Name That (Altered) Tune

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Good Morning,

Gold prices fell further overnight, following yesterday oil-led and hawkish Fed-induced rout. Further losses in the euro following reports of steep drops in Eurozone industrial orders helped the greenback climb to near 72.61 on the index and reduced the appeal of gold along with its value. Prices skirted a low of $931 ahead of the Wednesday NY session. Oil prices dropped further, as the oil installations in the Gulf of Mexico appeared to have avoided what could now be a Cat 2 storm slated to hit the US/Mexico border later today. If there was some supporting factor for prices not yet slipping into the $920's it was likely to be Iran's vow to pursue its nuclear technology program and claim that the US recognizes its rights to acquire such capabilities. In other regional news, the UK appears all set to have most or all of its troop leave Iraq in early 2009.

New York's midweek gold trading session opened with a $9.50 loss in the metal, at $935.50 per ounce as the trade monitored oil values near $126 - more than $20 from their recent peak- and the euro trading at 1.574 against the US dollar. Today's calendar has the Fed's Messrs. Mishkin and Kohn due to speak at a conference, and the Fed's Beige Book is on tap as well. Silver showed initial losses of 28 cents to open at $17.63 while the noble metals complex continued to slip with platinum losing a massive $68 to $1752 and palladium cracking the $400 level to sink to $386 per ounce, off $17 on the day. South Africa's power supplier -Eskom- forecast no load shedding events for the winter as the crisis phase of the situation appears to have been overcome for now. The country's mines appear to have limped along with the 90 to 95 percent level of available electricity and are slated to yield more metals as the situation stabilizes and/or improves. Such developments contributed to the white metals fading in value this morning as well.

In a move that is likely not just designed to freshen gold's image, the World Gold Council has decided that the tune it sings to India's gold buyers needs to be altered. Abandoning its "Speak Gold" campaign, the organization now plans to got directly for the proverbial jugular and highlight gold's historic and deeply ingrained allure and connection within the culture of India. That this shift has something to do with the 65% slump in gold imports recorded in the first half of this year in the world's top bullion-consuming country should be quite obvious.

Well, at least something is being done about the matter. As one Indian jeweler in Vancouver put it last night: "Well, now if they can only do something about the price of the metal..." Someone, somewhere is trying to do something about the price of black...gold. Bloomberg reports that the US "Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year. The headline reads: "Congress Pursues $80 Oil With Trading Limits, Disclosure Rules" - It is estimated that absent the fallout from aggressive speculation, the price of the commodity would indeed be nearer $80 per barrel. If that scenario were to materialize, then the perception offered by Ned Schmidt of the Value View Gold Report could have some interesting implications for the yellow variety of gold as well. The Washington Post brings us up to date:

How Long Can Gold Shine?

Financial crisis, slowing economy, rising inflation -- what a perfect recipe for a boost in gold prices and shares of gold-related companies.

And the bump has come. In the little more than a week since the Fannie Mae and Freddie Mac drama moved center stage, gold has climbed 3.2 percent, to about $958 per troy ounce Friday. Barrick Gold, the world's largest gold producer, has risen 1.2 percent since July 10, when the markets were hit by fears over the mortgage-finance giants. It closed at $47.30 on Friday.

So if the economic picture is darkening and inflation is on the upswing, gold will just keep on going, right? Ned Schmidt, publisher of the newsletter Value View Gold Report, offered a dose of skepticism. The uncertainty over the Fannie and Freddie shake-up does improve the long-term prospects for gold, Schmidt said in a report last week, and he remains firmly bullish on the metal. "That said," he cautioned, "the optimism on gold may be in need of a little dampening."

One measure Schmidt consults is the price of gold relative to the Standard & Poor's 500-stock index. The ratio currently shows the price of gold outpacing the S&P. By Schmidt's calculation, gold at $956 should equate with the S&P at a level of 810, far below its current reading of 1260. The numbers suggest that "gold may be ahead of the realities of the world," Schmidt wrote.

Schmidt lists more than a dozen stocks that have performed well in the past month, including Randgold Resources, up 30.3 percent; Kinross, up 18.3 percent; Barrick, up 17 percent; and GoldCorp, up 11.5 percent. "On average, the stocks have ceased to be a bargain," he said.

Excessive money is flowing into gold, Schmidt warned. "The current price is extremely overbought during this period of financial panic," he wrote. "Holding and gloating over your profits is appropriate at the present time. Buying should await lower prices or a crack in the price of oil."

Suppose we have to define 'crack' as the $20 lost since the peak or the $80 target envisioned by lawmakers. Hmmm... we would take $100 oil for now, and perhaps $3-3.50 gasoline. Active price gyrations will be the feature of the day, punctuated by possible dollar-related comments from Fed representatives. It still appears that the verbal variety of US dollar intervention is proving fairly effective and that it has thus far obviated the need to do so in real terms. Sell stops were the order of the day yesterday. Let's see what today brings.