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01/30/2006
The Daily Resource 1/30/06:
Good morning. . .Gold meandered aimlessly between $563 and $557 on Friday, finally settling at $558.50/oz, down $1.20 from Thursday. Early this morning, gold has been rising in London and, as we begin the New York day, it is selling for $561.60.
Platinum fell below $1045 in the early morning hours, but quickly regained its feet in New York and ended the day at $1060/oz., for a gain of $5 over Thursday. Overnight, platinum has been flat, and as we head for the morning opening it is trading at $1058.
Silver soared over $9.75 in London in the early morning on Friday, then traded choppily in New York for the whole day. In the end, it had added only 3 cents over Thursday, closing at $9.57/oz., but rested comfortably at a 19-year high. Overnight, silver has been trading steady to upward and, heading into this morning's New York open, it is selling for $9.66 in London. (Click here for charts)
Though the performance of silver garnered much of the attention last week, the influx of money into gold was dramatic, even if a little quieter.
Check this out: streetTRACKS Gold Fund (GLD)-the largest ETF traded on the NYSE, and one of several relatively new vehicles for owning gold without taking delivery of physical metal-added an eye-popping 39.62 tons to its trust vaults last week.
That's
Week-over-week, the net asset value of GLD ballooned by $664 million to $5.94 billion, almost all of which represents new money flowing into the fund. There must be a lot of head shaking going on in the bear's den, among those calling for a sharp correction, when that kind of interest is generated at these price levels.
Stunning . . .
In the currency market, the dollar moved positively vs. the euro again on Friday. Late in the day, the euro was changing hands at $1.2106, as opposed to $1.2215 on Thursday.
The buck was pressured lower early in the day, after a much weaker-than-expected fourth-quarter gross domestic product report surprised the market. The Commerce Department said economic growth slowed to a 1.1% annual rate in the fourth quarter, the weakest in three years and far below the 2.7% rate predicted in a survey conducted by MarketWatch.
But later the currency got a boost from better than expected numbers for December new home sales, and by apparent demand from Asian central banks. According to analysts, China often moves to bolster the USD in order to protect the value of its massive Treasury holdings.
Many analysts wrote off the dismal GDP figures as an anomaly, especially in light of home sales that remain strong. But a few, remembering the recent inversion of the yield curve, believe that a real slowdown is in the works, in which case further Fed tightening will be counter-productive. (Click here for currency prices)
The price of oil rose on Friday. Crude for March delivery moved up to $67.76/barrel on the New York Mercantile Exchange, a gain of $1.50 from Thursday. February unleaded also spiked, jumping back over the $1.70 mark to close at $1.7364/gallon, a gain of 5.21 cents.
Along with the Iranian and Nigerian problems, Norway now is poised to be added to the mix. Norwegian oil production may be reduced next month if a labor union and Norsk Hydro ASA fail to resolve a conflict over a tariff agreement, a union leader said on Friday. Norway is the third-biggest oil exporter after Saudi Arabia and Russia.
OPEC has a full plate when it convenes for it meeting in Vienna on Tuesday. While there is little indication that OPEC will make any dramatic moves, "There is little good news from oil-producing countries," said James Williams, an economist at WTRG Economics. Thus, "the market concern is not over current supply, but over the inability to cover any supply interruptions."
In recent weeks, various members of OPEC have assured the markets that they will cover any shortfalls. Still, supply uncertainty remains, and it is likely to be accompanied by continuing high prices.
The base metals were wildly mixed on Friday. Copper, which was marginally lower on Thursday, rebounded strongly, rising by more than three cents to $2.2495/lb. Nickel rocketed upward, gaining 21½ cents, to $6.8818/lb. Zinc fell, however, dropping below the $1.00 mark and ending at $0.9993/lb., down eight-tenths of a cent. Aluminum traded up strongly for most of the day but then backed off, nevertheless adding just over a penny, to $1.122/lb., while lead nosedived in the early morning hours and never recovered, shedding 4¼ cents, to $0.5896/lb.
Today, we wrap up our look, begun last week, at some of the factors driving the base metals boom.
Let's consider the forward curves. The futures market, and over-the-counter forward market, allow for buying and selling of physical metal out into the future, at a price fixed today. Normally, base metals forward curves are "backwardated," an awkward term that simply means the farther out in time you go, the lower the price.
This can be confusing when brokers call for a rising price, then set a future price that is lower than today's. But in actuality, this smoothes things out overall, because unless there's an immediate emergency need, buyers can plan to stock up and hold when prices are lower. Thus future prices are higher than spot only when there's real scarcity envisioned, and the further out on the curve you go, the more prices revert to an average level.
Today, we're in a historically unusual situation. While future prices are still backwardated, they are not shifting back toward the average as they did in the past. They are moving upward in tandem with spot. Which in turn buoys the spot price. And so on.
Yet another indication that base metals prices, like those for other commodities, seldom do what they do for no good reason.
That's what's happening . . . Until tomorrow!
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