Good morning ...

Precious Metals

Gold was slightly higher until the New York open, trading between $925 and $930, but took off from there, rising to a peak of $946 just after noon, then pulled back for the rest of the day, finishing at $939.70/oz., up $13.80. Overnight, gold has fallen off.

Platinum strayed very little from the $2060-2070 range all day, ending at $2065/oz., up $14. Overnight, platinum has been flat.

Silver was the day's big winner, shooting up with gold at the New York open and rising from $17.50 to a peak of $18.19, before easing slightly to close at $18.09/oz., up 69 cents. Overnight, silver has been trending lower.

Although platinum continued to tread water, it was off to the races with gold and silver yesterday after Monday's inactivity.

The usual suspects were both lined up to help, as oil pushed to new highs and the dollar slipped marginally.

It will be interesting to see what happens over the next two days, as market participants begin to trickle away for the long holiday weekend in the States (Canadians will be returning from Canada Day today), but some analysts are persuaded that the bull is really thundering ahead at this point.

Gold has seen increased support as a safe haven investment during these uncertain economic times, wrote David Beahm, a vice president at Blanchard and Co. Coming off their worst June since the 1930s, the financial markets are just too volatile right now for many investors to feel confident.

In Beahm's opinion, it all hinges on what happens tomorrow. Should the ECB raise rates, which all signs are pointing toward, the dollar will fall even further and commodities will shoot upward.

Jim Sinclair, of, was even more explicit.

This Is It, Sinclair wrote. Gold is preparing for an assault not on $1000, but for a brief penetration of $1200. Violent chopping will occur, then off it goes to $1650. This violent chop we have been living in here and now will resolve itself very soon and the take will be seen by history as having occurred in this last formation HERE AND NOW.

A bit less apocalyptic was Mark O'Byrne, of Gold and Silver Investments Ltd., who wrote that $952 is now the key resistance for this market ... Any close above $952 should see us re-challenging the psychological $1,000 in very short order.

Currencies and Economic News

In the currency market, the dollar was little changed against the euro. Late Tuesday, the euro was trading at $1.578 vs. $1.5775 on Monday.

The dollar sentiment is so negative right now that any temporary improvement is not going to be taken very seriously, so long as it takes place before Thursday, said Ashraf Laidi, of London-based CMC Markets. That's where the main point of focus for this week really is.

Laidi referred not only to the results of Thursday's meeting of the ECB, but also to the nonfarm payrolls data, which will also be released on that day. Could be a very volatile day, with diminished numbers of traders at their desks.

The buck had made some early gains but gave them back as the day wore on. The Institute for Supply Management reported its factory index rose to 50.2% in June from 49.6% in May, the first gain since January. The prices paid index -- a measure of inflation -- also rose, to 91.5% from 87% in the previous month, the highest level since 1979.

When you look beneath the numbers, it still showed a pretty big slowdown in the US since unemployment was down and new orders were weaker, said Boris Schlossberg, of Forex Capital Markets. When the market took a closer look at this, it lost their initial enthusiasm and it was back to square one for the dollar.


In the energy market Tuesday, crude for August delivery punched to a new alltime closing high of $140.97 up 97 cents. July reformulated gasoline added 1.4 cents, to $3.5134/gallon.

Trading was muted yesterday ahead of today's inventory report from the Energy Department. Stockpile surprises could be a real price driver today, but if not, the ECB meeting probably will.

If the ECB does raise rates and issues a strong policy wording to boot, we could see another dollar sell-off going into next week and a push higher toward the $150 mark on crude, wrote Edward Meir of MF Global.

Tensions also served to keep the price high, as Iran made it clear that an attack by Israel would be treated as an attack by the U.S., and retaliation would include closing the Strait of Hormuz.

Any disruption of supplies from the Gulf would certainly send prices surging higher, said Michael Fitzpatrick, also of MF Global. Israel has the will and the capability to attack Iran, and has made no effort to quell the world's rising concerns over a possible conflict, he wrote. And a comment from Israeli Deputy Prime Minister Shaul Mofaz that a clash was unavoidable was very disconcerting, Fitzpatrick added.

Base Metals

The base metals were mixed on Tuesday. Copper shot up at the New York open, briefly touching the $4 mark and, despite experiencing a late morning dip, rallied to finish just short of it at $3.9866/lb., up nearly 3 cents. Nickel sagged for nearly the whole day, only coming off its intraday low late in the session to close at $9.6819/lb., down 8 3/4 cents. Zinc was up and down to little ultimate effect, ending at $0.8492/lb., up a quarter-cent. Aluminum had a good day, pushing through the $1.40 barrier to $1.4073/lb., up a penny and three-quarters, while lead prolonged its losing ways, shedding three-quarters of a cent, to $0.7832/lb.

Copper forged an 8-week high on concerns about labor unrest in Latin America. Workers at more than a dozen mines in Peru began their third national strike in less than 14 months on Monday, while Mexico's largest mining union approved a one-hour walkout for this week.

The latter walkout will be the third union protest this year, and will likely not be the last. Workers in Mexico have also approved striking for a longer period later this year, the National Mining and Metal Workers Union says.

With the metal once again flirting with the $4/lb. level, its ability to breach the barrier will make or break the market, according to one trader.

While supply problems may be uppermost in people's minds at the moment, there is plenty of long-term bearish sentiment out there.

Present higher prices for copper are unlikely to be sustained because of weaker demand, wrote Robin Bhar, an analyst at Calyon in London.

Legendary Hong Kong investor Marc Faber essentially concurs, saying that, The industrial-commodity complex is vulnerable because demand will slow as global growth slumps. Moreover, he added that he expects the worldwide economic decline to last a very long time.

Meanwhile, global copper mine production capacity will grow by 5.2% a year through 2012, the International Copper Study Group said, with South America and Africa accounting for more than 40% of the capacity gain.

That's what's happening ... see you tomorrow!


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