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By Jon Nadler

After a brief dip to $928 gold started to build on yesterday's gains once again overnight as the dollar touched a new all time low vis a vis the euro and sank to 71.50 on the index.

Crude oil was aiming past $111.50 and was seen fanning the flames of inflation. Europe's inflation rate touched 2.9% a number that presents a challenge to the ECB as it ties to keep a slipping economy on the boil while fighting prices rises simultaneously.

Bets are still favoring a no action/plenty of talk stance by Mr. Trichet today. No such attitude from London today. The Bank of England as it took a page from the US playbook this morning and cut its key rate to 5% trying to hold back a replay of the current American situation. Alas, the US strategy appears to have been rather ineffective in reviving borrowing as lenders are still clenching their fists. Like we said, better bring plenty of coffee to the G 7 get together...

New York spot gold started the Thursday session with a small $0.60 gain, at $934.60 after having bounced off resistance at $the $940 area. Possible tests of $945/$955 could result over the next two days if the tea leaves in the economic data line up against the US dollar again. Participants also await words by Mr. Bernanke later in the day, but for the moment the dollar/oil duo are driving the action. Silver gained 4 cents to $18.21 while platinum rose $10 to $2036 per ounce.

Our friends at Standard Bank in S. Africa inform us that: Eskom, the power utility, has secured a five year deal to import 250MW in hydro electric power from its neighbour Mozambique in which 100MW was rolled out last week Friday. Further negotiations are being held with Zimbabwean authorities, with the possibility of a further 500MW being imported. However, the current political uncertainty in Zimbabwe presents a risk to this.

As London based consultancy and research group GFMS presented its annual analysis of the preceding year on the gold market yesterday, a number of issues surfaced. Among them, trends that we have alluded to in earlier reports and which we also observed in the recent CPM 2007 Yearbook. Mining Weekly relays the story:

Presenting the findings of the group's 'Gold Survey 2008', [GFMS analyst] Neil Meader said that the price of gold would likely reach a peak, perhaps around $1,100 per ounce, either in the last quarter of this year or in the first half of 2009.

However, he pointed out that the subsequent correction, which GFMS expects will take the price to levels around $600 per ounce in the longer term, represented a shift from previous forecasts.

I think that's important to bear in mind ... previously, in all our forecasts we were only talking about the push being one way higher but now I think it's very possible to start seeing the endgame, he commented.

I think we would say...we've got another 12 months of strong prices, and after that we would expect to see the market turn it could be 18 months.