The Daily Resource 07/25/2009

Good morning ...

This will be our final edition of The Daily Resource . Please look for our new letter called Casey's Daily Dispatch which will be posted right here every weekday in the afternoon starting Monday July 27th. Now on to The Daily Resource ...

Precious Metals

Gold traded sideways through Hong Kong then shot north at the London open and remained range-bound between $951 and $953 for the rest of the day, finishing at $951.60/oz., up $3.60. For the week, gold is up 1.5%.

Platinum sank in Hong Kong, falling to an intraday low of $1167 before adding back all the early losses and a bunch more over the rest of the trading day, closing at $1186/oz., up $11. For the week, platinum is up 1.2%.

Silver developed the gentlest of upward trends early in London and rode that trend through the Globex, ending just off its intraday high at $13.87/oz., up 17 cents. For the week, silver is up 3.4%.

Although profit-taking kept gold from staging a big rally this week, the yellow metal should be well supported at current levels because of dollar weakness and inflation fears, analysts said.

"We are still up here in quite a high range. We don't see any physical buying coming in at these levels, but what is supporting it is the dollar," said Andrey Kryuchenkov, an analyst at VTB Capital.

"The dollar's weakness and the idea that inflation expectations are on the rise are holding gold here," Kryuchenkov added.

In company specific news, Mineweb reported that Kinross Gold has recently assumed stock price leadership of the loosely-defined Tier 1 global gold stocks sector, which includes 12 companies with an aggregate market value of just under $200 billion. Kinross's stock price fluctuated between a 52-week low of $6.85 and high of $20.98 a share, with current trades around the $20.28 mark.

Barrick, the world's biggest gold miner by value and production, is trading nearly 25% off its 52-week high. Kinross was one gold stock chosen for investment this year by US hedge fund Paulson & Co Inc., which famously scored gains of nearly $4 billion betting against banks in 2007 and 2008.

In the past several years, Kinross has transformed itself from a stodgy, higher cost gold producer to one that increasingly reports lower costs, along with a highly convincing longer-term growth profile.

Currencies and Economic News

In the currency market, the dollar moved lower against the euro. Late Friday, the euro was trading at $1.4215 vs. $1.4194 on Thursday.

MarketWatch reported that the dollar lost ground to the euro after closely watched surveys indicated the 16-nation eurozone partially braked a fall in output in July.

The Munich-based Ifo Institute's July German business climate index rose for the fourth-consecutive month in July, posting a reading of 87.3. Economists had forecast a rise to 86.5 from 85.9 in June.

Also, the preliminary Markit euro-zone composite purchasing managers' index for July increased more than forecast.

The euro saw a modest jump versus the dollar after the data.

"All positive, but let's not get carried away," wrote strategists at Brown Brothers Harriman. "Germany's Ifo index ... is on the rise ... but remains very low on a historical basis and Germany's economy is still on track to contract by at least 5% this year."

In economic news, U.S. consumer sentiment fell in July, according to a survey released yesterday by the University of Michigan and Reuters .

Sentiment rose to a revised 66.0 from a reading of 64.6 in early July, but was down from the June reading of 70.8.

Analysts said the report highlights depressed levels of confidence as well as likely slow growth ahead.

"The July drop-back in confidence at still-depressed levels highlights the anemic pace of growth that appears likely as we enter the early quarters of the recovery," wrote Mike Englund of Action Economics.

"While off the lows that were recorded when panic and paralysis were the order of the day, this measure of consumer sentiment nonetheless remains severely depressed," wrote Joshua Shapiro, chief U.S. economist of MFR, Inc.


In the energy market, crude oil for September delivery rose 89 cents from Thursday to close at $68.05/barrel. August reformulated gasoline rose a quarter of a cent to finish at $1.9159/gallon.

Despite continued worries that oil's recent run-up can't be justified by market fundamentals, crude continued to climb Friday on the back of a weaker dollar and stubbornly resilient equities.

"The debate between whether the market should focus on green shoots or current weak demand and over supply goes on," said Phil Flynn, vice president at futures trading and research firm PFG BEST Research.

"The green shooters have had the upper hand this week, but the real test will be next week," Flynn added.

"Although we cannot discount further gains, we are somewhat wary about jumping in on the long side at this late stage," said Edward Meir, analyst at MF Global.

"The stock market advance, in particular, looks somewhat overextended," Meir added.

Base Metals

Base metals were higher on Friday. Copper rose 0.26 cents to close at $2.4919/lb. Nickel gained nearly 23 cents to finish at $7.5266/lb. Zinc climbed almost one penny, ending at $0.7530/lb. Aluminum added a cent and a half, closing at $0.7957/lb., while lead moved to $0.7880/lb., up a penny and a half from the previous session.

Copper is up 3.5% this week and 7.8% since June 1, but an abrupt reversal could be just around the corner.

China's copper imports are slowing after record purchases, likely ending an 81% price rally this year, according to Sumitomo Metal Mining Co., Japan's second-largest smelter of the red metal.

"Excessive imports mean much of the purchased metal was just stored, raising the risk that they may sell it back to the market and depress prices," said Koichi Kaku, general manager at Sumitomo. "Imports may have exceeded manufacturing demand by as much as 1.3 million metric tons in the first half," he continued.

Still, a few folks remain bullish on copper's short-term prospects. One such analyst is Jim Lennon with Macquarie in London, who recently told Reuters :

"From a stocking perspective China is not going to be as big a factor but actually from a real consumption perspective... it's going to be a lot stronger. We don't see an easing up in Chinese demand."

Time will tell who is correct, but we're betting on a short- to medium-term downward correction followed by a huge run-up when inflation kicks in.

That's what's happening... we hope you've enjoyed reading The Daily Resource as much as much as we've enjoyed bringing it to you.


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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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