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Precious Metals

The precious metals suffered mixed fates on Thursday as gold and silver ended their sharp declines of the past two days by posting modest gains, while platinum continued its freefall. Gold inched upwards throughout the day, hitting an intraday high of $931.20/oz. during London trading. Prices dropped during NYMEX trading, but recovered during electronic trading before closing the day up $6.90, at $926.50/oz.. Overnight, gold has trended higher.

Platinum had another rough day Thursday. Although up early in trading in the Far East,prices declined steadily throughout the day, finishing below the $1,700 mark, down $37, at $1695/oz. Overnight, platinum has risen

Silver was up in early trading before dipping to an intraday low of $17.075/oz. during the NYMEX. The metal recovered, however, ending at $17.41/oz., up $0.05. Overnight, silver has climbed slightly.

Gold's return to the black was largely the result of recovering crude prices, which finally posted gains after a week of heavy losses. This rise, along with stumbling US equities, was enough to push gold up despite opposition from gains by the dollar. Gold has closely tracked oil prices over the past week.

"The fundamentals haven't changed for oil and gold,'' wrote Ralph Preston of Heritage West Futures. "The washout in the metals has, for the most part, run its course. I'm comfortable wading back in."

Mark O'Byrne, the executive director of Gold and Silver Instruments Ltd. agreed that gold prices will soon recover from their beating over the past few days. "This looks likely to be the last such sell-off prior to a strong rally into the autumn, as is typical," he said.

"While gold has suffered strong selling in recent sessions, it is only working off an overbought position, and a correction and consolidation is healthy and normal," O'Byrne added.

In company news, Newmont Mining posted a second quarter profit of $277 million, vs. a $2.06 billion loss in the year-ago period. That loss reflected $2.27 billion in write-downs.

Currencies and Economic News

In currency news, the dollar was up again against the euro. The euro was trading at $1.5674 late Thursday vs. $1.5690 on Wednesday.

The positive news for the dollar comes despite bleak economic news on the day, as a report by the National Association of Realtors showed that financial woes in the housing sector are far from over.

Resales of single-family homes and condos fell 2.6% last month to an adjusted annual rate of 4.86 million, the lowest figure in ten years and well below economists' expectations for a drop to 4.95 million. Meanwhile, the number of unsold homes on the market rose 0.2% in June, to an 11.1-month supply.

News from the US equities market was also decidedly bearish, as the DOW posted its largest loss in a month, led by automakers Ford, Daimler AG, and General Motors, who all reported worse than expected quarterly results. Ford posted $8.7 billion in losses for the second quarter.

As a result, the dollar's gains against the euro were not so much a function of the currency's strength, as it was an indication of even worse financial turmoil in the euro-zone, where economic growth is expected to slow significantly.

According to Ashraf Laidi of CMC Markets, "Thursday's currency trading looks like a contest of which currency has the worst economic fundamentals, as the euro, sterling and kiwi are all falling against the U.S. dollar and the Japanese yen due to fresh evidence of deteriorating economic data."

Energy

In energy news, oil prices rebounded from their pounding of the past week. Crude for September delivery rose $1.05 to finish at $125.49 a barrel after trading as low as $123.50. September reformulated gasoline climbed about 2 cents to close at $3.08 a gallon.

The rise was likely due to a reaction among traders who feel that crude prices fell too much during the past week, which saw roughly a $20 a barrel drop. "After the free-fall yesterday it's no surprise that prices are rebounding," Phil Flynn of Alaron Trading Corp. said.

Tensions between Israel and Iran as well as supply issues in Nigeria may also have played a key role in fueling oil's gains. Israeli Lieutenant General Ashkenazi stated that "all options must be prepared" against Iran. Iran has threatened to block the Straight of Hormuz, through which oil from the Persian Gulf is transported, if attacked.

Nigeria's largest militant group, the Movement for the Emancipation of the Niger Delta (MEND), has threatened to destroy the nation's main oil pipelines within 30 days. Nigeria is the fifth largest supplier of oil to the U.S. As a result, "Some support is being provided by fears of further disruption in Nigeria," wrote Michael Davis of Sucden Research.

Base Metals

The base metals had a uniformly terrible day Thursday, as spot prices for copper, nickel, zinc, aluminum, and lead all tumbled. Copper dropped quickly throughout the day's trading and finished down 6 cents, at $3.6968/lb, despite a mid-morning rally. This represented a six-week low in copper prices. Nickel followed copper's lead as prices fell precipitously, as the metal lost 44 1/2 cents to close at $8.4361/lb, a two-year low. Zinc started the day well, reaching an intraday high over $0.87 in early-morning trading, but soon followed the other base metals into the red, sliding to $0.8385/lb., down 1 1/2 cents. Aluminum dropped as well, closing down almost 2 cents, at $1.3206/lb. Lead erased some of its gains over the previous two days, falling back below the $1 mark to $0.9902/lb., down 2 cents.

Copper's losses were the result of a poor outlook for global demand as sales of previously owned homes in the U.S. fell last month to their lowest levels in more than a decade, according a National Association of Realtor's report. This evidence of the continued housing slump bodes poorly for copper demand, which is largely dependant upon construction of new housing.

Concern about falling demand is outweighing fears of news of declining mine output from Codelco, the largest copper producer in the world. Codelco announced that labor problems and declining ore quality might cut production for the fourth consecutive year.

According to Matthew Zeman of LaSalle Futures Group, traders are "shrugging off" supply concerns because of "the outlook for a global slowdown and the anticipation of falling demand." He continued that "people are thinking, 'What difference does it make anyway,' since demand is going down."

Nickel's huge drop was also fueled by falling demand. Robin Bhar of Calyon wrote that "There has been increasing evidence of weak demand from the stainless steel sector in the third quarter." Production of stainless steel accounts for two-thirds of all nickel consumption.

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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