Good Morning,

Gold prices remained in a relatively tight trading band in Asia overnight, meandering between $931 and $941 as once again little in the way of news filtered into the market. The US dollar appeared stalled at 71.70 on the index while crude oil drifted lower to just under $105.00 per barrel. On the other hand, the Nikkei lost nearly 300 points, ending its worst quarter in 18 year on a sour note as apprehensions about feeble consumer spending depressed sentiment.

New York spot trading opened with a small gain as participants awaited a slew of US economic statistics that start tomorrow and culminate Thursday and Friday with the jobs picture. Gold added $5.00 on the open, rising to $936.00 per ounce. Participants remain mindful that Friday's large losses were part of a broader slump across the commodity sector and not just a result of quarter end book-squaring. Silver gained 10 cents to $17.98 while platinum rose $15 to $2046 and palladium fell $3 to $443.00 per ounce. Tests of last week's $950 area may be in the making once again however, as players expect the economic data to give rise to further Fed accommodation in coming weeks. Maybe, maybe not.

One of the more bizarre scenarios heard of late has been floated - not surprisingly, by the tinfoil league. Imagine if you will, that sinister central banks are 'pushing' gold out the back door by inverting lease rates. This, supposedly in a desperate effort to suppress prices. Then, imagine that all of this gold is finding eager buyers in India. Right, and that is why India imported only 5 tonnes of gold in January ( a month during which it normally absorbs 60 tonnes or more)...

That fairytale is about as credible as the back-channel talk that some kind of 'squeeze' must be on in the silver market as evidenced by the shortage of small fabricated products among silver retailers. Sure, and this is why depositories are practically choking on 1,000 ounce silver bars crowding their floor space. It's amazing what tales bored people will spin when it comes to markets they do not comprehend. Here is something that - on the other hand- is fairly easy to grasp:

The massive implosion in the credit markets was not going to pass without effect on the structural front as far as background regulatory conditions are concerned. Sooner or later, Wall Street expected that some changes would come its way from Washington. Well, that day has arrived:

The Bush Administration is calling for one of the most comprehensive changes in the way government regulates the U.S. financial systems, giving the Federal Reserve broader powers and combining several existing regulatory agencies.

In a speech Monday, Treasury Secretary Hank Paulson is expected to unveil the plan, which would put the Fed – which has taken an expanded role in providing liquidity in the market during the problems with subprime mortgages and the collapse of Bear Stearns in charge of overall issues of financial market stability, according to details released by the Treasury Department.

The plan would merge several existing agencies. For instance, the Commodity Futures Trading Commission, which regulates the commodities market (and, by default, has regulation authority over many hedge funds that trade in commodities), would be merged into the Securities and Exchange Commission, which regulates the stock and bond markets. Other agencies would be phased out altogether. The Office of Thrift Supervision, which regulates small thrift banks, would be eliminated, and its authority would shift to the Office of the Comptroller of the Currency.

In the shorter term, Paulson’s plan calls for creating a new Mortgage Origination Commission to create standards for state mortgage market participants. Not surprisingly, the winners in the proposed new regulatory structure lauded the plan. The Treasury's report presents a timely and thoughtful analysis and is an important first step in the complex task of modernizing our financial and regulatory architecture, the Federal Reserve said in a statement. We look forward to working with the Congress and others to help develop a policy framework that will enhance financial and economic stability.

Talk of changing the regulatory framework has been abuzz in Washington for much of the past year, but it accelerated as the financial liquidity crisis deepened this winter. In fact, much of the Congressional testimony of Paulson, Cox and Fed chairman Ben Bernanke has featured an undertone of the need for regulatory reform, though all three have stopped short of calling for new or broader regulation.

In other news that may be of interest to speculative minds, Bloomberg reports that:

Overall commodity prices may decline by half as the value of products such as corn, wheat and copper tend to ``overshoot'' on speculative buying, Barron's reported, citing independent analyst Steven Briese.

Briese's analysis of positions by commercial hedgers such as farmers, food processors, energy producers and others who trade commodities daily suggested these investments were fully valued in early September, the weekly newspaper said.

Briese estimates index funds, which account for 40 percent of all investments expecting the price of commodities to gain, hold about $211 billion worth of long positions in U.S. markets, the newspaper said in its March 31 issue.

Short positions held by commercial commodities investors in the 17 commodities tracked by the Continuous Commodity Index were 30 percent higher than the previous net-short record in March 2004, Barron's said.

More active and likely more volatile conditions will develop as we get into April and the reviews of Q1 start filtering into markets. Defensive posturing might not be unwise.

Happy Trading.