon Nadler said of the Fed’s decision: “While the Fed's take on the US economic situation reveals a central bank that is encouraged by the signals being broadcast from various sectors, it also shows that when it comes to hiking interest rates in order to avoid deleterious inflationary effects from recent liquidity injections, the time is...well, it is not now.”

How far will inflation be allowed to run, and how far the dollar allowed to fall? These are key questions.

In another comment supporting a higher gold price, Commerzbank analysts wrote that, “It is likely that China will buy further gold over the coming months and years, as, in contrast to other countries, gold still accounts for only a small proportion of China's entire foreign exchange reserves.”

Many in that country agree. China should buy gold rather than U.S. debt because the Fed’s policies make dollar depreciation inevitable, Li Lianzhong, a senior Communist Party official, told a conference in Beijing yesterday.

Currencies and Economic News

In the currency market, the dollar lost ground to the euro. Late Thursday, the euro was trading at $1.3991 vs. $1.3926 on Wednesday.

“Equity and commodity markets advanced, encouraging rotation out of the greenback,” said analysts at Action Economics.

Also noted was that, “The dollar has been driven over the last two days by central bank activity. One is the Swiss National Bank, which appears to be continuing its buying of dollars,” said Meg Browne, a currency analyst at Brown Brothers Harriman.

The Swiss National Bank is publicly committed to stemming any haven-related appreciation in the franc, but as to what it may be doing, said that it doesn't comment on intervention rumors.

However, the franc’s strength has proven “increasingly self-sustaining,” says Ashraf Laidi, chief market strategist at CMC Markets in New York. It has attracted support because of “broadening risk aversion, short-lived dollar strength and emerging doubts” about euro-zone banks,” Laidi said.

The day’s hard number was from the Labor Department, which said the number of U.S. workers filing new claims for jobless benefits unexpectedly rose for the week ended June 20 by 15,000, to 627,000. Ccontinuing claims—those drawn by workers for more than one week—climbed 29,000, to 6,738,000. Both numbers had fallen the previous week.

Energy

In the energy market on Thursday, crude for August delivery was higher, closing at $70.23/barrel, up $1.56. July reformulated gasoline rose 5.58 cents, to $1.8983/gallon.

“It seems oil is rallying with stocks,” said Zachary Oxman, managing director at TrendMax Futures. “There are no major supply demand issues present.”

However, traders were also reacting to the weaker-than-expected inventory report from Wednesday, and to further violence in Nigeria.

The Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility yesterday for a predawn attack against Royal Dutch Shell facilities, calling it a warning to Russia not to invest in the African country's oil and gas industry, according to Dow Jones Newswires.

The attack on the Bille-Krakama pipeline, which feeds the key Bonny export terminal in southern Rivers State, was carried out to coincide with a visit to Nigeria by Russian President Dmitry Medvedevk, MEND reportedly said.

Base Metals

The base metals were all smiling again on Thursday. Copper was down until just before the New York open, then took off, peaking north of $2.31 near noon, before sliding a bit to finish at $2.2996/lb., up nearly 4 1/2 cents. Nickel was like a yo-yo all day, but with an upward bias, ending at $7.0292/lb., up 9 2/3 cents. Zinc pushed steadily higher from the late pre-dawn hours on, closing at $0.7267/lb., up more than a penny and a half. Aluminum had a good day, adding a penny and a third, to $0.7448/lb., while lead filled out the plus column, tacking on a penny and a half, to $0.7761/lb.

Copper led the industrial metals higher as analysts saw more budding economic optimism, along with strong momentum among the technical indicators.

On the economic front, “Whenever any kind of good data comes out, people like to think that they are seeing some ‘green shoots’ for the economy,” said Gijsbert Groenewegen, a Gold Arrow Capital Management partner in New York. “The idea of the better growth has made people buy copper.”

However, Copper’s 64% gain this year may be “unsustainable” as prices have “gotten ahead of demand,” Groenewegen said. “People are just looking at these numbers through rosy glasses and not seeing that even though they are slightly better, things are still weak … People are oblivious to what’s really happening in the underlying economy.”

And over on the technical side, “When we took out [Wednesday’s] high ($2.3020 a lb), that was significant and we saw more upside interest in the market once that occurred,” said Larry Young, of Infinity Futures in Chicago.

But, Young added, “Keep in mind we have the end of the second quarter coming up next week and have had a really good quarter in terms of the metals, so I wouldn't be surprised to see prices sell off maybe by tomorrow or early next week as some funds book profits.”

RBC Capital Markets takes a look at the tea leaves and sees mush, writing that, “Closed arbitrage windows between the Shanghai and London Metal Exchange markets, the summer slowdown and speculation that China's SRB may be looking to sell copper continue to muddy the short-term picture.”

But on the stockpile front, copper inventories monitored by the LME declined another 3,450 metric tons yesterday, to 271,600 tons, the lowest level since mid-November.

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


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