Good Morning,

The dollar gave up most of Monday's gains overnight as the euro held above pivotal support near $1.30 and as oil prices recovered part of their deep decline seen on the same day. Albeit these are short-term (and some say month-end related) moves, participants find them broad enough to make a play intended to dress the otherwise messy logbooks that have defined March in many a market.

New York bullion trading started on the plus side for gold, which recorded a $4.40 gain per ounce and rose to $920.20 as the session got underway this morning. The greenback was shown at 85.25 on the index, while oil rose $1.3 to $49.72 per barrel. The aforementioned euro was trading at $1.3309 against the dollar. We had expected higher- and possibly much higher-gold values for the week.

While contract-related delivery notices and trimester-end book squaring may yet give us such a rise, the metal still appears poised to finish March with a 'first monthly loss since October' label being applied to it. We are happier with the best quarter in one year label if it comes down to having to choose. It's just that it was two-months' worth of a 'best quarter.' For now, gold remains home on the range; that range being the $895-965 acreage in values.

Silver gained 8 cents to $13.14 while platinum rose a modest $6 to $1119 and palladium dropped $2 to $212 an ounce. Survival - The Automotive Edition continues to be the rerun of the day on the noble metals' traders' 'must-watch' agenda. Such suspense. Have you heard of the Chrysler Topolino? It may or may not be squeaking at a dealer near you, soon. Makes for an amusing Google image search, in any case.

What is hardly amusing, is reading the drivel that is being issued as incontrovertible 'proof' of gold and silver bullion's manipulation by entities with an agenda. This, of course, as seen by writers in dire need of a day job. The liquidity-quest driven fall exodus of funds from the commodities' complex, has now been forcefully recast as the fairytale of sinister intervention in silver and gold. Yeah, right. Here is a little (indeed) word of advice to the myopic faction: gold - for all its glory- represents but 0.6% of global wealth. If you think that someone is worried/alarmed about it rising to a staggering 1.2% or even 5% of such a value pie, well, we suggest different meds, or a higher dose of whatever is being taken now.

At the end of the day, the global scene is now the focus of many position-takers - be they dollar, or equity, or commodity ones. The London G-20 summit and the World Bank's guardedly pessimistic diagnosis of the world economy are playing the gorilla's role this day, this week, and at the close of a tumultuous first trimester. The world bank sees a global economy in shrinking mode for the year, and it also sees 'emerging' nations as looking more and more like 'emergency' nations. Speaking of tumult, witness the angry hordes of protesters in London. Populist rage on an increasingly global scale, that. London's Bobbies are in overtime mode and then some.

Gold prices held steady above $915, but players were mindful of a number of potentially deleterious undercurrents in development behind the proverbial curtain. One such (largely unnoticed) bit of news concerns China. Again. Why, just last week, the perma-bull gold scribes were elated to be able to misinterpret words from China, Russia, and Tim Geithner and conclude that a call had been issued for the replacement of the dollar as the world's reserve currency.

Today however, Harvard economist Jeffery Frenkel (also a member of the NBER) revealed that China has now in fact gone back to a dollar-peg as regards the yuan. In a major case of talk loudly and carry a small stick China quietly turned away from the euro+dollar model it had adopted back in 2005, and has apparently embraced the idea that when push comes to shove (and there has been untold pushing and shoving since 2005) the dollar is still the widest, and coziest blanket to have over one's head. At this time. And maybe not just at this time.

Another troubling sign for the one-way gold price fan section continues to be the tectonic shift in Indian (and regional) attitudes towards the yellow metal. Never mind that gold imports (for a second month) were followed by a question mark and/or a zero in any article referring to India. The emerging reality is that the country is turning into a net exporter of the metal (in the form of coins) at this juncture.

Similar situations have been the subject of reports from Pakistan, Dubai, and pretty much the whole part of the world that we normally look to for underlying core gold demand. Hard to put a spin on such news. Does not mean that someone will not try and minimize the findings' degree of importance.

Something that is usually neither minimized or over hyped is the Mark Hulbert gold market pundit pit's temperature reading - as a contrarian indicator of things to possibly come. Marketwatch brings us the latest such bedside visit's results:

Is gold's glass half full or half empty?

For most of the last several months, gold timers were inclined to see the glass as half empty. But in recent sessions they have begun to change their tune, seeing it instead as half full.

And, from a contrarian point of view, that is not an encouraging development.


Consider: Two weeks ago, when I last wrote about sentiment among gold timers, gold bullion was trading for around $920 per ounce. That's essentially where it is trading today. And yet, the editor of the average gold timing newsletter is markedly more bullish today than then.

Consider the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold-market exposure among a subset of short-term gold timing newsletters tracked by the Hulbert Financial Digest. As of March 30, the HGNSI stood at 30.2%.

Two weeks ago, in contrast, it stood at minus 16.5%. So, in just ten trading sessions, during which gold bullion on balance went nowhere, the editor of the average short-term gold timing newsletter has increased his average recommended exposure level by nearly 47 percentage points.

Why the marked shift in sentiment?

The biggest single development in the gold market in the last fortnight was the 8% jump in bullion's price in a single session, March 19. That came in the wake of the Federal Reserve's announcement that it would purchase as much as $1.15 trillion in U.S. bonds and mortgage-backed securities.

Impressive as that one-day surge was, however, the market hasn't been able to hold onto that day's gains. Yet, in recent sessions as gold gave back some of its ground, the gold timers have not dampened their enthusiasm that developed after the Fed's announcement.

And, typically, gold does not thrive when the gold timers are stubbornly holding onto their bullish positions.

The last two weeks do underscore another trend I have noted before, however: A marked compression in reaction times between extreme sentiment readings and the expected contrarian reaction in the market place.

Prior to the last several years, for example, the HGNSI's greatest forecasting power was at the three-month horizon. In the econometric tests I have conducted, the correlations with subsequent one-month performance, though statistically significant, were somewhat weaker. At the two-week horizon, there was no statistically significant correlation at all -- which meant that, up until 2003, we could draw no conclusions from gold sentiment about what the XAU would do over the subsequent two weeks.

In recent years, in contrast, the correlations at the shortest-term horizons were the most significant. Now there is no statistically significant correlation with the three-month horizon. And not only have correlations at the two-week horizon become statistically significant, they now even exceed those that prevail at the one-month horizon.

This suggests that contrarian analysis, to the extent it is valuable in the gold market, is for an even shorter-term horizon than it was already. So even though my analysis of gold market sentiment leads -- at least for the moment -- to a bearish conclusion, that bearishness is most likely to last a matter of a week or two rather than months.

The question, of course, is what happens after late April. Akshaya Tritiya will have come and gone, brides will have been wed, and jewelers in the rest of the world will be eyeing their typical summer hiatus. The last Indian gentleman and father of a bride to be who called this writer was indicating that even for the relatively modest five or ten ounce dowry purchase he was planning to make, waiting in order to save money, was the intended course of action. These days, $500 or $1000 in cash from any source, means a lot more than it did during the go-go years. And, if relatively far better off Indians living in North America are sidelined and waiting, then the accounts of net selling in their home country are 100% credible.