PRECIOUS METAL PRODUCERS

[NYBob]

Gold fall from high near $660, but ends up on week -

Gold futures fell from a one-week high near $660 an ounce
Friday as a rise U.S. payrolls met most market expectations
and the trade deficit narrowed, boosting the dollar and
easing investment demand for precious metals.

But after climbing over the last three sessions, gold -
futures finished the week with a more than 1% gain.

Early Friday, the market was on its way higher
"but the market perceived economic data as dollar friendly,"
said Peter Spina, chief investment strategist at
GoldSeek.com, in e-mailed comments.

Gold for April delivery closed down $3.50 at $652 an ounce
on the New York Mercantile Exchange.
The contract had traded as high as $659.80 earlier in the
session.
It closed at $644.10 last Friday, so it was up $7.90 for
the week.

U.S. jobs data showed that nonfarm payrolls increased
by 97,000 in February, slightly lower than the 100,000
expected by economists surveyed by MarketWatch.
It was the smallest job gain since January 2005.
The unemployment rate fell back to 4.5% from 4.6%.

"The domestic employment statistics contained little in
the way of a surprise," said Jon Nadler, an analyst at
Kitco Bullion Dealers.

It's "better for all markets that [the data were] released
and there's nothing to worry about either positively or
negatively for the market, said Neal Ryan, director
of economic research at Blanchard, in e-mailed comments.

"That being said, I think the fact we have had a $10 jump
in oil prices in February compared to January will
significantly impact the trade deficit numbers on
the negative side moving forward," he said.

The U.S. trade deficit narrowed again in January, adding
to the sense that the trade gap has at least stabilized
and may be starting on a downward trend, a government
report showed Friday.

"Government reports out this morning make it seem that
since we've backed off the $70 billion number recently,
we're out of the woods on the trade imbalances and
I don't believe that is the case," said Ryan.

Following the jobs report, the dollar rallied against
the yen and rose against the euro. Strength in
the dollar typically put pressure on gold.

"Gold will now be seeking to call upon its old friends:
oil, the dollar, and interest rates to find better
correlations and to get away from the slightly perverse
focus on rising equity markets in order to steer a
price course," Nadler said in e-mailed commentary.

Crude-oil futures fell under $61 a barrel Friday, trading
lower for the week as traders gauged supply and demand ahead
of a meeting of key oil producers next week. But overall,
crude has held up fairly well even when the bottom fell out
from global financial markets and most other commodities.

"Bullion will also be seeking the return of the physical buyer
in order to ensure a healthy spring," said Nadler.
A mixed picture

On Thursday, gold closed up $2.60 at $655.50 an ounce, the
contract's highest level in a week. It gained $16.30 during a
three-session climb, which followed a five-session losing
streak that drew down prices by more than $50.

"Technically, gold and silver need to complete their
consolidation after the financial tsunami of last week,"
said Julian Phillips, an analyst at GoldForecaster.com.
"Oil favors gold and the dollar, whilst stronger than
earlier this week, is still looking anemic.

"Gold is still building a foundation, and waiting for
triggers to send it higher," he said in e-mailed comments.

May silver shed 15 cents to close at $12.97 an ounce, nearly
unchanged from the $12.96 level it closed at a week ago.

"The key to key to gold's performance over the next few weeks
is how emerging market equity indices behave ... because the
biggest per-capita purchases of gold are made by people in
countries like India, China, Malaysia, and in some Middle
Eastern countries," said Steven Jon Kaplan, a senior editor
at TrueContrarian.com.

June palladium rose $3.35 to end at $356.40 an ounce,
up 1.7% for the week, but sister metal platinum saw its
April contract pull back by $10.80 to close at $1,203.70
an ounce, down 0.7% for the week.

On the supply side, gold inventories were unchanged at
7.49 million troy ounces and copper supplies were unchanged
at 36,994 short tons as of late Wednesday, according to
New York Mercantile Exchange data. Silver supplies fell
34,733 troy ounces to stand at 118.18 million troy ounces
as of late Thursday.
Goldman Sachs remains bullish on gold

"The recent sell-off in gold and gold equities has created
a good buying opportunity for gold, given strengthening
fundamentals," said Oscar Cabrera, a Goldman Sachs analyst,
in a Friday research note.

Goldman Sachs expects gold prices to end 2007 at $725 an
ounce and to average $689 an ounce during the year, boosted
by further declines in the dollar.
Expectations of widening interest rate differentials
between the United States and the rest of the world
will continue to weaken the dollar in 2007. Gold and the
dollar have traditionally had an inverse relationship
and downward trends in the dollar are very bullish
for gold, which is seen as a safe-haven investment.

The same factors that triggered the sell-off in gold prices
on Feb. 27 will provide support for the precious metal,
Goldman Sachs said.
These include a weak U.S. January durable goods report;
concerns over performance of sub-prime mortgage loans
which could impact the U.S. financial system,
further weakening of the dollar;
concerns of an over-extended yen carry-trade, which if
unwound could strengthen the yen versus the U.S. dollar;
a 9% drop in Chinese equity markets, rising global risk
concerns;
and comments by former Federal Reserve Chairman
Alan Greenspan that a recession was possible in 2007.

Demand for gold has also remained strong, while mine
production has slipped in the last few years, as
companies deal with mature ore bodies, lower grades
and increasing costs for developments, Goldman Sachs said.

Finally, net central bank sales fell sharply in 2006, and
the central banks of important emerging markets, like
China and Russia, are adding to their gold holdings
to diversify their reserves.

http://biz.yahoo.com/iw/070308/0224411.html

http://www.marketwire.com/mw/release_html_b1?release_id=224411

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