December 9, 2004
Future Source

NEW YORK (Dow Jones)--Silver on the Comex division of the New York Mercantile

Exchange remained in freefall Thursday after a more than 70-cent collapse
Wednesday as trend-following fund players remained heavy sellers amid a scarce
buyer market.

The most-active March contract (100 oz. each) settled 34.5 cents lower at
$6.80 per ounce - its lowest close since late September 2004.

Dealers said that as silver's recent climb to eight-month highs above the
$8-an-ounce level was primarily fund-led, few buyers were around to absorb the
price fall once the speculative community turned sellers Wednesday and
Thursday. Indeed, potential buyers were encouraged to take cover on the
sidelines and wait for the rash of selling to pass before returning to the
market.

The spark behind Wednesday's rout was a corrective rally in the U.S. dollar
versus other major currencies which prompted a sudden hedge-fund bail-out of
dollar-denominated commodities.

The main sellers through Thursday's session were momentum-following commodity
funds who bought into the silver market while prices were rising and then
chased prices lower recently as the momentum turned the other way.

The head precious metals dealer with a major Wall Street bullion bank noted
that while the volumes of selling in the silver market were down versus
Wednesday's drop, the source of the selling was a key factor in keeping prices
on a downward path. Estimated closing silver futures volume Wednesday was
45,000 lots, while Thursday's estimated total volume was 33,000 lots.

"The commodity trend funds who bought this market up had built tremendous
positions over a period of weeks, if not months, so the market felt it had
better give them more than one day to do their selling. They were the big
players today and it was obvious everyone else was letting them do their
thing," he said.

A sense was emerging late Thursday, however, that a majority of the selling
had now passed and that the market could be poised for a spate of stability or
even a rebound, he added.

"The precious metals had their own engines today as the dollar was pretty
flat, but I think we've seen a majority of the price action," he said.

"And looking at the dollar, it doesn't look like it's capable of pushing all
that much higher so I think the shake-out has passed," he added.

However, he ceded that some residual selling may well occur overnight as
Asian dealers adjust to the lower silver price.

But, as the weekend approaches, buyers are expected to resurface to steer
silver away from its recent lows.

"I'd be surprised if we don't end the week above where we did today," he
concluded.

February gold futures also endured some follow-through selling Thursday but
managed to hold a steadier course than silver in a much more liquid market.

Indeed, February prices managed to hold above Wednesday's low of $435 for
most of the session on bargain hunting until a late burst of commodity and
bullion bank selling dunked values briefly to $434 and fresh one-month lows.

However, a rebound was staged late on to allow prices to settle above $437.

As with silver, many market watchers deem most of the heavy selling to have
passed and expect a recovery to be staged Friday unless the U.S. dollar renews
its push higher.

"I expect we've seen the worst of it and can now recover. But, as always, it
all depends on the dollar," noted a floor dealer with a futures commission
brokerage with a large hedge and commodity fund client base.

"Most of our customers have done all the selling they intend to do," he
added.

Nymex January platinum and March palladium remained under pressure in line
with the rest of the complex and closed $17 lower and $7.65 lower,
respectively.

However, as with the other precious metals, a push away from recent lows is
deemed on the agenda Friday if the U.S. dollar fails to make further progress.

Settlements:
London PM Gold Fix: $437.10 Thursday, $436.90 Wednesday
U.S. spot gold 1350 ET: $435.70, down $4.80 from Open; Range: $432.43-441.40
Feb gold (RGCG05) $437.20, down $1.50; Range: $434.00-439.90
Mar silver (RSIH05) $6.800, down $0.345; Range: $6.620-6.990
Jan platinum (RPLF05) $817.10, down $17.00; Range: $815.20-826.00
Mar palladium (RPAH05) $196.10; down $7.65; Range: $190.00-199.00


-By Gavin Maguire; Dow Jones Newswires; (201) 938-5947;

gavin.maguire@dowjones.com

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