What Happened

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Good Afternoon,

Commodities fans (with the possible exception of cocoa buyers) had a bad day at the office today, as the complex fell victim to that which had been alluded to for some time now: profit-taking in crude oil, and a Nosferatu-like US dollar.

We might as well start the day's synopsis with the observation that oil prices fell under $127 and lost more than $4 on a day when inventories fell by close to 9 million barrels (the largest drop in nearly four years). The dent in demand that record prices have engendered and will continue to result in, should values continue at such levels, put a severe amount of pressure on black gold and it ultimately caved. As if freed from its oily shackles, the greenback snapped forward and vaulted above 73.05 on the index, and pressed the euro to near $1.55 on the day.

Weighed down by the aforementioned major market developments and still lacking significant bargain hunting, New York gold headed toward the basement on the day, lowing about 3% at one point (equal to last week's entire gain) and was last seen showing a $23 loss at $876.80 spot bid. Silver buckled nearly 5% further demolishing ill-advised noise about putative shortages in the metal. Rising stockpiles and low demand impacted most of the base metals today, and the action snowballed once spec funds started to bail. Platinum caved more than $74 dollars to just under the round figure, last quoted at $1995.00 per ounce. Palladium lost $8 at $428.00 per ounce. Fundamentals still 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.

First Quarter GDP numbers came in at 0.9% - a revision 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? Run it did. Initial jobless claims rose 36,000 but personal income rose on the quarter. The remaining fly in the ointment in today's figures was the first drop in final retail sales in 17 years, raising worries about a consumer recession.

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.