us gold futures hits record high, page-4

Good Afternoon,

A fresh day of records was inked into the history books as gold successfully tested the $927 level and touched an even $930 on the offer side, after new home sales data emboldened speculators to lay more money on the line.

New York trading finished the week's first session on a strong note, with gold rising $16.40 to close at $926.90 per ounce against a still declining US dollar (@ 75.52) on the index) and. The anticipation of further interest rate-related gifts from the Fed is keeping the longs on the bold side, but signs of worry among some are still omnipresent despite the overt confidence they manifest.

Tacit apprehensions include those about another 540+ point decline in the Nikkei overnight, the 7.2% drop in Shanghai stocks, the potential for a contraction in the global economy, and the possibility that this round of interest rate cuts may either not be ultra-aggressive, or may be among the last bullets left in the Fed's belt. Silver first gained 27 cents to $16.68 per ounce, but the real fireworks were seen over in the platinum pits. In a delayed reaction to last week's news, the noble metal added another $49 to $1721.00 on actual as well as feared supply issues related to S. African power shortages.

However, before starting to chase that runaway platinum train towards the $1800 station, one would be well-advised to take glance at this morning's Marketwatch news headlines, within which one may learn that:

"Impala Platinum Holdings Ltd., the world's second-largest platinum producer, has resumed worker shifts at its Rustenburg operations in South Africa after receiving half its power requirement from state utility Eskom Holdings Ltd. The increase in available electricity follows weekend meetings with Eskom at which Implats said it has agreed to assist in reducing mining industry demand for power by 10%. Mining operations at Rustenburg have been halted since Friday due to a shortage of generating capacity at Eskom. Implats reiterated that the impact on production is in the order of 3,500 ounces of platinum a day and said its refining operation is receiving reduced input from suppliers similarly affected by power shortages. "

Sentiment continues to be subject to the ebb and flow of market news ahead of the Fed decision, but for the moment, equity market behavior seems to have the dominant trend-setting power. The AP reports that:

"A series of events this week, including expected references to the economy in President Bush's final state of the union address Monday evening and the Federal Reserve's interest rate announcement, are expected to influence trading. The Fed dropped rates by 0.75 of a percentage point Tuesday, and another rate cut is expected this week." Indeed, it would be a big surprise if the economy and/or housing and/or the wonderful measures that are being taken to rescue everyone (save those who happen to earn over $75K) were not mentioned tonight. Yes, it is an election year, indeed. Just checking.

But, wait:

"Hopes for a very large cut, however, have been tempered by news that French bank Societe Generale sold European index futures to close positions taken by an alleged rogue trader. It is now thought that those trades may have had a role in the massive losses one week ago on global indexes, when U.S. markets were closed."

Wow. Who needs George Soros or Nick Leeson when you can have a 31 year-old infant in the candy store, able to bring down the SocGen house? Well, at least one guy acted mature this day - Angelo Mozillo, he of Countrywide (in)fame(y) has decided it would be just too much to walk away with a fat chest full of money. Says the Guardian of Mr. M:

"The Countrywide chairman and chief executive has come under fire from politicians, with presidential candidate Hillary Clinton recently describing the payoff as "outrageous" and accusing 69-year-old Mozillo of being "one of the principal architects of this whole house of cards".

Speaking of falling houses, The New York Times notes that: "Sales of new homes fell last year by 26 percent, the steepest drop since records began in 1963, the Commerce Department said on Monday. Last week, the National Association of Realtors reported that sales of previously owned single-family homes, a large portion of the overall housing market, suffered their biggest annual drop in 25 years. Prices have also fallen sharply. In December, the median price of a new home fell to $219,200, down 10 percent from December 2006."

Maybe the heyday of excess and wild abandon is drawing to a close with these spectacular headlines. Or, maybe, greed and silliness will return after a sober period. The disturbing thought in the SocGen debacle is the possibility that the Fed wet'em and slashed rates inter-meeting for the wrong, unrelated reason. Now that would be some headline. The amount of "stimulus" being added to the economy would put any house of ill-repute in ancient Pompeii to shame.

Look for rising volatility and possible test of overhead resistance if the $940 area is reached, but mind the words of one 34-year veteran "technician's technician" - Martin Pring - who cautions that "any rally will be a risky proposition." Remain nimble, as the currents are swift, and the last $100 have been added awfully fast to this market.

Best Regards,

Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal