Money and Metals

The Associated Press reports on the US dollar. "The dollar ended the week with an ugly sell-off, triggered largely by news the United States will no longer exempt Chinese companies from U.S. anti-subsidy laws, which offset a slew of largely dollar-positive data. While the greenback was able to retrace some of its losses against the yen in particular, it ended the New York session down across the board."

"'Hope that the dollar could start a rally next week off of (Friday's) U.S. data was quickly extinguished by news of U.S. tariffs against China,' Michael Woolfolk, senior currency strategist at The Bank of New York, 'The market's reaction demonstrates how sensitive an issue this is.'"

"Late in New York, the dollar was changing hands at 117.87 yen versus 117.97 late Thursday, while the euro stood at $1.3356 from $1.3335, according to EBS. The dollar was at 1.2157 Swiss francs versus 1.2175, while sterling was at $1.9673 from $1.9623 late Thursday."

"Higher inflation would stem from higher prices consumers would have to pay due to the tariffs, T.J. Marta, fixed-income strategist at RBC Capital Markets said."

"'This is not a positive development for the U.S. economy,' Marta said, particularly as higher inflation would put pressure on the Federal Reserve to refrain from accommodating any potential U.S. economic weakness due to the housing downturn."

"Dollar-selling also came Friday amid continued geopolitical tensions between the U.K. and Iran."

"The National Association of Purchasing Management-Chicago said Friday its index of manufacturing activity rose to 61.7 in March from 47.9 in February, hitting its highest level in two years and versus an expected reading of 50."

"'The stronger-than-anticipated U.S. data virtually across the board throughout the morning was not enough to get dollar-bulls out of the woodwork,' Dustin Reid, currency strategist at ABN Amro said. 'This clearly indicates that fundamentals are likely to take a back-seat,' as geo-political tensions may come to a boil next week."

From MarketWatch. "Gold futures made fresh gains Friday to close almost $6-an-ounce higher for the week as developments in Iran and China punctuated the metal's appeal as a safe-haven investment. But gold's April contract finished the month of March with a loss of more than 1%."

"Gold for April delivery closed at $663 an ounce on the New York Mercantile Exchange, pulling back a bit from an earlier high of $665 to finish $1.50 higher for the session. The contract closed $5.70 higher than last Friday's closing level, but it's down about 1.4%, or $9.50, from the end of February."

"'Save-haven status is being confirmed,' said Neal Ryan, director of economic research at Blanchard & Co. 'But don't forget the performance-asset aspect.'"

"Prices haven't passed $700 per ounce yet because of the 'gold that has been dumped on the market in the past few weeks,' he said. Looking further ahead, gold prices will 'cross $700 in weeks -- and will quickly challenge the $730 May high without the corresponding wicked correction,' Ryan said, adding that gold has the potential to 'spike up to $800 by late fall.'"

"Gold prices had fallen by $5.30 to close Thursday at $661.50 an ounce, trading down some $11 an ounce at one point during the session. 'While one hopes that the event was a one-off, it comes on the heels of the recent safe-haven disappointment that gold generated in the wake of falling global equities,' said Jon Nadler, an analyst at Kitco.com."

"Other metals prices were higher Friday. May silver rose 11 cents to close at $13.45 an ounce. It was up 1.7% for the week, but down 5.5% for the month. June palladium climbed $1.25 to close at $357.25 an ounce, down over $2 for the week, but up a few cents for the month. And April platinum added $5.70 to finish at $1,248.30 an ounce, up almost $15 for the week but down around $8 for the month."

MarketWatch reports on currencies. "The dollar rose against the yen Thursday after a government report showed the U.S. economy grew at a faster pace than initially reported in the fourth-quarter. The yen fell across the board, snapping a two-session rise, as steadying global equity markets encouraged investors to reestablish carry trades. Weaker-than-expected Japanese retail sales data further weighed on the yen."

"'The dollar/yen extended its rebound by a full yen from yesterday's 116.40 low amid rebounding equities, a neutral [Federal Reserve Chairman Ben] Bernanke and a 0.2% decline in Japanese retail sales,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets. 'The redress in risk appetite is now boosting the higher yielding currencies.'"

"Late in New York, the dollar was quoted at 117.94 yen, compared with 116.86 yen late Wednesday. The euro stood at $1.3333, compared with $1.3312. The British pound traded at $1.9623 vs. $1.9612. The dollar changed hands at 1.2172 Swiss francs, compared with 1.2165 francs."

