Good Afternoon,

Barely 24 hours after recording a spike to $990.00 gold prices found themselves as much as $30 lower during a session that did not show much in the way of expected support emerging at the $975 level. Or, for that matter, at the $960 level. The day was dominated by fairly heavy long liquidation among funds, and evidence of same was in plain view within the 2 to 2.5 percent drops experienced by copper, silver, and crude oil. The exceptions was palladium which dropped nearly 7% to $544.00 per ounce. Put these declines within the context of a still declining dollar (last seen at 73.59 on the index) and certain scenarios suddenly do not looks so assured for some participants. To be sure, this drop could still be lumped into the 'mild profit-taking' category, along with recent similar ones. Let's see how the rest of the week unfolds first. As far as crude oil is concerned, it finds itself at $100 once again - could it break once more?

New York spot prices lost about $25.00 from last night's closing levels and were quoted at $958.90 bid as the trade wondered why - on a day when the Dow lost nearly 200 points, Bernanke warned of more foreclosures, and Citigroup started to resemble a hopeless case - the precious metal was not etching the $1,000 mark into the value scales of history. Oh well, some say -there is always tomorrow. Silver shed 68 cents, falling to $19.63 amid the deepening profit-taking and even platinum, which had been in the plus column for most of the day, lost $13 to $2218.00 per ounce. While we won't have a close until 5:15 EST, questions are swirling around about where the market heads next. Some have seen their objectives at 990 gold, 600 palladium, 2300 platinum, 20.50 silver and have decided to call it a day for now. Others, see a fresh buying opportunity and are chanting bring it on! to $900 to $915 gold as they see the last chance to ever buy bullion in the three-digit range. You decide.

After a 3.5% rise against the US dollar in just one week, the european currency's strength has certainly caught the eye of several finance ministers and ECB officials. Reuters tells us that:

Belgian finance minister Didier Reynders said U.S. concern over the dollar could be the first step to currency collaboration, while Trichet stressed that Washington favoured a strong dollar and ECB Governing Council member Guy Quaden called on the U.S. authorities to reaffirm that policy. There were also signs the exchange rate is starting to take its toll on European companies, with German engineering giant Siemens saying the euro is at a level that's not easy for it.

Current rhetoric still falls short of being interpreted as intervention-oriented, but analysts believe that if the U.S. gives the nod and collaborates with Europe on the issue, a departure from the hands-off stance could emerge.

Further evidence that the gold market is in the midst of a period of turmoil emerged from the Middle East overnight. Many of us have read various upbeat articles over the past two weeks about isolated examples such as gold demand rising in Egypt.

The reality on the ground in the region is, according to, that:

As the unabated and relentless surge in the gold price continued to keep buyers at bay, most jewellery outlets in the UAE suffered almost 55 to 70 per cent sales drop during the past six months compared to the corresponding period almost a year ago. Since August 2007, while gold prices have rallied 50 per cent, retail outlets in Dubai, Abu Dhabi and Sharjah faced an unprecedented sales slump during the traditionally peak festive seasons of Eid, Diwali, Christmas and Dubai Shopping Festival.

In the physical sector, dealers saw a surge in demand for gold bars from investors in Vietnam but holders in Indonesia and Thailand cashed in their bullion. Gold's rise scared off jewellers in Hong Kong and India, the world's largest consumer of gold jewellery. India's gold imports in January this year plummeted to just five tonnes from 62 tonnes in the same month a year ago as a surge in prices saps demand in the world's largest consumer.

In February, it was just three tonnes, reflecting the record slump in offtake, analysts said. The same trend is being felt in Dubai, home to one of the most vibrant gold jewellery markets and a main overseas shopping centre for Indian jewellery buyers.

While the attention lavished upon gold and other metals as well as other commodities by speculative funds has made for some spectacular headlines, the structural construct of the underlying market has been (not so slowly) shifting into a distorted phase which ought to be taken into account. Especially in light of the last six months' worth of developments. There could be a standoff developing between the consistent and traditional sector of demand (gold's largest) and the cyclical, fear & greed -driven safe-haven and speculative demand so much in evidence since September. Organizations charged with promoting gold demand across all channels must have their hands full and their marketing staff in a quandary. You sure can't please everyone.

Some of the overbought conditions may have been alleviated today, but the tug-of-war between the two camps certainly has not. If you think a $30 range is exciting, wait until we see $50 to $100 days come our way as this drama unfolds. Antacids advised. Make that: required.

Happy Trading.