Good Morning,

Gold's inaugural 2009 session got off to an initially firm but later difficult start overnight, as a major decline in crude oil and a decent rise in the dollar created less than auspicious conditions for continued advances towards the $900 level. The greenback rang in the new year with an advance against the euro, which was retreating following an 11 year low reading in manufacturing activity. Moreover, the single currency faces the start of its second decade of life beset with challenges.

A multi-decade high in French unemployment and output slumps in Italy and Germany have raised the odds that some Euro politicians will make the currency their prime target for scapegoating. The US will release December manufacturing data later today, and expectations are that the numbers will reveal a rate of shrinkage not seem in three decades.

In Asia, Singapore's recession deepened as well, with a negative 2% growth rate being forecast for 2009 ( for a third consecutive year). India lowered interest rates for a fourth time as inflation turned to disinflation.Unsurprisingly, oil prices dove by over $3 and traded at $41.50 on such glum GDP news. In the interim, the 'gas war' between Russia and the Ukraine continued solutionless, while the Israeli strikes against Hamas entered their seventh day.

Well, one of the more significant final tallies of 2088 is in, and it confirms that which we have been cautioning for the better part of the year that passed. Gold imports by India, traditionally the single largest global buyer of the metal, fell by 47 percent in 2008. Only 402 tonnes were demanded by the country, as high gold prices and a slowing Indian economy ended up nearly halving demand, according to the The Bombay Bullion Association.

The Mumbai-based trade body said that India's gold imports in last month dropped by 81 percent to total only 3 tonnes (just over 96,000 ozs.), as compared to 16 tonnes being imported in the same month of 2007. The deadly bombings in the centre of Mumbai were also seen as having affected demand in December. Unless gold can bank on investment demand to more than offset the slump in Indian purchase tonnages, we must remain on alert and exercise caution. Demand destruction of this type is not health-beneficial for our market.

One ought not take one of the pillars of gold demand and treat it as if it mattered little. The President of the BBA, Mr. Suresh Hundia made it quite clear: Imports were down because prices rose. There were not many marriages or festivals either, In 2007, India imported 759 tonnes of gold (in other words, almost as much as the gold ETF has amassed in four years' time).

New York spot gold dealings opened with a loss of $10, at just under $871 per ounce as the US dollar climbed higher on the trade-weighted index (now at 81.67) and as oil continued under selling pressure. As the days' trade is expected to still be missing quite a few participants in 'post-holiday' action, moves could become exaggerated and investors might hold off until the start of next week. Silver fell 25 cents to $11.07, while platinum lost $5 to open at $923. Palladium was off by $1, starting at $184 per ounce. Direction for the day will likely come more from oil and the dollar as stocks looked mixed and basically hung-over from a truly nasty year.

After a year like the one that just ended, nothing should surprise anyone, anymore. But if UBS is right we better not let our guard down. They say a few more bombshells could very well drop – but here's the twist – not all of them are bad! That's right there could be some upside surprises on the horizon.

Here's what UBS told CNBC just before Christmas, could be Some Surprises for '09.

1) Oil prices fall below $20 per barrel.

2) The dollar falls to new lifetime lows.

3) Global growth is negative for 2009.

4) Gold goes to $300.

5) Corporate default rates don't rise significantly.

These things may seem unlikely but this year has shown us that unlikely things can happen, says Jeff Palma, head of global equity strategy at UBS Investment Research. Of course these surprises are not forecasts. They're more like plausible what if situations. But, it's worth noting last year UBS put together the same kind of list and nearly half came true. At the other end of the prediction spectrum, lies India's Commodity Online - it feels that lower supply and higher demand will push gold to $2,000 per ounce. Standard Chartered Plc sees the metal as averaging $985 per ounce this year, and trading closer to $1K by mid-year. And the forecasts keep on rolling in...

Best Regards,