"In the GDP report, the year-over-year increase in core personal consumption expenditure price index was unrevised at 2.2%, described by Bernanke as 'uncomfortably high.' The Fed has an implied target of about 1% to 2% for core inflation."

"'Core inflation has remained elevated,' said Michael Woolfolk, senior currency strategist at The Bank of New York. 'Until core inflation falls back below the 2% [year-over-year], a Fed rate cut will remain a remote possibility. This may help to explain why Bernanke made a point yesterday of indicating that the Fed had yet to change its inflation bias.'"

"Gold futures fell Thursday, as traders locked in gains before the end of the quarter, despite rallying crude-oil prices and mounting tensions between Iran and the U.K. 'Fund liquidations hit bullion and hit it pretty hard,' said Jon Nadler, analyst at Kitco.com."

"Gold for April delivery closed down $5.30 at $661.50 an ounce on the New York Mercantile Exchange."

"Crude oil for May delivery rallied $1.95, or 3%, to close at $66.03 a barrel Thursday, marking the contract's highest closing level since Dec. 20. It touched a high of $66.50, its strongest intraday level since Dec. 5."

"'That gold is willing to give up some of its recent gains despite the lack of resolution to the hostage impasse is a caution sign in the making,' said Jon Nadler, metals analyst at Kitco.com. 'Fund liquidations hit bullion and hit it pretty hard.'"

"'The risk/reward picture is back in favor of taking profit or shorting bullion until at least such time as either the crisis deepens or other markets give a compelling 'buy' signal and drag gold along with it,' Nadler said."

"'While the current environment remains supportive for gold, the metal continues to meet strong resistance which may remain in place till after the end of the month/quarter,' said James Moore, metals analyst at TheBullionDesk.com."

"Other metals prices were lower. May silver fell 11.5 cents at $13.34 an ounce, April platinum ended down $8.20 at $1,242.60 an ounce and June palladium fell $1.85 at $356 an ounce."

"The number of B, or junk, credit ratings assigned to U.S. companies surged to 42% of all ratings in 2006, up from 36% in 1998 and up from just 7% in 1980 when A-rated credit dominated the market, according to S&P. Analysts say the shift away from sound credit at companies reflects a belief among managers that they can grow themselves out of debt and a comfort level with high interest rate risk."

"Last year, S&P issued two downgrades for every upgrade, the highest rate in three years."

"S&P said there were 300 new B-rated credits last year compared to just 66 in 2001, the average for companies getting assigned a rating for the first time has tumbled to B-minus from B-plus and the spread between investment grade and junk bonds has narrowed."

"'We're not saying this is Armageddon,' said Nicholas Riccio, a managing director at Standard & Poors. 'But we think the credit risk has increased over the last two years.'"

"Dollar volume of LBOs rose to more than $350 billion last year, up from less than $150 billion in 2005 and $50 billion in 2003, according to S&P. 'By the end of this year the default rates are going to increase,' Riccio said. 'If you look at the new issuance we're rating, it's coming in lower. Historically, if you look at the pattern, it's not too far afield before the default rates start moving higher.'"

"So, can anything be done to avert the coming credit crunch for corporations? No. And that's answered without hesitation. Look at any market. The cycle moves up and down. It may shift in a month or a year, or two years, but the credit cycle will change again."

"Corporate borrowers and the banks that bankroll them know the score. So far, no one is twisting the tap handle. But it will change. It may not be Armageddon, but it could be a recession."

Bloomberg reports on currencies. "The dollar may gain a second day against the euro after Federal Reserve Chairman Ben S. Bernanke said inflation remains the central bank's main concern. Traders bought the U.S. currency, paring the dollar's losses against the euro this month to 0.6 percent, after Bernanke told Congress the bank's policy is 'still oriented towards control of inflation.' The comment also helped the dollar trim losses versus the yen."

"'Bernanke is still vigilant on inflation, and this is giving the dollar a short-term boost,' said Scott Schultz, a currency trader at Brown Brothers Harriman & Co. in New York. 'Longer-term, the dollar is still under pressure.'"

"The dollar traded at $1.3317 per euro and 116.91 yen at 6:26 a.m. in Tokyo. Scott said the dollar will rebound to 117.20 yen and to $1.33 against the euro before 'the rally sputters.'"

"Volatility climbed on yen options as investors exited bets on riskier assets financed by borrowing in Japan's currency."

