Good morning ...

Precious Metals

Gold peaked at $935 in Hong Kong, and declined from there pretty steadily, right through the NYMEX session on Thursday, before edging a bit higher in the Globex and finishing at $920.40/oz., down $11.40. Overnight, gold has edged higher.

Platinum pushed as high as $2230 in Hong Kong, but sank through to New York, then traded sideways to end at $2164/oz., down $37. Overnight, platinum has been flat.

While silver was lower to the mid-point of the London session, it rallied from there, making its way nearly back to the break-even point, and closing at $17.96/oz., down just 2 cents. Overnight, silver has been trending higher.

As might have been expected, there was profit-taking in the precious metals yesterday after their recent runup.

But the damage wasn't large, especially considering that the usual market movers, oil and the dollar, both went against them, with the former backing off and the latter staging a modest rally.

In fact, some analysts were making the case that both the dollar's rise and gold's fall were technical in nature.

Technician Zachary Oxman, of Wisdom Financial, believes that, Until we cross and close above the $940 level, we'll remain range-bound between $900 and $940.

Nick Ruggiero, a trader at Eagle Futures Inc. in New York, noted gold's recent link to oil and said, You've got to be cautious because when you do get a big sell-off in oil, all commodities are going to get hit hard.

And how much does the paper gold market influence the metal's price? Plenty, contends Jim Sinclair of

It would be bullish to shut down the US market for gold, Sinclair writes, because then you would have a thin market with a positive Euro bent on gold and a more positive global market would be created.

No access for major traders will be denied, that you can be sure of. I would love to see US trading stopped in paper gold. That would be good for $150 on the upside after less than 24 hours. The poor COT would not be able to create the influence on the global market they do with the aid of the US paper market cabal.

Currencies and Economic News

In the currency market, the dollar reversed its recent trend and pushed higher against the euro. Late Thursday, the euro was trading at $1.5701 vs. $1.5791 on Wednesday.

The Labor Department reported initial jobless claims for the week ended May 17 came in at their lowest level since the first week of April, dropping by 9,000 to 365,000 on a seasonally adjusted basis.

That was apparently enough for traders to ignore more dismal housing data. The Office of Federal Housing Enterprise Oversight said home prices fell a seasonally adjusted 1.7% in the first three months of 2008, marking the largest quarterly price decline on record.

Analysts said the market is also concluding that not only will the Fed not lower rates at its June meeting, but that it will be forced to begin raising them again, perhaps as early as September.

But there wasn't a large amount of optimism about the buck's future. The U.S. dollar's tone is fragile and with oil prices showing little pullback, the budding dollar-bullish sentiment has been beaten back again, wrote currency strategists at Brown Brothers Harriman.


In the energy market Thursday, crude for July delivery pulled back after breaching the $135 level in overnight electronic trading, closing at $130.80/barrel, down $2.36. July reformulated gasoline dipped 7.03 cents, to $3.3297/gallon.

We're seeing the bout of profit-taking that everyone has been waiting on, said Neal Ryan, manager at Ryan Oil & Gas Partners, after crude concluded a 4-day run that had taken it up by 7%.

Just looking at the volatile price action today, it's pretty evident that the market is being driven up and down by the traders waiting on some news to hit the tape, Ryan added.

Meanwhile, the International Energy Agency is getting ready to issue a sharp downward revision of its oil-supply forecast, according to a Wall Street Journal report. The IEA is assessing the condition of the world's top 400 oil fields, and will reportedly say in November that future crude supplies could be far tighter than previously thought.

And, in one of the more bonehead political moves of late, the House of Representatives approved legislation, by a veto-proof majority, allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices. The bill would attempt to subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

Getting it right for once, the White House opposes the measure, saying that targeting OPEC investment in the United States as a source for damage awards would likely spur retaliatory action against American interests in those countries and lead to a reduction in oil available to U.S. refiners. $200 oil anyone?

Base Metals

The base metals took a severe beating on Thursday. Copper was down from the pre-dawn hours straight through the day, only coming off its lows near the noon hour and finishing at $3.497/lb., down 6 cents. Nickel's woes continued in spades as it struggled to hold the $11 level before giving it up at mid-morning and sliding to a close at $10.5793/lb., down more than 64 cents. Zinc also barely came off its intraday low to end at $0.9503/lb., down more than 3 3/4 cents. Aluminum showed strength early before it too succumbed to selling that dropped it to $1.3308/lb., down a penny and a quarter, while lead fell precipitously to an intraday low of $0.9139/lb., down almost 5 1/2 cents.

No doubt about it, after yesterday's selloff it's clear that traders' appetite for the industrial metals has all but completely dried up.

The decline was general, as the UBS Bloomberg Constant Maturity Commodity index slumped 0.9, with oil, gold, and coffee all slipping on concern the economy in the U.S. won't recover anytime soon, slicing into demand.

In terms of copper imports, April is generally the biggest import month of the year for China, said Daniel Hynes, an analyst at Merrill Lynch & Co. in London. And although they did rise 1.2% from March to April, the Beijing-based customs office said, shipments declined 31% from the year-earlier period.

Looking for a bright spot, Lehman Brothers analyst Michael Widmer said that, Imports were lower year-on-year because there was more restocking last year than this, but imports have risen month-on-month ... while some market participants expected them to fall.

Meanwhile, nickel skidded to a two-year low, as it has been in a surplus for the 13 months through March, according to the International Nickel Study Group.

More of the same may be coming. Natixis Commodity Markets predicts that production will outpace demand for a second consecutive year in 2008. Output will increase with today's opening of BHP Billiton's Ravensthorpe mine in Western Australia tomorrow. It will produce about 45,000 tons a year, making it the biggest new mine since Voisey's Bay commenced operations in 2005.

And in company news, Namibia's biggest zinc producer, Skorpion Zinc declared its Rosh Pinah mine has been in lock-out since Wednesday, following a strike that began May 10. The company declined to comment on the effect of the strike on the mine's output.

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


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 in 2007.

Learn more about First Majestic.

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