The Daily Resource 6.6.08
Precious Metals
Gold had another lackluster day, slumping to $865 just after New York opened, then making its way higher in fits and starts, finishing just into positive territory at $878.00/oz., up 60 cents. Overnight, gold has fallen off.
Platinum also bottomed in the first hour of New York trading, but it then found buyers that took it steadily higher, ending at $2006/oz., up $15. Overnight, platinum is sharply higher.
Silver bottomed at the same time as gold, at $16.50, but then it caught fire, shooting virtually straight up past $17.15 by mid-morning, eased back below $17 into the noon hour, but then re-ignited and closed near its intraday high at $17.15/oz., up 35 cents. Overnight, silver has been trending higher.
It was an odd day for the precious metals, as silver decoupled dramatically from gold, registering a sharp increase even as gold continued to struggle. Platinum too outperformed the yellow metal, posting a larger gain.
It had to be a disappointing day for gold bugs as the metal’s performance was anemic even with the usual suspects lined up solidly in its favor: oil climbing steeply and the dollar getting hammered against the euro.
Of silver, the Hightower Report wrote: “With the silver market also getting its share of private bearish price predictions during the trade Thursday it was very impressive to see the market generally favor the upside. In fact, with gold favoring negative ground for most of the session, some of the bull contingent had to be extremely happy with the action today. Perhaps the silver market was garnering some support from the reversal in the Dollar and perhaps the silver market was actually lifted by the up beat macro economic developments from the US. In fact, with favorable initial and ongoing claims, positive May retail sales figures and a soaring equity market, perhaps the silver market was being lifted by improved physical demand expectations.”
That gold lagged the rest of the market was a foregone conclusion to those who believe it will follow the dollar and who shrugged off yesterday’s weakness in the buck.
“It's [Ben] Bernanke” who drove down gold, said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. “He has basically said the other day that interest rates are going up. If the dollar is going higher, gold is going lower.”
Period? Uh uh, says James Moore, of TheBullionDesk.com, who wrote that “as inflation becomes an increasing issue globally and credit market issues resurface, investors are likely to increase their demand for safe-haven assets such as gold.”
Currencies and Economic News
In the currency market, the dollar tanked against the euro. Late Thursday, the euro was trading at $1.5568 vs. $1.5435 on Wednesday.
The European Central Bank, at its meeting yesterday, decided to leave its key interest rate at 4%, as expected. However, it was the accompanying rhetoric that caused a stir.
“It is not excluded that, after having carefully examined the situation, that we could decide to move our rates a small amount in our next meeting in order to secure the solid anchoring of inflation expectations,” said ECB President Jean-Claude Trichet.
Trichet’s qualifier—“I don't say it's certain. I say it's possible.”—sounded unconvincing to many.
“Trichet continues to sound the hawkish trumpets, revealing that some on the ECB board wanted to hike rates, and admits that while not certain, the ECB could raise rates next month. This is significantly more hawkish than any expected,” wrote Marc Chandler, of Brown Brothers Harriman.
The ECB's also released revised staff projections for an average inflation of between 3.2% and 3.6% in 2008, with a midpoint of 3.4%. That's dramatically higher than the March projections for a midpoint at 2.9%, and well above the ECB's target of below 2%.