"The yen reached a nine-day high against the dollar as a slowing U.S. economy and tension between Iran and the U.K. led investors to pare back on so-called carry-trade bets. Japan's currency touched a three-month high in early March when investors trimmed carry-trade wagers amid a slide in global stocks."

"'The market is concerned about funding carry-trade positions with yen,' said Paul Mackel, a senior currency strategist at HSBC Holdings Plc in London. 'There is concern about the outlook for the U.S. economy; geopolitical risk is helping bring a bid to volatility.'"

"'The market is due for a re-pricing of risk, which for the foreign exchange market will result in a stronger yen and a stronger Swiss franc,' said Phyllis Papadavid, a currency strategist at Lehman Brothers Holdings Inc. in London. Lehman forecasts a yen rally to 112 per dollar at year-end."

From MarketWatch. "Gold futures closed higher Wednesday, as the stand-off between Iran and the U.K., surging oil prices and the falling dollar boosted demand for the precious metal. Gold for April delivery ended up $4.30 at $666.80 an ounce on the New York Mercantile Exchange."

"'The principal driver for the surge in bullion was once again rising crude,' said Jon Nadler, a metals analyst at Kitco.com. 'The delayed reaction to Iran's initial abduction of the British sailors is now showing all of the signs of turning into a rush to safety of significant proportions.'"

"'The combination of heightened Middle East tension, the knock-on effect this is having on the oil market, and the continued poor performance by the dollar do still favor an upside breakout despite technical indicators suggesting otherwise,' said James Moore, metals analyst at TheBullionDesk.com. Technical factors include options expiration and month/quarter-end positioning."

"Crude for May delivery was last up $1.27, or 2%, at $64.20 a barrel on the New York Mercantile Exchange, retreating a bit from a peak of $64.85 -- the highest intraday price seen for that contract in a regular trading session since Dec. 22."

"Other metals prices also posted gains. May silver ended up 17.5 cents at $13.455 an ounce, April platinum rose $8.80 at $1,250.80, and June palladium gained $1.85 at $357.85 an ounce."

The Financial Times reports on currencies. "Weaker-than-expected US consumer confidence data ensured that the dollar remained on the back foot Tuesday with its defences against the euro crumbling due to stronger German business sentiment. Stuart Bennett, economist at Calyon, said: 'Stronger activity will put greater pressure on already stretched capacity and should intensify those upside risks to inflation that the ECB has warned are likely to come through later in the year.'"

"Canada's dollar jumped against its US counterpart as results from the Quebec election made it less likely a referendum on separation was imminent."

"Marc Chandler at Brown Brothers Harriman suggested that other factors behind the currency's strength, including cross-border merger deals and rising commodity prices. 'Oil prices near the high for the year may be helping underpin sentiment,' he said."

From Bloomberg. "The New Zealand dollar may rise on speculation the U.S. Federal Reserve will cut interest rates this year, luring investors to higher-yielding currencies."

"The local currency reached a 22-month high yesterday after a report showed U.S. consumer confidence dropped from a five-year high. The data prompted traders to increase bets the Fed will cut borrowing costs, spurring investment in riskier assets offering higher yields. New Zealand's record 7.5 percent interest rate is 2.25 percentage-points higher than the benchmark rate in the U.S."

"'Our view is price pressures will decline enough this year for an easing of rates' in the U.S., Todd Elmer, currency strategist at Citigroup Global Markets. As the U.S. dollar falls, 'New Zealand's high-yielding assets are a particularly attractive target,' he said."

"The local dollar bought 71.69 U.S. cents at 9:30 a.m. in Wellington, from 71.76 cents in late Asian trading yesterday. It reached 72.04, the highest since May 12, 2005."

The Statesman. "Iran has significantly reduced the amount of US dollars it holds in its foreign reserves, the head of its central bank has revealed. Dollars now make up 20% of reserves, in line with the policy of lower exposure to the currency, Ebrahim Sheibany said."

"Iranian industry officials have said 60% of its oil trade with other Opec members is now in non-dollar currencies, although this figure has not been corroborated."

"The Reuters news agency reported Chinese sources as saying that state-owned oil producer Zhuhai Zhenrong Corporation had moved out of the dollar for its Iranian trade late last year. If correct, this would be significant since Zhuhai imports 240,000 barrels of oil a day from Iran while China is one of Iran’s most important customers."

