Gold, Silver and ETFs

123jump.com Staff
28 Apr, 2006
Metals

Gold staged $18 rally and closed at a record price of $654 after climbing as high as $658. Gold continues to attract attention with international tension driven by Iran affair. Gold is up 12% for the month. U.S. dollar fell and oil climbed reflating tensions in the international markets.

[R]3:30PM Gold, dollar and international tensions.[/R]
Gold staged another record and climbed to as high as $658.20 on New York Mercantile Exchange before settling to $654.50, up $18.20 or 2.9% for the day. Gold is now up 11% for the month. Silver also staged a rally of 8% on the news that the first exchange traded fund was launched. The new ETF listed under the name ‘SLV’ closed up 7% or $9.12 on a heavy volume of 2 million shares. Silver price has been moving higher on the speculation of imminent launch of the ETF in the last month. Silver price may come down in the coming weeks now that the ETF has been launched. Gold ETF share represent one tenth of the ounce and silver ETF represent 10 ounces of silver. Gold ETF managed by StreetTracks Gold Trust was launched in November 2004 and has now accumulated more than $6.5 billion of assets.

[R]12:30PM European stocks closed lower on auto stocks.[/R]
European markets closed in the negative, extending earlier losses on weakness in the auto sector, contributed by 5.4% drop for Volkswagen after releasing fourfold earnings increase in Q1 which came far below expectations. The news dragged down other automakers like DaimlerChrysler and Renault. Market sentiment was also hurt by losses in oil companies like the Italian Eni and the French Total. The German DAX 30 tumbled 1%, the French CAC 40 lost 0.5% and London FTSE 100 fell 0.6%.

Crude oil prices climbed back on growing concerns about Iran’s nuclear program. Light sweet crude June delivery rose 63 cents to $71.60 a barrel. London Brent gained 75 cents to $71.66. European gold posted gains. In London gold rose to $650.30 per troy ounce from $641.25. In Zurich the precious metal rose to $637.95 from $639.15. In Hong Kong gold rose to $638.60. Silver closed at $12.40, down from $12.90. The U.S. dollar traded mixed vs. major currencies. The euro traded at $1.2583, up from $1.2424. The dollar bought 114.19 yen, up from 114.08. The British pound was quoted at $1.8139, up from $1.8023.

[R]11:30AM The Dow and S&P 500 moved higher. The Nasdaq traded down.[/R]
The major averages have traded in a lackluster fashion for the last hour with the Dow and S&P500 moving back into the positive territory, while the Nasdaq kept trading below the flat line. The strength shown by the Dow was largely contributable to a strong upward movement by shares of J.P.Morgan ((JPM)) and Citigroup ((C)). Both companies gained 3% giving a boost to the banking sector, which rebounded from recent declines on receding interest rates concerns. Citigroup advanced on upgrade by Piper Jaffray from market perform to outperform. Health insurance stocks moved notably higher on bargain hunting following recent weakness in the sector, with Coventry Health ((CVH)) helping to lead the sector higher after reporting Q1 profit growth.

A rebound in the price of oil contributed to a considerable strength among oil service stocks, with the Philadelphia Oil Service Index currently up 2.4% after closing lower in the four previous sessions. Bargain hunting helped the gold sector move higher, benefiting from gold prices as high as $647.50 an ounce. The Nasdaq posted a sharp drop after tech stocks came under pressure following the release of disappointing earnings and outlook from Microsoft ((MSFT)). Airline stocks were among notable decliners on profit taking. The Amex Airline Index fell 2%.In late morning trading, the Dow Jones industrial average rose 4.32, or 0.04%. The Standard & Poor''s 500 index rose 3.94, or 0.3%, and the Nasdaq fell 12.66, or 0.54%. Bonds edged higher on the GDP data, with the yield on the 10-year Treasury note slipping to 5.1% from 5.11%late Thursday.


[R]10:30AM Sensex rebounds after a volatile session.[/R]
Sensex in India finished after moving up 16.91 points (14%), to 11,851.93. The daily turnover on BSE was Rs 4426 crore, lower than yesterday’s Rs 5335 crore. Reliance Industries advanced 1.2% to Rs 1,009.That impacted the market as the company’s weightage is 10.4% in the index. TCS also posted positive news, increasing 1.9% to Rs 1.990. Another company to toe the line was ICICI Bank, gaining 1.4% to Rs 575. Infosys broke the line, remaining flat at Rs3.135. The company stock rebounded from the prior level of Rs 3.095.

