Good morning …

Precious Metals

Gold was flat until just before the London open on Thursday, then commenced a long, slow slide that continued until the noon hour in New York, with a bottom at $926 before some uninspired late day buying pushed it to a finish at $928.80/oz., down $11.50. For the week, gold lost 1%.

Platinum tightly rangebound all day, bouncing between $1180 and $1190, finally coming to rest at $1183/oz., down $16. For the week, platinum dropped 1.2%.

Silver was virtually unchanged two hours into London trading, but fell off into the first hour in New York, briefly dipping below $13.30 before inching back over it and going flat as a pancake the rest of the day to close at $13.35/oz., down 35 cents. For the week, silver skidded 5.1%.

The precious metals ended the abbreviated holiday week by stepping back in their recent one-step-forward, one-step-back pattern, with all three taking a licking out behind the woodshed.

If anything, it was probably surprising that they didn’t slide more in a day of grim economic news, a rising dollar, and falling oil prices. But they likely benefited from the early departure of some traders getting a jump on the long weekend.

How do you keep any kind of perspective in this yo-yo market? The irrepressible Dan Norcini, writing on jsmineset.com, comments:

“There is really not much to say about any of this – deflation is battling inflation and until one side gets a clear advantage and dethrones the thinking in the other camp, we are going to see no trends, no orderly markets, no sanity and nothing but idiotic volatility and casino-like markets.

“The markets have been completely taken over by the day trading, one minute bar chart geeks who wouldn’t know a pork belly from a brisket cut or a grain of wheat from a cocoa pod but who are enamored with lots of squiggly lines and dream of coming back from their bathroom break and discovering that they have traded in and out of the same market 15 times during that period and made $100,000 on each turn.

“The rest of us normal people who actually have lives to lead and families to raise, etc. are better served keeping a longer term perspective and understanding that the Dollar’s days of supremacy are forever over and that the rise of the BRIC nations means that America is beginning to go the same path as the once mighty and proud British Empire. Its leaders too spent it into oblivion and destroyed its currency in the process.”

Indeed they have, and gold will one of the few things that ultimately benefits.

Currencies and Economic News

In the currency market, the dollar climbed higher against the euro. Late Thursday, the euro was trading at $1.4027 vs. $1.4156 on Wednesday.

The day’s data was about as bad as it could be. Primary was the Labor Department’s report on nonfarm payrolls, which showed the loss of 467,000 jobs in June. That was in line with ADP figures from Wednesday, and far above the 325,000 contraction predicted by economists.

The unemployment rate edged up to 9.5% from 9.4% in May, not quite as bad as the 9.6% expected. All told, the data “strongly suggest that consensus forecast for a second half recovery is overly optimistic,” said Steve Ricchiuto, chief economist at Mizuho Securities in New York.

Some analysts tried to pretty things up by pointing out that the job loss trend is improving, but Millan L. B. Mulraine, of TD Securities in Toronto, wasn’t having any. “On the whole, this was a very ugly labor market report, and there is no amount of lipstick that can improve its image,” Mulraine said.

Across the pond, the ECB left unchanged its key lending rate, as expected, and stuck with the amount of covered bond purchases in its plan. At the same time, the statistics agency Eurostat reported that the unemployment rate in the 16-nation zone matched the US, rising more than expected to a 10-year high of 9.5% in May from 9.3% in April.

And Marketwatch.com reported that, “China hopes for diversification of the international currency system in the future, and this topic could be addressed at the Group of Eight leaders' summit next week in Italy, Chinese Vice Foreign Minister He Yafei said …

“The international financial crisis has fully exposed weaknesses in the international currency system, He reportedly said, and China hopes that the system can diversify.”

Energy

In the energy market on Wednesday, crude for August delivery fell again, closing at $66.73/barrel, down $2.58. August reformulated gasoline lost 6.82 cents, to $1.7908/gallon.

Oil posted its third straight weekly loss as the lousy economic numbers piling up have driven much of the recovery optimism from the field.

The jobs report “is confirming what we saw earlier in the week with the dropping consumer confidence,” said Phil Flynn, of PFG BEST Research. “This reinforces the outlook for weak petroleum demand and should put downward pressure crude prices.”

Flynn added that, “On the fundamentals level, high levels of inventories, low demand and sufficient supply continue to point to lower prices.”

The only bright note was sounded by the Commerce Department, which reported orders for U.S.-made factory goods rose by the biggest amount in close to a year in May, climbing 1.2% on a big jump in orders for transportation equipment.

In the natgas arena, the fuel continued to languish, posting a loss on the week, with August futures shedding 8.5% to finish at $3.615 per million British thermal units.

Base Metals

The base metals were mostly lower on Thursday. Copper sank from the pre-dawn hours to mid-morning, bottoming at $2.24, but rallied back from there to finish at $2.2754/lb., down more than 3 1/2 cents. Nickel had a pair of jagged ups and downs to mid-morning, but blazed higher from there, closing just off its intraday highs at $7.4382/lb., up 13 cents. Zinc was also choppy, ending little changed at $0.6994/lb., down a half-cent. Aluminum was weak, dropping more than a penny, to $0.7267/lb., while lead also sagged, shedding more than a penny and three-quarters, to $0.7626/lb.

Copper led all the industrial metals but nickel downward yesterday, as traders heeded the strengthening dollar and were spooked by bad economic data from both the U.S. and Europe that served notice a global economic recovery could be a long time in coming.

“When you have these continued weak employment reports, yes, they show maybe we are bottoming out, but there is no turn in any of the data,” said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey.

In addition to the grim unemployment numbers domestically and in the eurozone, the market also reacted to comments from the ECB about the length of the recession. However, the better-than-expected orders for manufactured goods helped keep a cap on the metals’ losses.

O’Neill added that, “If you take China out of the buying side of the market, you wouldn't have a lot there. It's going to be difficult for the market to break out of the current trading range in the third quarter because of the fact that we don't really see the kind of demand outside of china that the market needs to extend these levels.”

In company news, Rio Tinto did a massive re-financing. The world’s third-largest mining company sold about 97% of the London-listed shares (508.6 million) on offer in a $15.2 billion sale to reduce debt.

Rio rejected a $19.5 billion investment proposal from its biggest shareholder, Aluminum Corp. of China, last month, and went with the share sale and an iron ore joint venture with BHP Billiton.

That’s what’s happening … with the markets closed today, we wish you a great holiday weekend and will see you back here on Tuesday!


NEWS YOU CAN USE:

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