Good morning ...

Precious Metals

Gold developed a slight upward trend late in Hong Kong and rode that trend mostly sideways through the end of the day to a marginal gain. The yellow metal closed at $925.30/oz., up $4.50. Overnight, gold is up sharply.

Platinum's graph looked quite similar to gold yesterday, as the precious metal developed what looked like the gentlest of trends in the black but managed to tack on quite a bit before all was said and done, ending the day at $1129/oz., up $16. Overnight, platinum is way up.

Silver rounded out what ended up being a solid but uneventful day for the precious metals by showing the same slight trend as gold and platinum, ending at $12.87/oz., up 4 cents. Overnight, silver is trending much higher.

Gold had kind of a blah day, but I'm sure investors don't mind too much since it was still able to post a modest gain despite the third straight day of falling crude prices.

Nevertheless, holdings of GLD, the world's largest ETF backed by gold bullion, declined by 15.27 metric tons yesterday down to 1,094.54 tons. Since June 15th, holdings have fallen by 37.61 metric tons.

Darren Heathcote, head of trading at Investec Australia, said the dip was a reflection of the weak sentiment in last week's market when bullion slipped to below $910.

So it was not surprising to see some investor interest being unwound, he said.

He added, however, that he would not read too much into the decline.

I wouldn't consider it a change to the overall picture, the overall trend, which I think is still relatively positive for gold, Heathcote said.

In company specific news, Silver Wheaton Corp. announced that construction of the first sulphide process line at Goldcorp's gold-silver-lead-zinc Penasquito mine in Zacatecas, Mexico is now complete and commissioning work is advancing on schedule. Production and shipment of first concentrates are still targeted for the second half of 2009.

After a ramp-up period, Penasquito is forecast to produce an average of about 30 million ounces of silver annually over an initial 22-year mine life, of which Silver Wheaton is to receive 25% or in excess of 7 million ounces of silver per year.

Currencies and Economic News

In the currency market, the dollar fell against the euro. Late Tuesday, the euro was trading at $1.4058 vs. $1.3995 on Monday.

Although the dollar fell against most other currencies, it rose against the yen as the Bank of Japan decided at its policy meeting to extend its special liquidity-boosting measures for an additional three months to support the recovery.

In economic news, Tim Geithner praised himself and other policymakers around the world for what he sees as improvements in the economy coming faster than expected.

In the United States, the rate of decline in economic activity has slowed, business and consumer confidence has started to improve, housing markets have begun to stabilize, the cost of credit has fallen significantly and credit markets are opening up, Geithner said in remarks prepared for delivery in Jeddah, Saudi Arabia.

Meanwhile, the global economic recovery will be gradual with more than the usual ups and downs and temporary reversals. That means policymakers must remain focused on growth, he said.

The classic, tragic errors of economic policy in economic crises are to act late with insufficient force, and then put on the policy brakes too early. We're not going to repeat those mistakes, Geithner continued. [And anyone with a brain laughed... or cried.]

Geithner also pledged that stimulus measures would be quickly unwound as soon as the crisis had definitively receded. President Obama is committed to bringing the deficit down to around 3% of gross domestic product once a recovery is firmly established and to limiting future spending commitments through budget rules, Geithner said. [That's about $400 billion by the way, but still undoable given Congress' and Obama's addiction to spending.]

Energy

In the energy market, crude oil for August delivery fell 17 cents from Monday to close at $59.52/barrel. August reformulated gasoline climbed a little more than half a cent to finish at $1.6466/gallon.

OPEC expects a slower rebound in oil demand next year than the IEA, based on a weaker outlook for the global economy.

Worldwide crude-oil consumption will increase by 500,000 barrels a day, or 0.6%, to 84.3 million a day in 2010 as industrial production gradually picks up after this year's recession, OPEC said in a report yesterday. That compares with an increase of 1.4 million barrels a day, or 1.7%, to 85.2 million, forecast by the IEA last Friday.

Current uncertainties are expected to continue to cast a shadow over the market in 2010, OPEC's Vienna-based secretariat said in its monthly report. In the U.S., stretched households will require time to readjust their balance sheets, amid rising unemployment and sharply diminished wealth.

Next year's 2.3% increase in global gross domestic product will be driven by emerging countries, such as China and India, while economic growth among developed nations will remain anemic, OPEC said. The Paris-based IEA, which advises 28 consuming countries, assumes a stronger global GDP rebound of 2.5%.

OPEC's 2010 projection is 300,000 barrels a day lower than the 84.6 million barrels a day estimated in the organization's World Oil Outlook released on July 8. The monthly report is based on more timely data than the outlook, which projects through to 2013.

Base Metals

Base metals all posted gains on Tuesday. Copper climbed 6.38 cents to close at $2.2863/lb. Nickel added more than 30 cents to finish at $6.9974/lb. Zinc gained a penny and a quarter, ending at $0.6633/lb. Aluminum tacked on more than one and a half cents, closing at $0.7087/lb., while lead moved to $0.7098/lb., up about three-quarters of a penny from the previous session.

Copper jumped to its highest level since July 1 yesterday, as the dollar weakened and gains in equities reflected a more upbeat mood on prospects for demand and economic growth.

Metals are holding really well, said Andrey Kryuchenkov, analyst at London's VTB Capital. Copper has a very good chance of holding above 4,600 [almost $2.09 per lb.] this summer.

Market players are gaining confidence that the global economy is improving, but analysts warn broadly that it is too early to bet that a sure recovery has begun.

If data doesn't deteriorate, copper is looking good, Kryuchenkov said, but added it was market sentiment, not real demand, driving prices. The upside is very limited because there is no real fundamental demand at the moment.

In company specific news, workers at Canadian nickel producer Vale Inco's Sudbury and Port Colborne operations in Ontario have gone on strike, the company confirmed to BNamericas.

Vale Inco is owned by Brazilian miner Vale.

Employees voted over the weekend to reject the company's settlement offer, a Vale Inco representative said by email. We find the results of the vote unfortunate and disappointing. We did not want a strike and we put forward what we believe is a fair and responsible offer.

Vale Inco has a smelting complex in Sudbury and a nickel refinery in Port Colborne.

Rio de Janeiro-based Vale is the world's largest iron ore producer and also has nonferrous metal operations in addition to nickel, such as copper.

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



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