Good morning ...
Gold pushed higher overseas, peaking at $935 at the mid-point of London trading, declined from there straight through to nearly the noon hour, bottoming at $920 before rallying for most of the rest of the day, finishing at $924.90/oz., down $1.90 from Friday. Overnight, gold is sharply higher.
Platinum was traded in a jittery fashion through a range of about $40, ending near the middle at $2051/oz., up $9. Overnight, platinum has moved higher.
Silver's push higher was sharper than gold's, and its fall even steeper, from $17.87 to $17.18, before it too rose after the noon hour, to close at $17.40/oz., down 8 cents. Overnight, silver has been trending higher.
Although platinum edged higher, gold and silver were off modestly, as traders apparently decided to book a few profits after the runup late last week. The squaring of positions at the month's and quarter's end likely factored in as well.
The usual suspects provided little in the way of direction, as oil pulled back from its highs and the dollar rose marginally.
It's all about the dollar right now, wrote Dale Doelling, chief market technician at Trends In Commodities. A sharp decline in the greenback overnight gave gold and crude oil every reason to trade sharply higher, but the dollar is showing signs of life -- pulling gold lower ... and crude well off its high.
Gold spun its wheels to little effect during the second quarter of this year, climbing a meager 0.7%. Nevertheless, June may have marked a turnaround, as the metal added 4.1% during the month. It's also up 10.8% so far this year.
With metals traders focusing more on the dollar at the moment, the European Central Bank's meeting this week looms large. The ECB is widely expected to hike its key lending rate by a quarter of a percentage point, to 4.25%.
Any widening of the interest rate spread between Europe and the U.S. is poison for the dollar and gold-positive.
However, any effects on gold may be delayed. The ECB doesn't meet until Thursday, and Friday the markets are closed for the 4th of July holiday. That will leave traders with a long weekend to think about what their response is going to be.
Next Monday could easily bring a more volatile session than any day this week.
Currencies and Economic News
In the currency market, the dollar edged higher against the euro. Late Monday, the euro was trading at $1.5775 vs. $1.5789 on Friday.
End of quarter profit-taking has helped the U.S. dollar recover the majority of its earlier losses, said Kathy Lien, chief strategist at DailyFX.com.
Lien added that, It is going to be a very active week for the currency market ... The ECB interest rate decision and the non-farm payrolls report collide to create the perfect storm for the U.S. dollar.
Expectations that the ECB will in fact raise rates were stoked by a European Union statistics office report yesterday showing that consumer inflation across the 15-nation euro zone rose at an estimated annual pace of 4% in June, up from 3.7% in May. That exceeded economists' projections of a 3.9% rise.
The immediate effect of an ECB rate hike, to combat inflation that is now well out of its comfort zone, is of course negative for the dollar, but what about longer term? Some see a silver lining.
A euro close to $1.60 and higher rates are going to kill euro-zone growth, said Win Thin, a currency strategist at Brown Brothers Harriman & Co. in New York. Short-term the dollar is vulnerable, but long-term I like it.
In the energy market Monday, crude for August delivery retreated from a new alltime high of $143.67 in electronic trading, to close at $140.00/barrel, down 21 cents from Friday. July reformulated gasoline was unchanged at $3.5015/gallon.
As the second quarter drew to a close, crude found itself up 9.9% for June, and 37.8% for the quarter. Year to date, the gain is 45.9%.
Tensions in the Middle East were on everyone's mind.
U.S.-Iran tension is still a major concern and could have a substantial impact on the market if military action takes place, wrote Jeff Pritchard, an analyst at Altavest Worldwide Trading.
John Kilduff, of MF Global, added that, the war of worlds between Israel and Iran has moved up another notch, with Iran stating outright that shipping in the Persian Gulf, specifically the Strait of Hormuz, will be affected if it is attacked. Any moves against shipping would of course bring the U.S. in.
Outside of that threat, Due to the short trading week in the U.S., price movements [for oil] will be exaggerated but likely by the end of the week, oil will see widespread short covering ahead of the long holiday weekend, wrote Kevin Kerr, editor of Global Resources Trader.
The base metals were mixed on Monday. Copper suffered a steep late morning dip, but immediately rallied back to where it began the session and finished at $3.9571/lb., up a penny and three-quarters from Friday. Nickel was up during the pre-dawn hours, then held more or less steady through the day, closing at $9.7681/lb., up 9 3/4 cents. Zinc also suffered a morning slump, but failed to make it back to even at $0.847/lb., down more than three-quarters of a cent. Aluminum was highly rangebound and ended little changed at $1.3903/lb., up less than two-tenths of a cent, while lead was much the same to the downside, losing less than two-tenths of a cent, to $0.7908/lb.
Copper traded off a strong base of support due to labor problems in Peru, the world's second-leading source of the metal.
The largest federation of mining unions in Peru said on Monday a strike had started, disrupting operations at Peru's biggest copper pit, Antamina, jointly owned by BHP Billiton and Xstrata.
That copper didn't move more, according to Edward Meir, a metals analyst at MF Global, was that, The strike in Peru is probably starting to be discounted as people look to a possible settlement down the road.
Meir added that, I think a lot of these metals are very overdone so we wouldn't be surprised to see a bit of a pull-back.
Nonetheless, supply issues were also supportive. Inventories monitored by the LME declined by 300 metric tons yesterday, to 122,600 tons. That's sufficient for only two and a half days of global consumption.
Another good indicator of tightness in copper supply is that the metal is in backwardation, where the spot price for the metal is at a premium over the three-month price. Copper's backwardation is up to $180/ton, the highest difference since May 2006.
And regarding aluminum, prices could rise 12% next year due to the higher cost of coal, which will make production more expensive and force smaller plants to close, wrote analysts at UBS.
We expect market fundamentals to continue to tighten as global constraints on energy supply grow and impinge on the aluminum industry, the UBS report said.
That's what's happening ... see you tomorrow!
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