Don't Let Me Down

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Good Morning,

Gold prices gained a few dollars overnight following a lack of formal dollar-supportive sentences in the G-8 summit's joint statement released on Sunday. Oil prices gained slightly but traders are mindful of Saudi Arabia's intentions to turn its oil output spigots to a level not seen since 1981. Somewhere, somehow, the message of oil price-induced dangers is getting through. The greenback lost .33 on the index and fell to 73.72 while it traded at 1.546 against the euro. Not much physical offtake was seen over the weekend in overseas markets. The week begins with little in the way of economic data, but with plenty of focus on the unfolding woes over at Lehman and at AIG.

Spot gold trading started the new week with an $8.00 gain quoted at $879.00 per ounce, as the dollar's levels and oil values once again dominate short-term sentiment. Certainly, the former will take an even more important position in coming days, as we approach next week's Fed meeting. Participants expect that whatever was missing from the G-8 press release may be offset by the Fed's post-meeting policy statement.

In the interim, the ECB has its own hands full with an inflation level not seen in 16 years and is preparing to hike rates by 1/4 point next month. Silver rose 13 cents to $14.64 while platinum gained a relatively modest $7 to $2038 and palladium added $6 to $453 per ounce. The absence of concrete dollar statements gives bulls a chance to rally the metals ahead of the released of economic data later in the week, and ahead of the Fed meeting.

As mentioned, the weekend summit of the Club of Eight yielded quite a few poker faces in terms of what might be done about the dollar. On the other hand, the formal communique was certainly shaping up as a giant collective index finger pointed and wagging at crude oil and other commodities, however. The Wall Street Journal reports:

" Finance ministers from the Group of Eight leading nations who gathered this weekend focused their attention firmly on high-cost commodities, notably oil and food, which they warned can undermine economic growth and stir up inflation.

"Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressure," the ministers said in a joint statement Saturday.

As expected, they refrained from commenting on foreign exchange rates in their final joint statement. However, the subject was a hot topic in meetings on the sidelines, where U.S. Treasury Secretary Henry Paulson repeated his recent support for a stronger dollar. Meanwhile, ministers reiterated their commitment to strengthening the resilience of the financial system to prevent a replay of financial crisis that nearly a year ago saw fallout from the U.S. subprime mortgage market ripple throughout financial markets and economies around the world.

" The ministers did not discuss currencies or intervention at the meeting, Japanese Finance Minister Fukushiro Nukaga said, leaving analysts pondering a retreat by the dollar on Monday. "Some people may have expected stronger comments about inflation, and as part of that, concern about the dollar. The market may take profits from the dollar’s rise," said Masafumi Yamamoto, chief currency strategist for Japan at Royal Bank of Scotland in Tokyo.

The G-8ministers called on national authorities to examine commodity futures markets and take "appropriate measures as needed." They also asked the International Monetary Fund and the International Energy Agency for a report later this year on the factors behind surging oil and commodity prices."

A call in the statement for more information on how much money is flowing into the oil market indicated that there are serious concerns among some G-8 members such as France, Germany and Italy that speculators have been a key driving force behind recent record-high oil prices of nearly $140 a barrel on the futures market. Ministers urged producers to ensure more oil makes it onto the market and asked the International Monetary Fund and the International Energy Agency to further analyze the recent surge in oil and other commodity prices."