Auto stocks also looked positive. Hero Honda advanced 3.2% to Rs 850 and Maruti Udyog put up 2.8% to Rs 924. US crude for June delivery declined 32% to settle at $70.65. ACC advanced 1.8% to Rs 951. Cement prices have been on the rise over the past few days. NTPC, power generation company advanced 4.6% to Rs. 135.50. Patni Computer reported first quarter flat earnings of $13 million on revenue of more than $145 million. The revenue jumped 33% but earnings declined 5%. The ADR of the company stock in New York trading has declined from $24 to $16 in less than three months. Hindustan Lever reported fourth quarter profit of $100 million (Rs. 442 crores) vs. $55 million (Rs. 250 crores).


[R] 9:45AM Stocks opened in the negative. The Nasdaq dropped 1%.[/R]
U.S. stocks opened in the negative with the major equity indices moving to the downside. The Nasdaq showed a considerable weakness at the start of the trading session, dragged down by Microsoft ((MSFT)). The tech-heavy average dropped 1% after the software giant reported disappointing earnings and outlook. The stock slipped 11%.

The disappointing results from Microsoft contributed to weakness throughout the technology sector, sending software and computer hardware stocks notably lower. At the same time, strength among health insurance and commodity stocks helped to limit the downside for the broader markets. UnitedHealth Group Inc. ((UNH)) gained 1% following a government report that the health insurer landed the biggest share of participants in the new privately administered Medicare drug program. Another increase in the price of oil sent the energy sector higher, with oil service stocks posting significant strength after moving sharply lower in the previous session. Gold and other metal stocks rebounded as the increase in metal prices generated some buying interest.

Airline socks reversed from recent gains to post considerable weakness in early trading, sending the Amex Airline Index down by 1.6%. The weakness in the airline sector was attributable to an increase in the price of oil, which raised concerns about higher fuel costs. In the first hour of trading, the Dow Jones industrial average fell 20.49, or 0.18%. The Standard & Poor''s 500 index was down 0.69, or 0.05%, and the Nasdaq composite index slid 20.20, or 0.86. Bonds edged higher on the GDP data, with the yield on the 10-year Treasury note falling to 5.09% from 5.11% late Thursday.

[R]9:00 AM Stock futures indicated a negative market opening.[/R]
U.S. stock futures pointed to a weak start, following a sharp market turnaround on Thursday when stocks moved sharply higher after Ben Bernanke’s testimony before Congress. Stocks turned to positive direction as rate concerns receded after the Fed Reserve Chairman raised hope that the Fed may pause its interest rate raising campaign. Economic outlook and interest rates are expected to remain in focus today after a report on first quarter GDP was released, showing GDP growth roughly in line with analyst estimates. GDP increased at an annual rate of 4.8% in Q1 after seeing 1.7% growth in Q4, slightly below the expected growth of 4.9%. Quarterly earnings are also seen in the spotlight, with shares of Microsoft ((MSFT)) under pressure in pre-market trading after the company reported weaker-than-expected Q3 results and provided disappointing guidance for the Q4. Among the companies reporting robust earnings, Chevron Corp. ((CVX)) posted 49% profit jump to $4 billion, or $1.80 per share on 31% revenue growth of $54.6 billion. The company’s quarterly results exceeded the average analyst estimate by two cents.

[R]GDP grew in line with expectations.[/R]
Friday morning, the Department of Commerce released its highly anticipated advanced report on first quarter gross domestic product. The report showed that GDP grew roughly in line with analyst estimates. The Commerce Department said that GDP increased at an annual rate of 4.8 percent in the first quarter after seeing 1.7 percent growth in the fourth quarter. Economists had been expecting GDP to grow by about 4.9 percent. The first quarter GDP growth reflected a significant increase in consumer spending, which rose 5.5 percent for the quarter after a much more modest 0.9 percent increase in the fourth quarter. Increased equipment and software spending, exports, and federal spending also contributed to the growth. The growth was partly offset by a downturn in private inventory investment as well as an increase in imports, which are a subtraction in the calculation of GDP. The Commerce Department also said that its reading on consumer prices excluding food and energy prices rose 2.0 percent in the first quarter following a 2.4 percent increase in the fourth quarter. The deceleration may help to offset inflation concerns.

