Another MUST READ on a more macro commodity market view of Reg’s latest Piece is "The Central Bank Gambit" by Eric Sprott and Sasha Solunac of Sprott Asset Management. Great piece. Some excerpts:

Given the drubbing that has taken place in the markets over the past month or so, we thought it necessary that this issue of Markets at a Glance be dedicated to an explanation of what we believe is happening in these rather turbulent times. Given the violence of the recent market correction, investors cannot be blamed for

believing that a global meltdown is taking place, the brunt of which is being felt in the sectors that have heretofore performed the best; i.e., commodities, energy, and gold. There can be no denying that the first quarter was a "great year" for commodity investors. Commodity prices, and commodity equities, soared. So

much so that one could take the pragmatic view that commodities et al were "overbought" and therefore due for a correction. However, we are of the belief that there are greater machinations at work beneath the surface than mere technical indicators. In our view, there is a chess game of paramount importance being played that is driving current market conditions... at least in the short term. The game of chess in question pits the world’s central banks against the "free" markets…

The game of chess in question pits the world’s central banks against the "free" markets. The opening move in the central banks’ repertoire was a gambit. This occurred, not coincidentally, at the same time that commodity prices were hitting new highs and gold was breaking out above $700 per ounce. In chess parlance, a gambit is a ruse or trick in the form of a sacrifice of material (usually a pawn) with the hope of gaining a decisive advantage in space and time early in the game. If this advantage isn’t made to count (i.e. the bankers’ initiative peters out), then the market’s advantage in material will eventually win the day. We’ll call this opening the Central Bank Gambit. It is a desperate move to take control of an inflationary environment where they may already have lost control. For now the central banks have the initiative and are on the attack. But if the markets are able to hang on, then they will win the endgame and checkmate the central banks…

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Please go to this address to read the entire commentary:

Click here: http://www.sprott.com/pdf/marketsataglance/06-2006.pdf