From MarketWatch. "Gold futures closed lower Tuesday, tracking a pullback in crude-oil prices a day after a strong rally sparked by tensions between Iran and the U.K."

"Gold for April delivery closed down $1.40 at $662.50 an ounce on the New York Mercantile Exchange. 'Another largely sideways day has been seen in the precious metals despite a weaker than expected confidence reading from the New York Conference board,' said James Moore, metals analyst at TheBullionDesk.com."

"'Both oil and the dollar will provide intra-day direction, while traders now will likely wait for Bernanke testimony tomorrow and the impact it might have on the greenback,' said Moore. On Wednesday, Federal Reserve Chairman Ben Bernanke is scheduled to testify on the nation's economic outlook before the Joint Economic Committee on Capitol Hill."

"'Bullion market participants expect they will get a better sense of gold's immediate trading direction once they hear from Mr. Bernanke again regarding the state of the U.S. economy,' said Jon Nadler, analyst at Kitco.com."

"Gold prices are meeting strong resistance between $664 and $666, though the continuing stand-off between Iran and Britain may spark further safe-haven buying, Moore said."

"Other metals prices were mainly lower. May silver ended down 13 cents at $13.28 an ounce, June palladium fell $3 at $356 an ounce and May copper ended down 8.10 cents at $3.0575 a pound. April platinum gained $5.50 at $1,242 an ounce."

Reuters reports on currencies. "The dollar firmed against the euro on Friday as a surprise jump in U.S. existing-home sales tempered the case for lower benchmark interest rates by the middle of the year. It also recovered losses against the yen sustained overnight when data showed the first annual rise in Japanese land prices in 16 years."

"The data also helped the dollar wipe out losses suffered earlier this week when the Federal Reserve adopted a more neutral monetary policy stance at its latest meeting, suggesting to some investors that a rate cut was imminent."

"By late afternoon, the euro was trading at $1.3288, down 0.3 percent on the day. It hit a two-year high of $1.3411 on Thursday following the Fed's policy shift."

"The dollar last changed hands at 118.07 yen, unchanged from late Thursday, and ended the week up 1.5 percent against the Japanese currency. The yen got a boost overnight when Japanese Finance Minister Koji Omi told a news conference that recent rises in Japan's land prices reflected a strengthening economy."

"Against the Swiss franc, a safe-haven currency, the dollar reversed losses that were initially sparked by reports that 15 British Royal Navy sailors and marines had been seized by Iran. The dollar was last up 0.4 percent at 1.2183 Swiss francs."

"In the long run, traders said the dollar's fortunes looked gloomier since higher euro zone interest rates are expected to keep cutting into the dollar's yield advantage. 'Fundamentally, I see very little reason to buy the dollar at the moment,' said Greg Salvaggio, vice president of trading at Tempus Consulting."

"Friday's relief rally stems from the 'enormous amount of fear the subprime situation built into the system,' Schlossberg said. 'Does that mean the problems have gone away? Absolutely not, and we will see further evidence of a U.S. slowdown,' he added."

"The Canadian dollar ended lower against the U.S. currency on Friday, as the greenback rallied late in the session, offsetting a Canada-positive rise in the price of oil."

"The currency finished at C$1.1608 to the U.S. dollar, or 86.15 U.S. cents. down from C$1.1582 to the U.S. dollar, or 86.34 U.S. cents, at Thursday's close."

"'The declines today are really consistent with the fact that the U.S. dollar is gaining strength almost across the board,' said Carolyn Kwan, markets economist at Scotia Capital."

"For the week, however, the Canadian currency rose a sharp 1.2 percent, due to mid-week gains on the back of stronger than expected Canadian inflation data and U.S. Federal Reserve statements that sparked talk about possible U.S. rate cuts."

From MarketWatch. "Gold futures closed with a loss Friday as traders locked in a six-session gain of more than 3%, but prices still finished the week over $3 higher. 'Nervous and technical traders moved in to take gold lower Friday using U.S. housing data as the excuse to lock in gains and in the process hit a technical support level to sell gold off further,' said Peter Spina, chief investment strategist at GoldSeek.com. 'Gold is grinding its way higher, while still consolidating from the prior correction,' he said."

"Gold for April delivery closed down $6.90 at $657.30 an ounce on the New York Mercantile Exchange after a decline to $655.50. On Thursday, the contract closed at a three-week high of $664.20. It had climbed $21.70, or 3.4%, over the course of six trading sessions."

"'Gold bullion prices quickly retreated to the $660 level after gaining nicely over several sessions during the week, said Jon Nadler, a metals analyst at Kitco.com. 'This week's ascent, while looking promising, was not only stalling at higher levels, but was subject to some mild pull-backs soon.'"

"June palladium climbed $1.75 to close at $359.50 an ounce, up 2% for the week. Sister metal platinum saw its April contract give back $7.60 to close at $1,233.40, though it was up 1% for the week. Silver, copper, palladium and platinum all ended the week higher."

"Silver dipped to $13.17/13.22 an ounce from its Thursday close of $13.41/13.46."

"Sentiment had turned positive after gold broke $650 an ounce last week and stayed above that level, triggering buying by people who had sold the metal to cover losses after a sell-off in global equities in early March."

"'Risk markets generally seem to have recovered a long way after the recent concerns they had about the U.S. housing market,' said John Reade, head of metals strategy at UBS Investment Bank. 'And if risk markets continue to do well, then the gold price will likely go higher and we are forecasting $700 in one month and $750 in three months.'"

"'But I am concerned that if we do get another wobble coming through in equity markets etc., they could put some pressure on gold,' he added."

The Associated Press reports on currencies. "The euro on Thursday gave up some of the gains it made against the U.S. dollar after the Federal Reserve held interest rates steady. The 13-nation euro bought US$1.3330 in late European trading, down from US$1.3381 in New York late Wednesday. The British pound slid to US$1.9643 from US$1.9687. The dollar rose to 118.15 Japanese yen from 117.47 yen."

AFX News Limited. "The yuan finished at a record high of 7.7266 to the dollar on the over-the-counter market, compared to yesterday's 7.7340. On the exchange-traded market, the yuan also finished at a record level of 7.7260 up from 7.7341 yesterday, a Shanghai-based trader with a domestic lender said."

From MarketWatch. "Gold and silver futures climbed Thursday to close at their highest levels in three weeks as rallying crude-oil prices and bullish sentiment tied to a Federal Reserve statement on interest rates helped gold mark a sixth-winning session in a row."

"The Federal Open Market Committee on Wednesday left interest rates unchanged at 5.25%. It reiterated that 'some inflation risks remain' but at the same time dropped a phrase from previous statements about the 'additional firming that may be needed.'
The change was interpreted by some as signaling that the Fed is moving closer to cutting interest rates later this year."

"Gold for April delivery rose $4.20 to close at $664.20 an ounce on the New York Mercantile Exchange after a high of $667.30. It's at levels not seen since March 1, after rising $21.70, or 3.4%, over the course of six trading sessions. May silver closed up 16 cents at $13.48 an ounce, after peaking at $13.57 -- also the contract's strongest levels since March 1."

"'The prospect of lower interest rates in the U.S. does bode extremely well for gold,' said James Moore, metals analyst at TheBullionDesk.com."

"Oil rallied 'after some particularly bullish data points yesterday on supplies into the U.S. economy and the general market belief that sooner or later the dollar has to start weakening,' Neal Ryan, director of economic research at Blanchard & Co., said."

"Gold breached the technically important $661-an-ounce level and is now potentially in a good position to target $700, coinciding with energy prices headed toward their peak demand period, Moore said."

"And 'we add to this the next 30 days demand from India as the religious festivals add to the demand for gold alongside the next burst of marriage demand, where gold is traditionally given as a dowry to the marriage by the bride,' Julian Phillips, an analyst at GoldForecaster.com, said."

"But analyst Jon Nadler warns that he sees 'a noticeable stall in the action.' 'All in all, $660 remains comfortable and $675/$680 still presents a barrier,' he said. 'If anything really helped today it would have to be energy.'"

"Other metals prices followed gold higher. June palladium rose $5.75 to close at $357.75 an ounce and April platinum gained $11 to end at $1,241 an ounce."

A report from MarketWatch. "Gold futures gained a dollar Wednesday to end near their highest level in three weeks, then climbed some more in electronic trading after the U.S. Federal Reserve left interest rates unchanged at 5.25% for the sixth time in a row.
In a statement, the Federal Open Market Committee said its 'predominant policy concern remains the risk that inflation will fail to moderate as expected.'"

"'Inflation failing to moderate, per the FOMC decision today, indicates new worries on inflation from the Fed,' said Peter Spina, chief investment strategist at GoldSeek.com."

"'This, combined with the drop in reference to a rate hike, places pressures on the U.S. dollar and therefore deemed favorable for gold prices,' he explained. 'The initial reaction is a bit muted in the gold markets, but some firming bids are showing and may assist the yellow metal to break past this $660 area barrier.'"

"Gold for April delivery rose $1 to close out the regular trading session at $660 an ounce on the New York Mercantile Exchange. It was the contract's strongest closing level since March 1. It had gained $17.50, or 2.7%, during a five-session winning streak."

"In electronic trading on CME Globex, the April contract was quoted at $664.60 an ounce, about two hours after the Fed decision. The Fed announced its decision at 2:15 p.m. Eastern, 45 minutes after the official close of regular metals trading in New York."

"'There's absolutely nothing in the latest Fed comments to altar gold's march to $700+,' said Peter Grandich, editor of the Grandich Letter. 'Their notation the economy is now 'mixed' ratchet their economic outlook lower, and puts another pin in what little hot air remains in the U.S. dollar balloon.'"

"'While the fat lady hasn't sung yet, she's already in the building and has flowers for the gold bears burial upcoming,' he said."

"Before the announcement, James Moore, an analyst at TheBullionDesk.com said in a note to clients that although most people expected the Fed to leave rates unchanged, the recent slowdown in the U.S. housing market had led to speculation the Fed may cut rates, 'a move likely to be bearish for the dollar and bullish for gold.'"

"Other metals prices lost ground during the regular trading session. May silver fell by 5 cents to close at $13.32 an ounce. June palladium fell $3.30 to end at $352 an ounce and April platinum slipped $5.30 to close at $1,230 an ounce."

From Bloomberg. "Canada's dollar climbed to a three- month high after the U.S. Federal Reserve abandoned its tilt toward higher borrowing costs, raising speculation the rate difference between the two countries will narrow."

"Traders bought the currency as the yield advantage on U.S. two-year notes over Canadian bonds shrank to the smallest in 14 months. The currency's gain yesterday, the most in nine months, followed a report of quicker Canadian inflation that damped speculation the Bank of Canada will lower its 4.25 percent benchmark interest rate. The U.S. key rate is 5.25 percent."

"'The market has started to price in a rate cut by the Fed later this year, and that's helping the Canadian dollar,' said Marc Levesque, chief strategist at TD Securities in Canada."

"The New Zealand dollar surged to its highest in a month on speculation the U.S. Federal Reserve will cut interest rates this year, bolstering the appeal of higher- yielding currencies."

"The U.S. dollar fell to a two-year low against the euro after the Fed removed a reference in its statement yesterday suggesting its next move may be to raise interest rates. 'The Fed's watered-down tightening bias undermines the attractiveness of U.S. dollar investments,' Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington said. 'It encourages people to invest in currencies with higher yields.'"

"Gains in the U.S. stock market also boosted the local currency, Hampton said, adding to the so-called carry trade, where investors borrow cheaply in currencies such as the yen to invest in higher yielding assets like those in New Zealand. The yield gap between Japan and New Zealand is 7 percentage-points."

"'The carry trade is quite tied to the equities market at the moment,' she said. 'The stock market rally boosted risk appetite and the appeal of currencies like the kiwi.'"

Reuters Reports on currencies. "The dollar fell against the yen Tuesday after a magazine reported that China would stop stockpiling foreign exchange reserves and slipped against other major currencies as investors remained wary of risky trades."

"But analysts said People's Bank of China Governor Zhou Xiaochuan might have been misquoted, since China's $1 trillion (U.S.) stash of reserves will keep growing as long as the central bank buys dollars to prevent the yuan from strengthening, a practice it has shown no sign of abandoning any time soon."

"The dollar was lower against most major currencies and emerging market currencies such as the Mexican peso. Sterling rallied broadly after inflation data boosted the case for higher UK interest rates, while the dollar fell 1.4 per cent against its Canadian counterpart to $1.1604 , a three-week low."

"'Effectively the dollar is losing ground against virtually all assets,' analysts at CitiFX Technical wrote in a note to clients on Tuesday. 'We think this could be the start of the weak dollar trade reasserting itself.'"

From Bloomberg. "The dollar may extend its drop versus the yen on bets the Federal Reserve will change its statement to reflect a deteriorating housing market. Some traders said the central bank may remove language from its statement saying housing has stabilized."

"'They may soften their statement a little when it comes to housing, and that could weaken the dollar,' says Camilla Sutton, a currency strategist in Toronto at Scotia Capital Inc."

