Good morning …

Precious Metals

Gold had a very inconclusive day on Monday, rising from the far East to a peak of $942 in early New York trading, then plunging back to $934 at mid-morning, before moving in fits and starts through the rest of the day, to finish at $937.30/oz., down $1.70. Overnight, gold is trending higher.

Platinum peaked at $1195 in Hong Kong, but traded rangebound between $1180 and $1190 for the bulk of the day, ending at $1183/oz., down $14. Overnight, platinum is pushing higher.

Silver hit its high for the day, $14.10, early on, then declined straight through with only a few temporary blips up, and closed at its intraday low of $13.84/oz., down 23 cents. Overnight, silver is sharply higher.

It was another listless day for gold, although platinum and silver took more substantial downside hits. A better showing might have been predicted, if one had known that the dollar would be essentially flat while crude shot up, but the usual suspects seem to have had a rather less than usual impact on metals prices lately.

Kitco’s Jon Nadler wrote that gold's “primary focus remains on U.S. dollar movements, but volatility could also come this week from the cyclical process of quarter-end book-squaring processes.” If so, that sure hasn’t shown up as yet, with both Friday’s and yesterday’s market activity yielding little price change.

“Rangebound” may be the operative word as we approach the dog days of July. James Moore, of TheBullionDesk.com, wrote that trading is expected to remain choppy this week, although overall [gold] appears comfortable in the recent $930 to $950 range.

Adding to the lack of movement in gold, the SPDR Gold Trust, largest ETF backed by bullion, has barely budged in recent days.

“Exchange-traded fund flows remain subdued, jewelry demand is weak, coin and investment bar buying is subdued,” wrote John Reade, of UBS in London. “At the moment, gold ETF inflows are associated with fear, not greed, and there has been less fear around recently.”

Any sharp move in gold may have to wait until the inflationary pressure being backed up in the system by government actions finally begins to escape.

Currencies and Economic News

In the currency market, the dollar was marginally lower against the euro. Late Monday, the euro was trading at $1.4078 vs. $1.4068 on Friday.

“The U.S. dollar has started the week a touch firmer, with renewed concerns over the global recovery helping the greenback ahead of a busy week” of economic data, wrote strategists at Brown Brothers Harriman.

With the July 4th weekend ahead, the Labor Department will release the closely-watched tally of non-farm payroll losses a day early, on Thursday. Economists are projecting a net loss of about 325,000 jobs in June. Any strong variance from that figure is likely to have repercussions.

But if there are further indications that the ‘green shoots’ scenario is correct, will that necessarily have a positive effect on the buck? Many doubt it, even though a strengthening economy should portend a stronger greenback.

However, “The past seven years have proven each time U.S. data emerged on the stronger side, global bourses pushed higher-at the expense of the greenback,” said Ashraf Laidi, chief market strategist at CMC Markets.

The scenario seems to be that investors flee to the dollar when they’re concerned about the economy, and abandon it for riskier assets at any sign of an upturn.

In other developments, the dollar got some support after People's Bank of China Governor Zhou Xiaochuan said that, longer-term, “Our forex reserve policy is always quite stable” and “there are not any sudden changes,” he said over the weekend.

Energy

In the energy market on Monday, crude for August delivery shot higher, closing at $71.49/barrel, up $2.33. July reformulated gasoline gained 6.2 cents, to $1.936/gallon.

Crude pushed upward after an attack on an oil platform in Nigeria rekindled supply worries, and provided “the big underpinning for oil,” said Kevin Kerr, president of Kerr Trading International.

The Movement for the Emancipation of the Niger Delta (MEND) said that it had struck at the Shell Forcados offshore platform in Delta state. That was a disappointment, after militants said late last week that they are prepared to lay down their weapons while they consider an amnesty offer from the central government.

Kerr added that “if the dollar fails to hold support [at current levels], it's likely crude will rally further.”

But Edward Meir, of MF Global, wrote that, “Outside of a sharply weaker dollar, we do not see any imminent factors that could see crude-oil prices retesting their June highs anytime soon.”

Meir added that “energy fundamentals still look rather weak in terms of oil demand, this despite a slight improvement in the global macro picture.”

Base Metals

The base metals were mixed on Monday. Copper held in positive territory during the pre-dawn hours, then tacked on some more gains to mid-morning in New York, before easing through the rest of the day to finish at $2.3086/lb., up 3 2/3 cents from Friday. Nickel was well up at mid-morning but sold off sharply from there, just pulling up out of the red late to close at $7.1002/lb., up a half-cent. Zinc declined in the pre-dawn hours, rose in early New York trading, but fell off after mid-morning to end at $0.6935/lb., down a penny. Aluminum was modestly lower, dropping less than a half-cent, to $0.7267/lb., while lead eked out a gain of less than a third of a cent, to $0.7697/lb.

Copper was a bit higher as there was little movement in the industrial metals’ prices on Monday, as “the drawdown in stockpiles is one of the fundamentals supporting the [copper] market,” said Michael Gross, of OptionsSellers.com in Tampa, Florida. Traders who follow historical price patterns bought copper, supporting the rally, Gross said, but added that concerns that demand may sink in China limited the day’s gains.

Inventories monitored by the LME skidded 1.1% yesterday, to 267,300 metric tons. It was the 37th straight session of declining stockpiles, marking the longest slide since April of 2004.

In addition, inventories recorded by the Shanghai Futures Exchange slipped 18% last week, the first drop since May. That could indicate that all the metal China has been stockpiling might begin to be drawn down.

The downside to that is, “Chinese buying of nonferrous metals has been a major crutch to these markets,” wrote John Reade, of UBS in London. Should the country discontinue importing and sell metal to domestic buyers, copper “will have fewer upside drivers in the second half,” Reade said.

And Bloomberg wrote on the subject that: “China may stop buying for reserves after purchases this year spurred price gains, business magazine Caijing reported, citing Yu Dongming, a metals industry official at the National Development and Reform Commission. The commission is the government’s top economic-planning group.

“China has bought 235,000 tons of copper, 590,000 tons of aluminum and 159,000 tons of zinc, the magazine cited Yu as saying at a conference in Beijing on June 26.”

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


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