Good Morning,

The US dollar once again picked up some serious tailwind and surged ahead on the trade-weighted index as the overnight trading hours unfolded. The greenback reached towards the 81.50 mark and notched gains against the euro (last seen at 1.338) as the latter fell for a third day on apprehensions engendered by Greece's putative desire to bypass the IMF if conditions deteriorate to a point where it will need help. This latest posturing by Greece has placed the recently crafted rescue package (one that contained a hybrid EU-IMF assistance construct) into question and has rekindled negative sentiment against the euro.

Since gold and the euro have acted like conjoined twins of late, the slide in the common currency triggered overnight profit-taking in the yellow metal as well. Gold backed off from four-week highs -precisely at the EW resistance point of 1134.50 mentioned in yesterday's post- and fell to an overnight low of $1122.00 per ounce.

Similar moves to cash in some handsomely profitable chips were observed in the white metals. Platinum and palladium were the stand-out overnight decliners as $1700+ and $500+ proved to be a bit frothy for some specs. Such was certainly not the case in copper however, as the orange metal vaulted above the $8K per tonne price marker, adding more than 1.6% in gains on the LME. Copper has gained 86% over the past year as specs have pushed hard to the upside, emboldened by their perceptions of the global economic recovery's strength.

Indian buyers finally made more than a tentative appearance at the local gold outlets and were seen picking up a better quantity of wedding season-related ornamental gold. Also helping the Indian gold shopping spirit overnight was a stronger rupee -the currency traded at year-and-a-half highs at one point, making dollar-denominated gold a bit more attractive than previously. The local 'season' for getting hitched runs through next month.

Over in Vietnam, the local central bank is grappling with how to mobilize the circa 500 to 600 tonnes of bullion that are believed to be located under countless beds of the country's denizens. In recent years, some of the occupants of said beds have deposited such gold at banks which offered quite attractive interest rates for the stuff. The State Bank believes that the gold tonnage- if mobilized- could offer a pool of capital for economic development that is quite desirable. In the interim, the string of restrictions, law changes, trading and conversion regulations keeps arguments and controversy at a heated level.

New York spot metals dealings opened mixed this morning, with assorted losses and/or small gains in the complex. Gold fell $4.40 to $1126.40 per ounce, while silver lost 14 cents to start the day at $17.92 the ounce. No change was recorded in platinum, which opened at $1703.00 per troy ounce, while palladium climbed $2 to start at $503.00 this morning. Quick, give me back those chips! They still look attractive!
Meanwhile, Sydney-based Resource Capital Research (RCR) is moderately bearish on the medium-term outlook for gold, saying it expects bullion to trade in the $1 050/oz to the $1 100/oz band for the rest of 2010. RCR also said that after the speculative surge the market experienced November and December of last year, gold is now back to the dollar-inverse game - only this time, in the opposite direction.

We are moderately bearish on the outlook for gold in the medium-term because we consider that the current uptrend for the US dollar could continue, particularly when taking into account the status of most of the currencies the greenback is measured against, said RCR.

We consider that gold's supply-demand fundamentals also tip the balance towards further gold price weakening, the firm's spokesman added.

Rhodium remained static this morning, quoted at $2530.00 per ounce. See a special section on this mysterious metal, below. Crude oil remained near 17-month highs, around the $87 per barrel ahead of US gasoline supply levels data due later on. The surge in black gold has pushed the loonie to parity with the greenback for the first time since 2008.

Yesterday's ISM data revealed that service industries in the USA grew at their fastest rate since May of 2006. The figure offered by the ISM was 55.4, and it overshot economists' expectations. The statistics imply that the US recovery is gaining some serious traction and that jobs creation is spilling over into the service sector and is no longer confined to manufacturing.

In the interim, various central banks are going their own way in dealing with local conditions as best they can. Australia's central bank hiked its benchmark rate to 4.25% -the fifth such increase in six meetings it has held. The bank's Governor, Mr. Glenn Stevens, has recently warned that Aussie house prices might be getting out of hand and signaled that he has little desire to follow the US 'model' anytime soon, and that the spectre of inflation is not welcome Down Under.

No such worries however on a global level, as the clear and present danger remains that of falling into Japanese-style deflation - if one takes their eyes off the economic radar. Core OECD consumer prices rose by a record low 1.5% in February. The weathervane continues to point to dis-inflation in the 30 countries that are part of the OECD, and growth rates for the group are projected at but 1.9% for the current year. This leaves the output of the group about 4% under capacity. Slacks are in fashion, worldwide, while alarmists continue to frighten us with the imminent resurrection of the Weimar Republic's inflation levels.

Kitco News reporter Daniela Cambone recently interviewed CPM Group NY's head Jeffrey Christian and talked with him about rhodium. Yes, the oft-overlooked noble metal that spiked to a number that is generally associated with the golden dreams of hardcore gold bugs -$10K per ounce. The unique metal -along with many commodities- has since (mid-2008) come down to terrestrial levels and appears to hold promise on several fronts, including the one related to its future possible price.

Ms. Cambone reports that demand for rhodium, a key element in catalytic converters, is expected to increase as automobile markets in China and emerging countries continue their rapid growth. Indeed, as this writer will report at the Rare Metals Conference in Los Angeles later this week, robust car sales in several thriving regional pockets and the expected resurgence of North American and Western European automotive sales is likely to be...driving rhodium forward, and could...steer it back towards a significantly higher annual average price level.

Mr. Christian observed that In the United States auto sales will probably be 10 to 15 per cent higher than they were last year. When you sell a car pretty much anywhere in the world you need a catalyst on in, so that means more platinum, palladium and rhodium. Medium-term projections made by the CPM Group have called for a return towards an annual average of $4000+ for rhodium. Unlike other metals that are employed in auto catalyst applications, rhodium cannot be substituted with less costly alternatives. Thus, automakers have little choice but to purchase the metal when inventory levels dictate so.

We have little left for today, but to wish you:
Happy Trading.
Jon Nadler