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Precious Metals

Gold was only modestly higher from the overseas markets to the New York open on Wednesday, but it spiked up to mid-morning at that point, leveled off, spiked again at the noon hour, then drifted lower through the rest of the day, to finish at $940.30/oz., up $13.70. Overnight, gold is trending lower.

Platinum was lower at the end of Hong Kong trading, but shot higher from there to the noon hour, adding $30, then held its gains through the day, ending at $1199/oz., up $22. Overnight, platinum has fallen off.

Silver moved a bit higher in the far East, but was trapped all day in a range between $13.60 and $13.80, finally flattening out through the Globex to close at $13.70/oz., up 15 cents. Overnight, silver is sharply lower.

After the beating they took on Tuesday, the precious metals showed some spunk yesterday, taking back the lost ground and then some. With the dollar sliding and oil doing likewise, some help from the usual suspects was finally forthcoming.

James Moore, of ThebullionDesk.com muted his optimism by saying that the outflow of SPDR metal [Tuesday], absence of substantial demand despite the recent correction, and still sizable speculative longs suggest the market is at risk to further pressure in the short-to-medium term.

GLD announced on Tuesday that it had sold off 5.19 metric tons, or 167,000 ounces, of gold from its vault.

Platinum, meanwhile, gained on speculation that usage in China is on the way to heating up.

Chinese platinum demand, which slowed sharply in May and early June, posted a decent recovery in the past fortnight as platinum prices dipped, wrote John Reade, of UBS in London. Chinese jewelry demand for platinum is providing a strong crutch this year, he said.

With automakers accounting for much of the demand for platinum, good numbers out of China in that regard also helped. The country saw an overall 14% gain in auto sales for the first five months of 2009. And GM, the biggest overseas-based automaker in China, said its first-half sales in the country rose 38% to a record 814,442 vehicles as the government's stimulus package took hold.

Currencies and Economic News

In the currency market, the dollar was lower against the euro. Late Wednesday, the euro was trading at $1.4156 vs. $1.4032 on Tuesday.

The buck fell after ADP Employment Services said companies in the U.S. shed 473,000 jobs in June. The ADP report, is often considered a strong precursor of the official Labor Department jobs report, due today. And consensus for Labor's report is for a much smaller job loss number.

The ADP data supports the view that payrolls will post a larger decline in June than they did in May, said economists at RDQ Economics.

The U.S. dollar reacted negatively to the ADP report, contributing to the sell-off in the greenback that began in overnight action as risk tolerance remained high on buoyant equity and commodity prices, said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon.

Also today, reported Marketwatch.com, European Central Bank president Jean-Claude Trichet will begin speaking about officials' monetary policy and economic outlook. Analysts will also look for any comments on the ECB's new covered-bond purchase program, the central bank's answer to quantitative easing programs out of other central banks.

If Trichet suggests that he has done enough, which we expect him to do, the euro-dollar could extend its gains, said Kathy Lien, director of currency research at Global Forex Trading. If he openly talks about extending the size and scope of program, it would be bearish for the euro.

Looking ahead, risk appetite is likely to remain the key driver in the currency markets in the near term, though light, summer trading volumes could make for choppy price action well into next month, wrote currency strategists at Standard Chartered Bank.

Energy

In the energy market on Wednesday, crude for August delivery dropped off, closing at $69.89/barrel, down $1.60. August reformulated gasoline lost 4.3 cents, to $1.859/gallon.

We feel [oil is] very overbought at these levels and crude has had a very hard time putting new highs right now, said Zachary Oxman, of TrendMax Futures. I see the markets settling down for a few months before the fourth quarter.

In its weekly inventory report, the Energy Information Administration said crude stocks unexpectedly rose 2.33 million barrels in the week ended June 26, advancing for the first week since late May.

Gasoline supplies increased 2.3 million barrels and distillates were up 2.9 million barrels. Both numbers were higher than expected. And total U.S. daily fuel demand in the four weeks ended June 26 was down 5.8 percent from a year earlier, the EIA said.

Supply and consumption remain really bad, said Bill O'Grady, the chief markets strategist at St. Louis-based Confluence Investment Management. It's hard to make a bullish case for anything.

Base Metals

The base metals were grinning green on Wednesday. Copper rose from the pre-dawn hours to late morning, cresting above $2.34, before pulling back to finish at $2.311/lb., up more than 5 1/2 cents. Nickel was up very powerfully to the same late morning point, reaching $7.45 before easing to close at $7.3081/lb., up 39 cents. Zinc followed a similar path, just coming off its intraday highs to end at $0.7042/lb., up nearly 2 cents. Aluminum had a strong day, adding better than a penny and a half, to $0.738/lb., while lead completed the up day, adding 2 cents, to $0.7808/lb.

Copper led the industrial metals upward yesterday, rising to a 2 1/2-week high, as positive manufacturing data out of China helped to boost traders' confidence in the world economy.

The China Purchasing Managers' Index (PMI) rose in June to 51.8 from 51.2 in May, a modest enough gain, but an indication of further expansion in the country's manufacturing sector.

The Chinese PMI has helped, everyone is looking to China to remain a positive factor, said said Alex Heath, of RBC Capital Markets. However, Heath cautioned that we are talking about a market slowing as we go into the summer period.

David Wilson, an analyst at Societe Generale in London, noted that while copper was stronger than expected in the first half ...We expect a lot of volatility in the third quarter and sideways trade.

Also factoring in, Copper has had a tremendously close correlation with the stock market in the past few months, said Donald Selkin, of National Securities Corp. in New York. People are looking at the stock market as a symbol of worldwide economic recovery.

Stockpiles were little changed, with inventories monitored by the LME dropping a mere 225 metric tons yesterday, to 265,725 tons.

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



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