The Dirty Fingerprints of Digital Gold

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Good Morning,

We might as well start the daily synopsis with the observation that oil prices fell under $130 ahead of the release of US inventory figures, a drop which sparked a further rise in the US dollar (now at 72.85 on the index). Weighed down by the aforementioned developments and lacking significant bargain hunting gold headed back towards $890 per ounce after a valiant effort to maintain the $900 level following the close of futures trading in NY yesterday. Evidently, now that everyone and their cousin has chimed in on the prospects for $150 oil being just a few trading sessions away, some participants are deciding that it is time to pull some chips off a very rich table and let some hard data first corroborate the justification for such exuberance.

New York's Thursday session opened with gold still on the retreat, quoted at $891.30 spot bid, a decline of $8.60 per ounce. The lows overnight were very near the lows observed during the previous one, just above $888 an ounce. Today's economic platter of statistics offers rich pickings for those who read the tea leaves therein in order to gauge the current tilt in the US economy. Aside from the oil inventory figure, we get preliminary first quarter GDP and jobless claims numbers for last week as well.

Both figures are normally dollar-movers, thus the trading crowd will be paying keen attention. Et voila, the GDP number is in. First Quarter 2008 came in at 0.9% - a revision to the higher number from the original 0.6% estimate, during a period when even the most optimistic watchers had expected a flat-to-negative figure. Let the dollar run? Too early to tell. Initial jobless claims rose 36,000 but personal income rose on the quarter. The fly in the ointment here was the first drop in final retail sales in 17 years, raising worries about a consumer recession.

Silver fell 30 cents to $17.11 an ounce, right along with further 2% to 4% drops in various base metals as the commodity sell-off continues this week. Platinum caved more than $70 dollars to just under the round figure, last quoted at $1997.00 per ounce. Palladium lost $2 at $434.00 per ounce. Fundamentals remain quite bullish for the noble metal complex, but sympathetic adjustments precipitated by the dollar/oil tango will not be ignored at least in the short-term.

While we do not expect the following story to go without mention in the tinfoil forums, we feel it is important enough to bring to our readers as the potential developments on this front could have some effects on those who may have chosen investments in this area of the bullion product spectrum. Our good Mineweb friend Dorothy Kosich writes about regulators and digital gold and the latest developments on the enforcement front :

" The concept of digital gold currencies (DGC) or e-currency, digital currency or e-money denominated in gold weight is now being offered by such reputable organizations as the London Gold Exchange.

However, digital gold currency has regulators in the United States, Canada and France concerned that it may use a tool favored by ordinary criminal and more sophisticated forms of organized crime to launder money, or utilized in the commission of crime, or even finance terrorism.

In a report originally intended as intelligence for a law enforcement agency, but made public this week by the Globe and Mail through Access to Information requests, Canada's financial regulator, the Financial Transactions and Reports Analysis Centre of Canada, FINTRAC, found Digital Precious Metals Operators "have achieved critical mass on the web."

As financial institutions and non-financial businesses increasingly deter money laundering and terrorism financing, adaptable and technology-savvy criminals and terrorist financiers will likely see other unregulated, exploitable avenues to further their nefarious purposes. Digital precious metals may become one of them," FINTRAC warned.

The system works thusly: