Gold longest slidein five months' time resumedovernight, with the precious metal dropping for a sixth consecutive session, this time to just under $940 for a short while, as the stronger dollar and a static crude oil price hampered its attempts to recover. The metal remained in 'pre-Fed' mode, but then again, so did a number of other markets which await some kind of wise words from the US central bank this afternoon.

New York's spot gold dealings opened the midweek session with a $1.80-cent loss, quoted at $943.50 per ounce. Awareness of the loss of another 3 tonnes of bullion from the largest gold ETF continued to keep the market in check, but few players were seen willing to drive the metal to the $930s prior to the Fed announcement, fearing that it might contain a British-style surprise statement on the continuation (or augmentation) of the ultra-liberal accommodative stance that the Fed and other central banks have become notorious for since 2007.

Thus, it was status quo in the gold pits this morning, but the price bias was still pointed into a southerly direction. The release of a higher US trade gap number for June failed to undermine the US dollar as of 8:30 NY time. Although the deficit rose by a billion from May's levels, it still underscores the lowest level of US imports in well over five years. That R word, you know. Finally, the alarm bell of the day - Fed futures. They show a US rate hike by April 2010. Not December of 2010. Not a misprint. Not what gold or other commodity players would like to hear just about now.

Silver lost one penny on the open, starting the day off at $14.27 per ounce. Platinum dropped only $1 to $1237 but palladium fell $3 to $269 as Wednesday's session got underway. In the background, the US dollar index was steady at 79.14, while crude oil managed a small, 20-cent gain, rising to $69.64 per barrel. US inventories of black gold expanded last week in the US according to EIA data

The principal focus among various market participantsremains the R word - as in, recovery -complete with all of itspossible nuances. The timing andstrength of the rebound, thecollateral damage (lost jobs) it may come with, related central bank policies as regards the interest rate environment; these are all hot topics during this hot August. As regards the US, its central bank is widely expected to acknowledge that the American economy's recovery has begun.

However,that there are sufficient numbers of credit/consumer/unemployment/real estate etc. landmines still to be found out there to provide an excuse for keeping rates near zero. Thetask -going forward- is thehow and when to cut the Fed's balance sheet from the bloated $2 trillion of the moment, down to the $700+ billion it was prior to this global credit crunch.

A tall order, that, but, not an unmanageable one. Aside from these delicate surgeries to be performed by various central bankers, the confidence levels related to the global economy are certainly something to write home about. They jumped to their highest levels in nearly two years. What kind of R is this? Well, one that can -at present- only be labeled as slowing contraction.'

Other central bankers took a bit of a bleaker view of theR underway in their own countries. The UK's Mervyn King opined this morning that the local version of the R word could well be slow an protracted whilst inflation may very well miss his institution's target for the next three years.

Two percent being that target, the Guv feels that a more than one percent undershoot could end up being the reality in Britain until around 2012. Complete with the -by now familiar- picture of the highest joblessness in a decade and a half. Over on the continent, the economic R was once again in question, following a surprise of a different kind. The unexpected 0.6% drop in industrial production recorded in June. So...the euro will now rally...on what?

Over in China, it was back to worrying about bank lending overnight. The SGE fell a hefty 4.7% this morning, repeating last week's swoon which eventually impacted gold as well. Chalk that up to the Beijing government jawboning about keeping the credit spigot on 'full' while in reality banks have already begun to tighten same, with a not-so-small wrench. What's a speculator to do? Why, sell, of course.

Something else that looks like a 'sell' is the basket of so-called commodity currencies. A 37 percent drop in the Baltic Dry Index, a barometer ofcommodity prices, from this year's high may foreshadow losses in the dollars of Canada, Australia and New Zealand, countries that rely on raw-material exports. reports Bloomberg in its commodity roundup this morning. We are all familiar (though some wish we were not) with the BDI.

It collapsed at post-supernova rates last year. TheLoonie, the Aussie and the Kiwi- the three amigos- track the BDI pretty closely. On occasion, so does gold.

Bloomberg also reports that: The index collapsed in the wake ofLehman Brothers Holdings Inc.'s September bankruptcy. TheBaltic Dry bottomed in December, rallied through June 3, andthen tumbled. It fell for an eighth straight day on Aug. 10, reaching the lowest since May 20. Commodity currencies haverallied over the past five months. Camilla Sutton, director ofcurrency strategy at Scotia Capital Inc. in Toronto. ``We've seen the index drop dramatically. It's a cautionary sign.''

We'll keep it simple until after 2:00 PM. Back to Fed-watch.