Precious Metals

Gold was flat until the mid-point of the Hong Kong session on Monday, fell steadily from there to a low of $920 in the second hour of Comex trading, then rallied modestly through the rest of the day to regain a little lost ground and finish at $924.90/oz., down $3.90 from Thursday. Overnight, gold is slightly higher.

Platinum plummeted from the far East to the New York open, then traded rangebound between $1140 and $1150 through the day, ending at $1144/oz., down $39. Overnight, platinum has been flat.

Silver plunged from its $13.40 peak in Hong Kong to as low as $12.98 in New York's first hour, then staged a powerful comeback to the noon hour that left it just short of break-even, before flattening out the rest of the day and closing at $13.25/oz., down just 10 cents. Overnight, silver is unchanged. (Click here for charts)

Precious metals traders returned from the long holiday weekend in more of a selling mood than not but, although platinum was hammered, gold and silver turned in only mildly negative results.

All in all, it wasn't too bad a day considering that both the tumbling price of crude and the strengthening dollar were working against them.

The commodity selloff was general, as well, with the Reuters/Jefferies CRB index of 19 major commodities down 1.8%.

On top of everything is a little bit of anticipation that [the] G-8 meeting will come up with something to strengthen the dollar [further], said George Gero, of RBC Capital Markets. And that's pushing gold and other commodities lower. Leaders of the G-8 nations meet in Italy for three days, beginning tomorrow.

The meeting will be closely watched, for what the participants have to say about the world economic situation and, perhaps more importantly, a possible clarification of where the dollar now stands as a global reserve currency.

At the moment, a hazy short-term pessimism seems to be hanging over the gold market, with the bears gathering strength of numbers.

Commerzbank analysts noted the countervailing trends, with a firmer U.S. dollar and falling oil prices undermining gold's role as a hedge against currency and inflation risks, while higher risk aversion and falling equity markets are not having much of an impact at present.

Currencies and Economic News

In the currency market, the dollar climbed higher against the euro. Late Monday, the euro was trading at $1.3986 vs. $1.4027 on Thursday.

Last Thursday we had very disappointing jobs data and people are saying that maybe the recovery is in doubt, said Marc Chandler, of Brown Brothers Harriman, and the hangover from that report gave the buck an early boost. But the dollar's rally ... has run its course and now the dollar is beginning to weaken again, Chandler added.

Chandler also cited the upcoming G-8 summit, saying that people are nervous about getting too long (on the) dollar ahead of the events of this week.

Of the day's hard number, analysts at Action Economics said that a better than expected non-manufacturing ISM report, helped Wall Street eventually turn positive, which weighed the dollar down once again.

The Institute for Supply Management reported yesterday that its nonmanufacturing index rose to 47.0% from 44.0% in May.

Ahead of the G-8, Suresh Tendulkar, a senior official in the Indian government, said he's urging India to diversify its foreign-exchange reserves and hold fewer dollars, Bloomberg reported. India will be sending unofficial representatives to the meeting, along with other non-members China, Brazil, Mexico, South Africa and Egypt.

Meanwhile, Marketwatch.com wrote that Russian President Dmitry Medvedev told Italian media the dollar-based reserve system is flawed but that 'there is no alternative to the U.S. dollar or the European currency,' according to news reports.Energy

In the energy market on Monday, crude for August delivery fell sharply, closing at $64.05/barrel, down $2.68 from Thursday. August reformulated gasoline lost 5.04 cents, to $1.7404/gallon.

Oil fell off in the first post-holiday session following three straight weekly losses. The market is pricing in another wave of weak demand and some seasonal factors, said Phil Flynn, of PFG BEST Research. Still the dollar seems to be the key today.

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.

Analysts also cited Vice-President Biden's comments during a Sunday TV interview. The administration misread how bad the economy was when the stimulus package was being designed, Biden said.

Looking forward, The normal summertime lull in trading may put some pressure and profit-taking into the market, as traders take some money off the table for the next 30 to 45 days, said Kevin Kerr, president of Kerr Trading International.

Base Metals

The base metals were all well into the red on Monday. Copper had a completely U-shaped day, with the bottom near the New York open, and finished at $2.2302, down 4½ cents from Thursday. Nickel followed a similar but less steep path, closing at $7.4382/lb., down nearly 23½ cents. Zinc was similar, just retreating from its intraday highs to end at $0.6904/lb., down short of a penny. Aluminum had a strong late-day rally but it wasn't enough as it shed more than three-quarters of a cent, to $0.718/lb., while lead also sagged, dropping almost a half-cent, to $0.7582/lb.

Copper led the industrial metals lower yesterday amid economic worries and inventory gains, but rose sharply off of session lows when chart-based buying hit key technical trading levels.

For the first time in weeks, stockpiles showed gains on two consecutive days. Inventories monitored by the LME added 900 metric tons yesterday, to 269,175 tons. That followed a much larger jump of 4,050 tons on Friday.

On the other side of the world, Chinese stocks followed suit, with inventories monitored by the Shanghai Futures Exchange rising 7% last week, to 59,980 tons, from 56,088 tons a week earlier.

The double whammy of those rising stockpiles and the stronger dollar is having a negative impact on prices, said Donald Selkin, of National Securities Corp. in New York. People are getting nervous about the outlook for copper.

And recently, there has been a change in sentiment, with the gradual realization that unemployment levels are rising and that this recession is going to run longer, said Alex Heath, of RBC Capital Markets in London.

Concerning aluminum, anecdotal evidence suggests that at least 50% to 75% of the metal is held in LME warehouses under longer-term contracts, which brings lower rents for metal buyers, a Merrill Lynch report said.

These volumes are not available to markets participants at arms lengths and this is one factor suggesting that aluminium prices may temporarily spike higher when demand starts to improve through 2H09, the report said, but added that fundamentals for aluminum remain poor.

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