Doug Hornig
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-4.0008/20/2008
The Daily Resource 8/20/08:
Good morning …
Precious Metals
Gold fell below $785 in Hong Kong, but that was the low for the day, as it rolled up and down around $790 in
Platinum remains unloved, as it dipped below $1200 in New York’s first hour before latching onto some late-day buyers who pushed it back to $1345/oz., down $32. Overnight, platinum has been flat.
Silver plunged 40 cents in far Eastern trading, but then hit two waves of buying interrupted by a couple of sharp retreats that limited its gains on the day, as it closed at $13.24/oz., up 21 cents. Overnight, silver has edged higher.
Gold bugs may be anticipating the day when the metal decouples from the usual suspects, but for now they rule, and the market benefited from another decline in the buck along with rising crude and falling equities.
Mark O'Byrne, of Gold and Silver Investments Ltd., isn’t exactly calling a bottom yet, but gold should be “well supported above $750 per ounce,” he said.
Going forward, “More consolidation in the gold market looks necessary and a weekly close above $850 will be needed prior to the primary trend reasserting itself … [and] the important short-term influences on gold will be whether the dollar can keep strengthening and whether oil prices continue to fall.”
Beyond that, though, the trend is still in place, and reasserting itself seems not far off.
“Inflation and stagflation are now stalking developed western economies and developing and emerging markets alike and this bodes well for gold in the long term as it was in the 1970s,” O'Byrne said.
Concurrently, “physical demand is surging again in
Meanwhile, “The platinum group metals continue to stink up the room,” O’Byrne said. Is the hideous selloff overdone? Well, he said, “the speed and size of the correction looks overdone and these metals are pricing in massive demand destruction and a global recession.”
Not that that couldn’t happen, but if it does no investment is safe.
Currencies and Economic News
In the currency market, the dollar slipped further against the euro. Late Tuesday, the euro was trading at $1.4785 vs. $1.4702 on Monday.
“The
“These events combined to take the dollar to lows of the week versus most major currencies, as a decent squeezing out of U.S. dollar longs set in,” they said.
The day’s hot number concerned inflation, as the Labor Department said U.S. producer prices increased by 1.2% in July, driven higher by prices for energy, cars, food and other products. That swamped expectations of economists, who were looking for an increase of only 0.3%.
Producer prices are up 9.8% over the past 12 months, which is the most since June 1981.
Separately, the Commerce Department estimated that housing starts fell 11% in July. That would drop the number of new single-family permits to the lowest level in 26 years.
And Richard Fisher, president of the Dallas Fed, stirred the pot by saying the conventional wisdom that inflation may soon peak as oil prices drop and the economy slows may turn out to be wishful thinking. Fisher said the Fed should remain "poised" to hike rates if slowing growth fails to contain inflationary pressures.
 |
| Inflation is coming. That will be the result of the Government’s “plans” to bail out banks, car companies, and anyone and everyone who asks for a handout. |
Energy
In the energy market Monday, crude for September delivery rose for the first time in four sessions, closing at $114.53/barrel, up $1.66. September reformulated gasoline added 4.9 cents, to $2.8639/gallon.
“Housing down more and inflation up are negative for crude oil,” said James Williams of WTRG Economics. “The European economy is having similar problems to ours, which is negative for oil consumption.”
Overall, that “would certainly seem to endorse the oil market's sharp month-long decline,” Kilduff said.
However, he added, “the current level of economic activity is sufficient to support [oil] prices at these, or even higher levels … We still live in a world where consumption of petroleum products is quite high and although slowing global economic growth has provided a temporary breather, supplies will be pressed, and even harder, once growth begins again.”
And OPEC member
Base Metals
The base metals were all in positive territory on Tuesday. Copper noodled around unchanged until mid-morning, when it took off and climbed steeply, then held to finish just off its intraday high at $3.4736/lb., up nearly 10˝ cents. Nickel was up in the pre-dawn hours, but took off most sharply higher at the same mid-morning point, closing at $8.6553/lb., up almost 52˝ cents. Zinc had a rollercoaster day of sudden ups and downs, but ended higher at $0.7679/lb. up nearly a penny and a quarter. Aluminum was down in the pre-dawn hours but regained the black during the morning, tacking on better than a penny to $1.2387/lb., while lead forged a very nice day, adding 4˝ cents, to $0.8168/lb.
Copper shoved its way to a two-week high after the decline in the dollar provoked a spate of short-covering, analysts said.
There was also apparently some momentum generated when automatic stop-buy orders were triggered by the push through $3.40.
Supply concerns factored in, as well. Citigroup wrote that copper will advance through 2010 as mine shortfalls and diminished production crimp output. BHP said miners will continue to face “serious challenges on the supply side” on Monday.
“Things like equipment stress, industrial action and wage disputes, labor and equipment shortages, inflationary pressures and then infrastructural problems” will continue to limit mine production, BHP CEO Marius Kloppers said.
Thus, “We expect a recovery in copper prices primarily based on lower than expected supplies,” said Joel Crane, of Deutsche Bank AG in
Nickel soared after Xstrata , the world's fourth- largest producer of the metal, suspended production at its Falcondo operations in the
Other nickel producers have delayed new projects and cut output as nickel prices’ slid to near their production cost, curbing profits.
That’s what’s happening … see you tomorrow!
NEWS YOU CAN USE
High Ridge Resources Inc. is in the business of evaluating, acquiring and developing natural resource properties. High Ridge properties are located in British Columbia and Peru with a mix of commodities; gold, silver, copper and zinc. The properties have been acquired by staking as well as optioning to earn 100% interest. The properties are chosen because of their significant past histories and expenditures. In some cases in addition to excellent drill targets already defined, near term production is possible.
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