Good Afternoon,

After touching a new record of $976.90 in overnight trading, gold prices were seen tracking closer to $970 for most of the day in New York. Most other markets that also recorded overnight peaks retreated a bit as well. Crude oil was off 50 cents at just above $102, the US dollar was barely changed at 73.71 on the index while it was showing $1.519 against the euro and 104.04 vis a vis the yen.

Participants took yesterday's words on potential small bank failures by the US Fed Chairman as a signal to add to the rising mountain of long bets in various commodity markets. Some of the bettors are hopefully more seasoned and less rogue-ish than the fellow who just cost MF Global a fifth of its value by losing $141 million on a bunch of wheat contracts bought with funds he did not have at his disposal. Oops.

New York spot bullion was -at last check- on this final session of February at $970.80, up $1.30 per ounce as players took stock of the decline in consumer sentiment in February, and of the fact that there are more households reporting financial distress than anytime since the worst of the 1991 recession. Thus, the current sentiment remains anchored to the expectation that the Fed will cut rates in March, and cut them with an extra dose of vigor to try to reignite the US economic engine. Thus far, all it has managed is to turn it over, if that. To wit, the Dow promptly took a heading southward, losing 280 points thus far on the day.

Silver lost 2 cents to $19.73 on the heels of not-so-light profit-taking. The noble metals presented a mixed picture, with platinum adding $20, at $2161 and palladium losing $10 to $569 per ounce respectively. February's gains in gold hark back to another impressive month of gains - those seen in April/May of 2006 when the metal rose from $597 to $725 over a 30 day period. Gold has added nearly 5% over the past 30 days. Not to mention the 45% year-on-year gain it has now achieved. Hopefully, this time, the aftermath of the chart spike will be different.

This session was marked by less choppiness than expected, even though the trade had to digest the statistics and square books ahead of the weekend. Bad news from AIG ($5 billion out the window, and SwissRE kept gold on the boil. However, signs of the quantification of the credit debacle are starting to emerge. UBS said today it believes the size of the problem to be around $600 billion. Let's see what crystal ball they are using over there.

Here is today's version of the Friday funny - (a Kitco office tradition of sending the joke of the day). Bloomberg reports that:

- Treasury Secretary Henry Paulson reiterated yesterday he favors a strong dollar.

- President George W. Bush said the currency should reflect the economy's ``fundamentals''

- [Ben] Bernanke told a Senate panel the declines [in the US currency] have resulted in ``some improvement in

the trade deficit, which is a positive.''

Ah, the words of wisdom from officialdom. To which, we say:

- Really? And you are doing...what, about it Mr. Paulson?

- Maybe it is, Mr. President. Maybe it is.

- Yes, and look at what other 'positives' the declines have resulted in, Mr. Bernanke.

(Late word is that January's jump in inflation has all but erased any gains in personal income levels. Consumer spending was flat (as in: flatlining) for the third month.) Thank you, gentlemen.

Keep alert and count the next ten trading sessions down as windows within which your favorite precious metal makes your price dreams come true.

PS - I wish to leave you on an optimistic note as this weekend approaches. My friends, the Aden sisters (whom I have known for 30 years now) just published their latest update on the markets. One passage in their letter struck me as extremely wise, and I wish to relay it to you here. When it comes to the future, Pamela and Mary Anne opine that:

We’ll see what happens, but over the many years we’ve been in this business, we’ve noticed that, when all is said and done, things rarely end up as bad as they may seem. Even though there may be many valid reasons why a worst case scenario could evolve, it rarely does. Markets survive, economies survive, people make money and they lose money, markets move up and they move down, change is inevitable but that doesn’t have to mean disaster is coming. Most important is to keep an open mind and stay flexible. Allow for surprises and don’t stubbornly hold onto an idea because you think it’s right. The markets will tell us what’s happening and if a market changes, we’ll change with it.

Happy Trading.