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Good morning ...

Precious Metals

Gold was flat in the far East, picked up a bit in London trading, fell to its low for the day at the New York open, then traded rangebound between $950 and $960, finishing at $954.60/oz., down $2.40. For the week, gold was off just over 1%.

Platinum was, yet again, lower throughout the day, ending at $1839/oz., down $27. For the week, platinum was the metals' worst performer, coughing up nearly 9%.

Silver had a gloomy day, hitting its high early in then London session, then sliding for most of the day, closing just off its intraday low at $18.13/oz., down 38 cents. For the week, silver dropped 3.5%.

The end to a depressing week that terminated with a whimper rather than a bang couldn't have come too soon for the precious metals fanciers, as a succession of bad news out of both Washington and New York failed to kindle even the semblance of a fire under them.

Even though the dollar's performance was less than stellar, its modest gain against the euro appeared to drive the market more than oil, which was little changed.

Perhaps it was that, "The ameliorating Fannie/Freddie situation has lifted some of the fears of the taxpayer having to bail the institutions out and moderated the forward momentum in oil as well as gold," as Kitco's Jon Nadler theorized.

Or perhaps it was that, "Precious metals saw end-of-week profit-taking," said analysts at Sucden Research.

That gold held up so much better than either of its sisters suggests that they are still considered primarily industrial metals, and haven't attained the high investor status enjoyed by gold.

Platinum, for instance, hit a 5-month low yesterday and is off 8% over the past month, entirely because of the economic downturn. It's been hit by the double whammy of sinking auto sales, and the conversion of manufacturing lines to turn out smaller cars that use less of the metal.

"We're seeing demand destruction across the board in the auto sector and that has really impacted the platinum situation," as Nadler put it.

Traders have focused on that, ignoring the potentially huge supply disruptions in South Africa.

Currencies and Economic News

In the currency market, the dollar edged higher against the euro. Late Friday, the euro was trading at $1.5841 vs. $1.5859 on Thursday.

"The U.S. dollar is firmer in quiet but choppy trading, helped by what appears to be better than expected earnings from the U.S.'s largest bank," wrote currency strategists at Brown Brothers Harriman.

The reference was to Citigroup, which reported a second quarter loss of $2.5 billion. Horrendous in other times, but rosy in a present in which analysts had been predicting losses of nearly twice that.

Traders were likely encouraged that Citi shed $99 billion of its riskiest assets over the past three months.

But some analysts were dismayed that the dollar didn't perform better this week.

The buck was "influenced by conflicting factors, [but] even the sharp drop in oil prices was not enough to give the dollar strong support, at least not against the single currency," strategists at KBC Bank in Brussels wrote. "This is slightly disappointing from a dollar point of view."

Energy

In the energy market Friday, crude for August delivery had a quiet day, giving up some early gains to close at $128.88/barrel, down 41 cents. August reformulated gasoline added a penny, to $3.17/gallon.

The week's "huge pullback" came "as the economic mess in the U.S. continues, which has hurt current and future forecasted demand for oil," said Michael Davies of Sucden.

Even though China's GDP expanded at a robust 10.1% pace in the second quarter, that was down from 10.6% growth in the first quarter, was the slowest pace since 2005, and was below expectations for something closer to 10.3%. It was taken as further evidence that crude demand will decay going forward.

Also factoring in was the perception that there may be a thaw in relations between Washington and Tehran, leading to a lessening of Middle East tensions. Saeed Jalili, Iran's top nuclear negotiator, expressed cautious optimism about weekend talks in Geneva, to which Washington is sending a top diplomat.

Base Metals

The base metals were all in the red on Friday. Copper was all over the place, but stayed between $3.75 and $3.79, finishing near the lower part of the range, at $3.762/lb., down a penny and two-thirds. Nickel fell off at the New York open, bottoming at $9.05, after which a late-day rally helped it back to $9.1777/lb., down 10 1/4 cents. Zinc sagged, ending at $0.8131/lb., down more than a penny. Aluminum held up until mid-morning, but then sold off, eventually losing 2 2/3 cents, to $1.3541/lb., while lead also came well off its mid-morning high, dropping three-quarters of a cent, to $0.8865/lb.

Copper dipped lower on signs that Chinese demand is slowing.

China reported that stockpiles monitored by the Shanghai Futures Exchange gained 13% this past week, to 42,935 metric tons. That's their highest level since May 29. Chinese production in the six months through June rose 19% from a year earlier, the country's statistics bureau said.

"Rises in Chinese production, and increased stock levels in Shanghai, are having a much more direct downward impact today," wrote Edward Meir, of MF Global.

And Donald Selkin, National Securities Corp. in New York, said that "between slowing worldwide demand and increased Chinese supplies ... It's hard to justify higher prices right now."

China watchers have now revised their estimate of copper demand growth there at around 5% a year, compared with earlier expectations of 10%.

Yet, "Copper prices have remained very resilient over the past six months, this despite a deteriorating demand environment," UBS analysts wrote. "This counter-intuitive performance is a function of continued supply growth disappointments and risks which have plagued copper producers."

And technicians, consulting their tea leaves, chipped in by saying that there is strong resistance at $3.80 and especially $4.00, but good support at $3.63-3.65.

Meanwhile, aluminum's slump was also blamed on rising stocks. Inventories monitored by the LME rose 4,325 metric tons yesterday. That put them at more than 1.1 million tons, the highest level since May 2004.

"There's no real shortage of aluminium as we've seen from the large stock builds this week," said Lehman Brothers analyst Michael Widmer. "It's hard to make a case for prices to move higher but fears of supply disruptions in China due to power shortages and relatively high energy costs are supporting the market."

And in company news, a Companhia Vale do Rio Doce spokesman called rumors that Vale was preparing a bid for Freeport McMoRan "totally baseless."

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

First Majestic Silver Corp is committed to building a senior silver-producing mining company based on an aggressive acquisition and development plan with a focus on Mexico.

The Company presently owns or operates three silver mines in Mexico: The La Parrilla Silver Mine; The San Martin Silver Mine and the La Encantada Silver Mine. Annual production from these three mines is anticipated to be 5 million ounces.

Learn more about First Majestic.

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