Good Morning,

Gold prices tripped and fell overnight, as anticipation about the Fed meeting's eventual results turned into apprehension that the massive slide in rates seen since September will not only come to an end shortly, but will likely be partially reversed after a period of no action. Not helping matters for bullion was a rise of .31 in the dollar index to 72.84 (the greenback traded at 1.5553 against the euro) and a more than $1 drop in crude oil to $117.68 a barrel, as BP prepared to restart its UK pipeline. Light physical purchases in Asia kept the metal just above $880 overnight but the pressure on prices was still visible as NY prepared for the open. All of this was unfolding against still fragile background conditions, as Deutsche Bank reported its first loss in five years, as it wrote down over $4 billion in soured investments. The culprit(s)? LBO loan values and asset-backed securities. US foreclosure filings spiked 112% in the first quarter, as Nevada, California, Arizona, and Florida's bubbles continued to implode. Las Vegas risks becoming a ghost town of a different kind, as one in every 44 homes is in mortgage trouble. The cleansing cycle sure ain't pretty.

Spot gold opened today's session with a $10.50 loss at $882.70 bid on the heels of an $886 London AM Fix and as participants geared up not as much for the release of retail sales and consumer confidence numbers, but for the critical FOMC meeting taking place today and tomorrow. The market appears to be aiming towards the $873 area as stale longs are still exiting ahead of what they see as the inevitable shift in Fed policy. Gold will have to make a go of it more on its internal fundamentals than on the fuel that has provided much of its stellar ascent since the fall; the engineered decline of the US currency. Silver lost 34 cents falling to $16.65 and the noble metals sank as well, with platinum dropping $19 to $1956 and palladium down $7 to $430 per ounce. The losses in metals accelerated shortly after the open, with gold down about $15 to near $875 and silver falling more than half a dollar to $16.46 per ounce.

We have previously noted that as metals prices rose sharply, so did the supply of scrap recovery. In fact, last year's scrap-sourced gold supplies came within 150 tonnes of the investment demand for the metal. It turns out that deep-shaft mining and strip-mining may have some new competition: urban mining. Mineweb reports on the growing - and profitable -trend of reclaiming precious and rare metals from some unique sources in Japan:

Thinking of throwing out your old cell phone? Think again. Maybe you should mine it first for gold, silver, copper and a host of other metals embedded in the electronics -- many of which are enjoying near-record prices. It's called urban mining, scavenging through the scrap metal in old electronic products in search of such gems as iridium and gold, and it is a growth industry around the world as metal prices skyrocket.

The materials recovered are reused in new electronics parts and the gold and other precious metals are melted down and sold as ingots to jewellers and investors as well as back to manufacturers who use gold in the circuit boards of mobile phones because gold conducts electricity even better than copper.

It can be precious or minor metals, we want to recycle whatever we can, said Tadahiko Sekigawa, president of Eco-System Recycling Co which is owned by Dowa Holdings Co Ltd.

A tonne of ore from a gold mine produces just 5 grams (0.18 ounce) of gold on average, whereas a tonne of discarded mobile phones can yield 150 grams (5.3 ounce) or more, according to a study by Yokohama Metal Co Ltd, another recycling firm. The same volume of discarded mobile phones also contains around 100 kg (220 lb) of copper and 3 kg (6.6 lb) of silver, among other metals. Recycling has gained in importance as metals prices hit record highs. Gold is trading at around $890 an ounce, after hitting a historic high of $1,030.80 in March.

Recycling electronics makes sense for Japan which has few natural resources to feed its billion dollar electronics industry but does have tens of millions of old cell phones and other obsolete consumer electronic gadgets thrown away every year. To some it's just a mountain of garbage, but for others it's a gold mine, said Nozomu Yamanaka, manager of the Eco-Systems recycling plant where mounds of discarded cell phones and other electronics gadgets are taken apart for their metal value. At the factory in Honjo, 80 km (50 miles) southwest of Tokyo, 34-year-old Susumu Arai harvests some of that bounty.

A ribbon of molten gold flows into a mould where it sizzles and spits fire for a few minutes before solidifying into a dull yellow slab, on its way to becoming a 3 kg (6.6 lb) gold bar, worth around $90,000 at current prices. Wearing plastic goggles to protect his eyes while he works, Arai said he was awestruck when he started his job two years ago. Now I find it fun being able to recover not just gold, but all sorts of metals, he said. Eco-System, established 20 years ago near Tokyo, typically produces about 200-300 kg (440-660 lb) of gold bars a month with a 99.99 percent purity, worth about $5.9 million to $8.8 million. That's about the same output as a small gold mine. Eco-System also recovers metals from old memory chips, cables and even black ink which contain silver and palladium.

Yesterday's upward tilt has evaporated and the metals appear to have resumed the trend that started on the 18th of this month. We do not have to advise staying tuned for the Fed's get-together. That process is well underway. It is the end result of same that has people on edge.

Happy Trading.