Good Morning,

The US dollar's post-Fed action rally lasted about as long as cheap lipstick on a prom date as markets returned to 'worry' mode less than 24-hours after the fact. While the Dow and overseas equity markets enjoyed rallies, the greenback was back to 72.53 on the index and 1.5469 against the euro in a vote of 'no confidence' on the Fed's offer to accept mortgage-backed securities from and extend terms to troubled institutions.

Pessimism continues to manifest itself in the markets and an this juncture, gold, oil and other commodities remain as good a barometer of that state of mind as any. While there are other weapons left in the Fed's arsenal and cooperation with other central banks could include active currency management down the road, the current reading indicates that dollar selling remains a relatively 'safe' activity for speculators. Buying gold, therefore, remains safe as well for the moment.

Overnight gold trading was confined to a $10 range of from $968 to $978 but the bias remained to the upside after the initial beneficial effects of the Fed's announcement on the greenback wore off. Crude oil remained quite firm as well, logging only minor losses above $108.90 per barrel. New York spot gold opened mildly higher, quoted at $975.40 per ounce bid, up $2.20 as participants await oil inventory figures and look forward to tomorrow's economic statistics (initial jobless claims and retail sales). Silver added a nickel to $19.71 while the noble metals continued under pressure, with platinum shedding $5 at $2048 and palladium losing $2 at $488 per ounce respectively.

Well, the big news yesterday was the launch of the 2007 Gold Yearbook by CPM Group New York. Addressing a packed roomful of media and institutional professionals, Jeffrey Christian - Managing Director of CPM - highlighted the figures and trends we observed during the past year in gold. He paid special attention to the fact that the key to the surge in the average gold price in 2007 was investment demand. That same market driver will remain the essential element to watch as markets progress within the current year. Some key findings follow:

As the subprime mortgage crisis hit in August 2007, investors adopted a gloomier view of economic and political prospects, interest rates, the dollar, inflation, equity markets, bond values and more, according to CPM. This accelerated the level of investment demand for gold. But, this is not an open-ended trend in any way.

Mr. Christian warned gold bugs that, At some point investors will exhale, and some of the upward pressures will come off of the gold prices. Equity values will fall low enough, and management shifts at corporations will instill renewed confidence sufficient to lure investors back into equity and bond issues. Economic activity will recover.

One of the economic facts of life that gold bulls often overlook is that recession ends, he advised. They tend always to look toward the collapse of the international economic and financial system. ...Instead, the paradigm for economics crises that they should use ought to end with economic recovery. This current period of economic weakness too shall pass, and with it will investors' presently seemingly insatiable appetite for gold.

One of the other things that is also normally overlooked is the fact that central banks have (several times now) stepped in and mopped up the liquidity created during periods of crisis and managed to sterilize the inflationary effects of their actions. Specific examples were cited where precisely such reversals prevented the runaway inflation that makes gold bugs all tingly all over. Not to mention that the world's economies and institutions did not collapse either.

We are but four sessions away from the Fed meeting and decision. In the interim, take note of any additional measures being offered and whether or not they are seen as cures or desperation. Markets will tend to exaggerate the effects of news and jawboning, as they are nervous as well-as trigger happy. Range-trading would actually be preferable at this delicate time.

In future commentaries we plan to bring you supply and demand highlights from CPM's yearbook. We think you will find the data fascinating and decide that it is required knowledge as we go forward in these markets. The 2008 CPM Gold Yearbook, as many insiders already know, is one of the two Bibles of the trade when it comes to the facts and figures related to supply, demand, central bank activity, investor trading patterns, and other relevant data. Kitco is very proud to be a sponsor of this type of essential research and will soon dedicate a section on our site to the latest charts, tables, and information from the world of gold. You now have an opportunity to secure one of these coveted books for yourself, at a bargain price of only $75 a copy (a $150 value). If you are interested, (and, as a gold bug, you ought to be) simply go to : and secure your own copy. You will be glad you did.