Good Morning,

Confined to an $890-$898 range overnight, gold did not do much more than track a markedly slower trade in oil (at just under $128) and a marginally lower US dollar (at 72.80 on the index). Although Asian fabrication demand remained on the anemic side, at least it was visible - something that cannot be said about several periods in the preceding months. Turkish imports for example reached nearly 20 tonnes last month - however, the five month tally this year still shows a near 30% overall drop. You already know the reason for such a swing. Early reports from the big JCK jewelry show in Las Vegas over the weekend indicate that the industry is experiencing a marked slowdown. By contrast, just one year ago, the exhibit halls were strictly standing room only.

New York spot prices opened with a small gain once again, showing a $2.00 rise at $892.30 as the trade awaits several potentially market-moving pieces of information this morning. Among them, Euro zone economic figures (expected to show a slowing in progress) and attendant interest rate posturing (IMF says ECB is correct in holding rates steady despite the slowdown), and US factory orders for April. In addition, a speech by Ben Bernanke will be scrutinized for clues as to what stance the Fed will adopt at its meeting this month. At the moment, the number of those who expect a further rate cut has shrunk to practically zero.

Silver lost a dime, opening at $16.74 while platinum gained $5 at $2012 and palladium showed no change, quoted at $431 per ounce. Muted or not on the day, platinum now shows the best performance among precious metals in the current year. The noble metal has risen 31% (mainly on production difficulties in S.Africa) versus the 13% gain shown by silver and the sub 5% performance turned in by gold since the beginning of 2008.

In the interim, signs that commodities markets have not only come under scrutiny but are about to experience a few...changes (to say the least) are starting to show up. The New York Times reports that:

Regulators of the nation’s commodity markets will demand more information about investors to determine whether they are evading market limits on speculation and artificially driving up world food prices. The regulatory agency, the CFTC, also plans to initiate talks with bank regulators to ensure that adequate credit is available for the farm economy.

In addition, the commission intends to strengthen a program aimed at lowering the cost for farmers of hedging crop prices, which has grown more expensive with the increasing volatility in the markets, according to a draft of the proposals obtained by The New York Times. The commission is expected to announce the proposals Tuesday.

Finally, in an unusual departure from the secrecy that usually cloaks its enforcement actions, the commission will confirm that it is investigating the price spike that hit the cotton futures market in late February, a step demanded by cotton industry executives at a commission hearing on April 22.The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.

But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market — from pension funds, endowments and a host of other institutional investors — through the new conduit of commodity index funds.

Don't assume that is it just the CFTC that is caving to US politicians in this ominous process. Bloomberg reports that:

Austrian Finance Minister Wilhelm Molterer said he'll propose a Europe-wide tax on commodities speculation as people across the continent protest against higher fuel and food prices.

``A tax on speculation would boost transparency in the markets,'' Molterer said in a Bloomberg Television interview in Frankfurt late yesterday. ``It would send a signal that speculation is unwanted.''

Molterer is the latest European politician to criticize financial markets and suggest measures to contain prices. French President Nicolas Sarkozy earlier this year called for an end to a ``capitalism of lies, of frivolity.'' Three years ago, the chairman of Germany's Social Democratic Party compared investors seeking short-term gains to ``locusts.''

Finally, as regards housing, Chief economist Irwin Kellner, (over at Marketwatch) has looked at some indicators and he expects a turn in the situation sooner rather than later. By his calculations:

As of the April stats, the typical existing home cost 3.4 times estimated household incomes, while median new-home prices equaled almost 3.8 times family incomes. These are down from the peak of 4.2 reached in the bubble year 2005, although they remain above the 2.8 figure that prevailed in the 1980s, when housing sold at a brisk pace.

But home prices don't have to get down to 2.8 times incomes to kick-start the market. A bit over three times might do it.

Remember, incomes are still rising, so home prices don't have to fall as much as you think before buyers decide that they can once more afford the home of their dreams. Sooner or later, the fact that housing is more affordable will sink in. That's when the market will turn.

Let's see what the day's news bring to the market. Oil and the greenback remain at the center of the action and the statistics and words in the pipeline might still make for a busy day. Downside risk remains present for bullion although the relatively level tone with which the week opened feels a lot better than what we experienced last week.

Happy Trading.