• Print
• E-Mail

Good morning ...

Precious Metals

Gold was flat in the far East, picked up a bit in London trading, and really took off during the New York session yesterday, fought off a late morning slump and continued higher into the Globex, finishing at $965.30/oz., up $18.90. For the week, gold was up 3.4%.

Platinum spent most of the day pushing hard for $2040 but couldn't get there and in the end retreated to $2018/oz., up $27. For the week, platinum eked out a gain of less than a half of one percent.

Silver rose more sharply than gold, and its late morning retreat was shallower, as it wound up closing just off its intraday high at $18.80/oz., up 51 cents. For the week, silver pushed higher by 3%.

It was another banner day for the precious metals, as well it should have been, since the market movers were all lined up in their favor with oil blasting higher, and the dollar and equities declining in the face of serious questions about the solvency of Fannie Mae and Freddie Mac.

Add in reports that Israeli warplanes have been practicing in Iraqi air space, fueling speculation about a potential strike on Iranian targets, and investors would be expected to flee to the safe haven of gold.

Are we now into the next leg up for this bull market? Many analysts are beginning to suggest just that.

A good example is Peter Spina, of Goldforecaster.com, who wrote that, "The growing sense of concern over the stability of the financial system is starting to teeter on the edge of a panic. There remain many, even those within the gold industry, ignorant to the severity of the unfolding financial turmoil. As the education process continues and the significance of situation deepens in severity, the destruction of confidence will translate into greater flow of capital into both gold and silver. Confidence in gold and silver's monetary integrity is backed up by many attributes including history itself.

"Mining stocks have particularly been depressed and further short-term downside risks do remain. The valuations of these mining investments continue to diverge from the current metal prices and future prospects. There will be, sometime in the coming months, the start of a tremendous influx of capital flow into these mining equities. The risk to reward opportunities here are quite incredible. I believe that once these metal prices establish new record highs that will be the likely trigger for many institutional and retail funds to pour into these equities.

"Next week gold has the opportunity to build on gains and once again challenge the $1,000 level and potentially higher. Once we break past the prior record levels, I expect the next leg higher to ensue. Is this another false start? Next few weeks will be telling!" Spina concluded.

Currencies and Economic News

In the currency market, the dollar plunged against the euro. Late Friday, the euro was trading at $1.5931 vs. $1.5729 on Thursday.

"For the greenback, politics is trumping economics as fear that Israel may attack oil-rich Iran makes traders jittery," said Kathy Lien, of DailyFX.com.

As traders fled to safety, "even the better than expected U.S. trade balance numbers could not help the dollar, because the sentiment in the market is very dollar bearish," she added. The trade deficit unexpectedly narrowed in May to $59.8 billion from $60.9 billion.

Financial markets remain in turmoil. Friday's New York Times said that Bush administration officials have weighed the possibility of a government takeover of Fannie Mae or Freddie Mac, or both, if the situation worsens.

But Treasury Secretary Henry Paulson refused to give that credence, stating that the Treasury is "supporting Fannie Mae and Freddie Mac in their current form."

Separately, Fed Chair Bernanke assured Fannie and Freddie that they would be welcome to show up at the discount window, if need be, according to reports. The Fed, formerly the lender of last resort for commercial banks, opened up to investment banks earlier this year, and now will apparently support government-sponsored enterprises (so-called GSEs), as well.

Energy

In the energy market Friday, crude for August delivery backed off from a record high hit in early electronic trading, but still moved substantially higher for the second straight day, closing at $145.08, up $3.43. August reformulated gasoline added 5.23 cents, to $3.56/gallon.

What a wild and woolly week it's been, with an unchanged price on Wednesday bracketed by a $9.25/barrel loss on Monday and Tuesday, and a $9.03 gain Thursday and Friday.

The difference seems to have been in foreign affairs. "Most of the current upward pressure is about Iran," said James Williams, of WTRG Economics. "Until the rhetoric on both sides [Iran and Israel] is toned down, this will be a major driver in oil price movements."

Indeed, demand doesn't seem to be driving anything. The Energy Information Administration projected that U.S. petroleum consumption will shrink by 400,000 barrels a day in 2008, up nearly 40% from the June estimate.

Michael Fitzpatrick, an analyst at MF Global, added that "with the weekend looming no one wants much of an exposure, particularly with potential MEND activity tomorrow." Nigerian militants who head the Movement for the Emancipation of the Niger Delta (MEND), have said they will end their two-week cease-fire today.

Base Metals

The base metals, except for nickel, were all in the black on Friday. Copper started up in the pre-dawn hours and peaked around mid-morning at nearly $3.87, but then dropped off before finishing in positive territory at $3.8335/lb., up 4 cents. Nickel rose in the pre-dawn hours, poking through the $10 barrier again, but again fell off from there to close at its intraday low of $9.6524/lb., down less than 3 cents. Zinc was up in the pre-dawn hours and held onto its gains through the day, ending at $0.9092/lb., up more than 3 3/4 cents. Aluminum hit $1.50 in the pre-dawn hours, and again at mid-morning, but failed to hold there, dropping to $1.4767/lb., up 3 cents, while lead rocketed past $0.92 early and stayed in the black despite a steep morning drop, adding 2 cents, to $0.882/lb.

Except for nickel, the industrial metals were well supported yesterday, benefiting from credit crisis fears on the one hand, and potential supply deficits on the other.

"For the moment supply disruptions and a feeling that consumers are generally running with low stocks and therefore are vulnerable to higher prices and may end up chasing the market higher seems to be driving sentiment," said Basemetals.Com analyst William Adams.

Copper inventories monitored by the LME were off 725 metric tons, to 124,125 tons yesterday, and stocks are down 37% so far this year.

Freeport-McMoRan Copper & Gold Inc.'s Peruvian copper-mine workers are still planning to go on strike July 16. That follows earlier unrest in Latin America this year, which has affected production in Peru, Chile and Mexico.

Wednesday's announcement by China producers that they're cutting output by 5-10% was still being felt, although many were downplaying it.

"Estimates of 1 million metric tonnes of lost [aluminum] production are plainly ridiculous as this assumes that this capacity reduction is semi permanent," said JP Morgan analyst Michael Jansen. "We would be surprised if cuts, if they happen, last more than two months as one major reason for the cuts is to reduce electricity production from polluting coal fired power stations. After the Olympics this rationale will not be convincing."

But, in a report out of China yesterday, it appears that zinc producers may follow aluminum's lead. Zinc smelters in the world's largest producer of the metal will meet this weekend to consider production cuts as a response to falling prices causing losses.

That's what's happening ... have a great weekend and see you Tuesday!

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.

The Daily Resource has been brought to you by our friend's at Casey Research.

For a great overview of the commodity sector we offer the 'Casey's Daily Resource Plus'.

Inquire Here