Crude oil prices declined on receding fuel supply concerns but kept hovering over $70 as tensions over Iran’s nuclear program weighed. Light sweet crude June delivery fell 33 cents to $70.64 a barrel. London Brent dropped 35 cents to $70.56. Gold prices regained ground after the sharp drop yesterday, following China’s decision to raise its interest rates. Gold for June delivery rose $4.60 to $641.20 per troy ounce. Silver July delivery gained 13 cents to $12.72. Copper added about 1 cent to trade at $3.34 a pound. The U.S. dollar dropped to an eight-month low vs. the euro but rose vs. the yen on economic data. The euro traded up 0.1% at $1.2551. The dollar bought 114.28 yen, up 0.1%. The British pound was quoted at $1.8086, up 0.4%.

Snap-On Inc, ((SNA)), tool maker, reported Q1 earnings of 37 cents a share, up from a profit of 31 cents a share a year-earlier despite sales decline, beating analysts’ estimates for a profit of 28 cents a share.

Automatic Data Processing Inc, ((APD)), data and transaction processor, reported Q3 net income advanced to 64 cents a share, up from 57 cents a share in the year-ago period. Sales increased 10% to $2.44 billion from $2.22 billion in Q3. The company beat analysts’ forecasts by a penny.
Simon Property Group Inc, ((SPG)), real estate properties operator, reported Q1 net income increased to 47 cents a share, from 26 cents a share in the year-ago period. The company added that funds from operations advanced to $1.26 a share from $1.12 the prior year. The company topped analysts’ estimates for earnings of 23 cents a share, and funds from operations of $1.20.

The Lamson & Sessions Co, ((LMS)), telecommunications and engineered sewer products manufacturer, reported Q1 net income advanced almost four times to 58 cents a share, from 15 cents a share in the year-earlier period on 37% revenue growth, beating analysts views for earnings of 55 cents a share.

American Axle & Manufacturing Holdings Inc, ((AXL)), driveline systems producer, reported its Q1 net income dropped to 17 cents a share, from 26 cents a share in the year-ago period. The company added the 2006 results incorporated a tax-related gain of 6 cents a share and a $10.4 million rise in non-cash expenses. The company missed analysts’ estimate of 19 cents a share.

Corinthian Colleges Inc, ((COCO)), education group, reported Q3 net income dropped to 17 cents a share, from 23 cents a share a year earlier. The company added that current earnings incorporate stock-option expensing costs of 2 cents a share. Revenue dropped to $250.3 million from $252.8 million. The company also announced that the sale of its Corporate Education Services division reduced revenue by around $7.1 million in Q3. If not for this divestiture, revenue advanced by around $4.6 million, or 1.9% in Q3. The company beat analyst estimate for earnings of 16 cents a share. Corinthian is expecting Q4 earnings in the range of 13 cents to 15 cents a share, including aRound 1 cent a share for stock-option expensing.


[R]8:15AM European averages dropped for a fourth day in a row.[/R]
European markets posted losses for a fourth consecutive session. Averages were dragged down by weakness in oil companies as crude oil prices further declined to reach levels above $70 a barrel, sharply down from recent highs of $75. The Italian Eni and the French Total posted the steepest drop among oil majors. In currency markets the euro gained vs. the dollar on economic data. The German DAX 30 slipped 0.8%, dragged by 4.2% loss for car maker Volkswagen on lower-than-expected quarterly earnings and 2.4% decline for Siemens due to a brokerage downgrade. The French CAC 40 lost 0.4% and London FTSE 100 fell 0.3%.


[R]7.00AM Asian Markets finished lower.[/R]
Asian-Pacific benchmarks closed lower. The Nikkei, Japan’s benchmark ended down 208.31 points, or 1.2% to 16,906.23. .The low came in the wake of China’s decision to tighten its grip on its soaring money supply growth, for fears of a potential investment bubble. Japan’s benchmark was also influenced by a poor Sony performance, shedding 5.8% after reporting a first-quarter loss and an uncertain outlook for the fiscal year. Other blue chips faired better, Canon advanced 2.3%, reporting 18.7% quarterly growth. Pioneer rose 5.3%, despite announcing $143 million operating loss on restructuring issues. Kospi, Seoul’s benchmark shed 2.5%, led by government data and Hyundai Motors legal problems. Hong Kong’ Hang Seng also ended 0.5% lower or 16,661.30 making it 1.5% for the week.