Compiled 05/20/08 6:00 AM (CT)

Statistics: London Gold Fix $907.00 -$1.75 LME Copper stocks 122,650 tons -75 tons

SILVER MARKET FUNDAMENTALS: (6:00 AM CT) The silver market has clearly lagged behind the gold market on the recent recovery bounce. Apparently the Press coverage highlighting the slightly less bullish classic fundamental condition in silver has discouraged some buyers of silver. Furthermore, with the copper market periodically showing definitive divergence with recent gold market strength, it is also possible that the physical commodity demand outlook is simply serving to hold back silver prices. Some traders are even suggesting that silver is just not garnering as much classic inflationary buying as the gold market and it certainly goes without saying, that the silver market lacks the same type of supply side tightness as the platinum market. Therefore, those that are suggesting silver has the weakest fundamental case within the precious metals complex, appear to have some of the numbers on their side. However, given that the metals markets are seeing a persistent influx of "investment" money and that the silver market has the new investment vehicles to funnel in demand, the bull camp also has its arguments. In fact, from a classic inflation hedge argument, one could suggest that silver prices, relative to their all time highs, could be more attractive than gold prices.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CT) With the US Dollar clearly lower and in fact forging a fresh new low for the move overnight, the bull camp in the precious metals markets would seem to have the initial edge from the currency market front. However, action in the energy complex this morning failed to give off a distinct pattern and early weakness in platinum and copper prices this morning seems to leave the overall outlook toward the metals markets somewhat conflicted. In the end, seeing the Dollar Index reach the lowest level since April 24th would seem to give the bull camp an edge, especially if the US Dollar remains weak into and through the US PPI report release. With some Press outlets predicting the hottest PPI reading in 16 years this morning and the headlines recently flush with predictions and complaints about soaring US inflation, it would seem like the bull camp in gold and silver are expecting an unusually beneficial spin from the headlines and the US Dollar action directly ahead. While the US will also release a Chicago Fed National Activity Index reading along with the PPI report this morning, it is unlikely that the Fed Index reading will take precedence over the inflation report.

Technical Analysis:
Note: Compiled during previous session 05/19/2008 at 3:21 PM CBOT SILVER (JUL) 05/20/2008: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The market's short-term trend is positive on the close above the 9-day moving average. The close over the pivot swing is a somewhat positive setup.