Good Morning,

Bullion prices dipped as low as $858.80 overnight as continuing dollar buoyancy perpetuated the ongoing weakness in demand and added to the liquidation pattern we have observed among funds. Some physical demand was reported from VietNam and Indonesia but buyers are basically on hiatus in India as calendar-related buying has now come and gone. Although more voices have been reportedly heard in the 'worst is probably over' camp, the degree of certainty and optimism is markedly lower over in Europe. Inflation continues to be higher than desirable over in the UK, while the EU remains concerned about a contagion of the slowdown that has gripped the US economy of late.

New York spot prices started off on a better note for this midweek session, opening with a better than $3 gain at $870 per ounce. Today's focus will remain on the dollar (easing slightly back towards 73.25 on the index) and crude oil (also falling, last seen at $125.25) as participants are not yet convinced that they have seen the highs for the current period in either asset just yet. Silver added 14 cents to $16.82 while platinum lost $15 to $2035 and palladium was unchanged at $438 per ounce.

This morning's gain however was very likely largely due to a combination of news of losses over at Freddie Mac (smaller than expected, but still very much part of the string of losses that continue to emanate from subprime adventures) and by the lower than anticipated CPI numbers which gave participants some hope that if the Fed should need to lower rates come June, they might have some wiggle room to do so. Unfortunately, food prices rose the most in 18 years as part of the inflation landscape. The overall trend has been to turn away from such expectations and parts of it have already turned towards anticipated rate hikes perhaps even as soon as prior to year-end.

Gold remains at risk of turning lower so long as its rallies do not draw fresh buying interest but more importantly, neither do its dips. A broad range of from $845 to $885 is seen as the most likely value zone at the moment although surprises will remain...surprising. Paul Volcker is going to be heard from today, chiming in on the credit crisis and how one might have gone about avoiding it, dealing with it, and what regulatory changes it might engender. In the interim, Senator Schumer was heard on the Hill, ahead of Mr. Volcker's speech, wondering why on earth BofA would buy Countrywide - the poster child of the subprime debacle. Maybe its slogan will now also become No one does what we can do. Not by a long shot.

As today is a travel day, we will curtail the coverage to the basics and hope to be back with a more detailed afternoon update in the afternoon.

Happy Trading.