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Good morning ...

Precious Metals

Gold was essentially unchanged until the New York session opened yesterday, but it took off northward from there and pushed higher with only minor setbacks through the day, finishing at $946.40/oz., up $18.20. Overnight, gold has pushed higher.

Platinum had a decent day for a change, moving higher into the late morning, then trading sideways to end at $1991/oz., up $37. Overnight, platinum is sharply higher.

Silver's chart was a lot flatter than gold's, with no sharp moves, yet it still stayed in positive territory from the New York open on, closing at $18.29/oz., up 18 cents. Overnight, silver has been trending higher.

That the metals did as well as they did was heartening to investors, as equities rebounded and the dollar strengthened during the day. But oil blasting higher was apparently enough of a stimulus.

And Middle Eastern instability also played in.

The Hightower Report summarized: "With a big range up extension in August gold today in the face of a minor weakness in the US Dollar, would seem to suggest that something other than classic currency related forces were serving to boost prices. Clearly ongoing geopolitical uncertainty, concern for the pace of the US economy and recent concerns of trouble in US agency issues provided the gold bugs with a host of safe haven factors to choose from. In fact, with some US Administration sources suggesting that the US wasn't going to give Iran a pass on their ongoing violations of UN rules some traders were bracing for ongoing tensions off the Iranian situation. We also suspect that a recovery bounce in oil prices and suggestions from the Fed's Bernanke that the markets were still being presented with ongoing turmoil, suggests that anxiety levels could remain high off a number of angles."

There were also technical factors at work, as the push above $930 triggered chart signals to buy, according to Marty McNeill, of R.F. Lafferty Inc. in New York. "It's a technical move," McNeill said. "In the short term, gold is well-bid above $930 or so."

Currencies and Economic News

In the currency market, the dollar was slightly higher against the euro. Late Thursday, the euro was trading at $1.5729 vs. $1.5741 on Wednesday.

The buck gave back much of its gain from early in the day, as equities sagged off of their highs.

Traders were paying close attention to Washington, trying to sort out what may happen with government-sponsored mortgage buyers Fannie Mae and Freddie Mac. Fed Chair Ben Bernanke and Treasury Secretary Henry Paulson were on the Hill, talking about financial regulatory reform before the House Financial Services Committee.

Paulson told Congress that both Fannie and Freddie are well capitialized, but that didn't keep the companies' stocks, which have been in free fall, from declining further yesterday. Their troubles are the latest, and potentially the most serious, of the continuing threats to the housing/credit market.

"Financial market turmoil resurfaces amid increased uncertainty [about] the solvency of Fannie Mae and Freddie Mac [raising] questions about the need for a government bailout," wrote Ashraf Laidi, chief foreign exchange strategist at CMC Markets.

"Four months after the Federal Reserve rescued ailing Bear Stearns via a lifeline from JP Morgan, questions arise on the way the government will rescue these companies, which own half of the $12 trillion in home mortgages," Laidi added.

Looking ahead, strategists at KBC Bank in Brussels see the dollar stuck in a broad trading range vs. the euro, wandering between $1.5285 on the low end and the euro's all-time high at $1.6020.

Economic fundamentals in the U.S. and Europe "are not that much different and both the [European Central Bank] and the [Federal Reserve] are in a similar deadlock," they wrote, with both facing increasing inflationary pressures.

And the Bank of England, as expected, decided yesterday to leave its key lending rate unchanged at 5%. The BoE is as trapped as any other, confronted by a slowing economy with inflation set to surge even further after hitting 3.3 %, annualized, in May.

Energy

In the energy market Thursday, crude for August delivery rocketed higher as it recovers from the big two-day blowoff, closing at $141.65, up $5.60. July reformulated gasoline added 5.52 cents, to $3.44/gallon.

"This market, losing $9 in two days, has really been oversold," said Zachary Oxman, of Wisdom Financial. "Geopolitical pressures mixed with the oversold condition" are pushing oil prices back up.

The tensions include developments in Iran, which reportedly launched a second missile test yesterday. However, a senior U.S. military official disputed that report.

And in Nigeria, where the militant rebel group, Movement for the Emancipation of the Niger Delta (MEND), said it will end its two-week ceasefire on Saturday. MEND made the announcement following a U.K. offer to help Nigeria quell violence.

British Prime Minister Gordon Brown said at the G8 summit that Britain would help Nigeria "deal with lawlessness," and that provoked a spokesman for the MEND to vow that U.K. interests would "suffer the consequences."

Base Metals

The base metals were nearly all in the black on Thursday. Copper started up in the pre-dawn hours and climbed until the late morning, but then ran into a determined selloff that sank it back into negative territory at $3.7929/lb., down a penny and a third. Nickel poked through the $10 barrier at mid-morning, then fell off steeply before closing with a meager gain of 5 3/4 cents, at $9.6812/lb. Zinc had another strong day and, though it pulled back nearly 3 cents from its highs, still ended at $0.8711/lb., up more than 4 cents. Aluminum went vertical in the pre-dawn hours, continued higher until mid-morning, then eased to $1.4466/lb., up more than 3 cents, while lead was smoking, adding another 7 1/4 cents to Wednesday's 6 cent gain and finishing at $0.8616/lb.

Aluminum hit its highest level ever, breaching the $1.50 mark at 10:30 before subsiding later in the session.

The metal was the talk of the sector as it took off after the Aluminum Corp of China and its peers - a group of 20 companies which produce over 70% of the country's aluminum output - signed an accord that will cut output by 5-10% , the China Nonferrous Metals Industry Association said .

That may remove as much as 1.2 million metric tons, RBS Sempra Metals says, which would go a long way toward easing the current supply glut. The global supply surplus was 458,000 tons in the first four months of this year.

The gang of 20 "also call for other producers in the country to cut output, showing support for the Beijing Olympic Games and creating an easier market condition for the industry," the Association said.

The move was seen as an attempt to curb energy use (aluminum being the most electricity-intensive of the metals) ahead of the Olympics. Authorities eliminated preferential power rates to smelters in January this year, and have also been cutting rebates for aluminum end-products.

But analysts at MF Global cautioned against irrational exuberance, writing that "while today's price reaction may be justified, the situation is very fluid, and may not necessarily be sustainable given the uncertainty about the time-line of the reductions, and more importantly how demand, exports, and duties, all play out against this production decrease."

Taking an opposite tack, Gayle Berry, of Barclays Capital London, said that, "We think these cut-backs in production will be a long term issue, and is not going to last for only a few weeks. They will continue to categorize the market going forward and could intensify in nature."

That's what's happening ... see you tomorrow!

Pediment Exploration Ltd. is a mineral exploration company with gold, silver and copper properties in Mexico. The company has significantly grown over the last year and has successfully developed one of their gold projects. Their current focus is on two very prospective projects, one in Sonora and one in the Baja California Sur, Mexico. Pediment spent approximately $3.5 million on exploration in 2007 and encountered a success rate of 98% on over 109 holes. The company is well financed and has aggressive exploration plans for 2008.

Learn more about Pediment Exploration Ltd.

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