"The dollar fell 0.2 percent to 117.25 yen yesterday in New York, and traded at 117.28 at 6:31 a.m. in Tokyo. It dropped 0.1 percent against the euro to $1.3317 yesterday."

"The British pound rallied against the dollar and the euro yesterday after U.K. consumer prices rose 2.8 percent from a year earlier, the second-fastest pace in a decade, adding to speculation the Bank of England will keep raising borrowing costs from 5.25 percent to stem inflation. 'The BOE may have to do a lot more to keep inflation under control,' said Paul Chertkow, head of global currency research in London at Bank of Tokyo Mitsubishi UFJ Ltd. 'This should cause the pound to appreciate.'"

"Mexico's currency climbed to the highest in more than three weeks against the dollar as gains in the nation's stocks sparked demand for the currency."

"The peso rose for a second day, and has regained most of the ground lost following the Feb. 27 rout that prompted selling of emerging-market bonds and currencies. 'Risk appetite has recovered significantly after the wash- out,' said Enrique Alvarez, an economist at IDEAglobal in New York. Investment 'flows have returned to the region.'"

"The yield on the 8 percent peso bond due in December 2015 fell 7 basis points, or 0.07 percentage point, to 7.75 percent, the lowest since Feb. 22, according to Santander Central Hispano SA. The price, which moves inversely to the yield, rose 0.41 centavo to 101.56 centavos."

"The premium, or spread, investors receive for holding a Mexican peso-denominated 10-year bond over a comparable-maturity U.S. Treasury widened 1 basis point to 3.24 percentage points."

From MarketWatch. "Gold futures scored a fourth consecutive winning session Tuesday to close near their highest level in three weeks, underpinned by softness in the dollar as traders awaited Wednesday's Federal Reserve decision on interest rates."

"Gold for April delivery gained $4.70 to close at $659 an ounce on the New York Mercantile Exchange, its highest closing level since March 1. It touched a high of $662 earlier in the session and the contract has now gained a total of $16.50, or 2.6%, from Wednesday's closing level."

"'For the moment, the wider range remains $635-$685 and volatility is on the rise. Caution is well-advised,' analyst Jon Nadler said."

"'The U.S. economy is about to slide into a recession,' Ned Schmidt, editor of the Value View Gold Reportt. 'This one may be more dangerous as it is a slide rather than a fall into recession due to high interest rates.' And the "U.S. dollar will likely accelerate its demise during this recession,' he said."

"'In the broader markets, gold is firm, but struggling to get above $655-$660, oil is weak at $56.65 and the yen is off its recent highs,' said William Adams, analyst at BaseMetals.com. 'Also with firmer stock markets, with the Dow Jones Industrial Average rallying 102 points yesterday and the Nikkei up 153 points overnight, the markets seem to be getting over the jitters of the last few weeks,' he said."

"Other metals prices also closed higher, with May silver leading the gains, up 1%, or 13.7 cents, to close near a three-week high of $13.37 an ounce. April platinum closed up 60 cents at $1,235.30 an ounce and June palladium gained $1.20 to end at $355.30 an ounce."

MarketWatch reports on currencies. "The yen fell sharply against other currencies Monday, as risk appetite returned to the financial market, prompting investors to reestablish carry trade positions. Speculation that the Bank of Japan on Tuesday will leave rates unchanged and signal future rate hikes will remain gradual further weighed on the yen.

"'The single most correlated trade in all of finance over the past two weeks has been the relationship of the [dollar/yen] to global equity markets,' said Boris Schlossberg, senior currency strategist at DailyFX.com. 'As equities rose and risk appetite returned, the [dollar/yen] rose as well and when equities sold off so did the currency pair.'"

"Late in New York, the dollar was quoted at 117.49 yen, compared with 116.81 yen late Friday. The euro stood at $1.3291, compared with $1.3308. The British pound traded at $1.9435, compared with $1.9418. The dollar changed hands at 1.213 Swiss francs, compared with 1.2076 francs."

"In other trading, the Slovak currency, the koruna, rallied to a record high on Monday after the country surprised the market by revaluing its currency by 8.5%, triggering speculation that other new members of the European Union will follow suit."

"Slovakia gained approval from the European Commission to revalue the koruna's central parity rate against the euro in a move to control inflation and prevent the Slovak economy from overheating. Slovakia is preparing to join the euro zone in 2009.
The new parity is now at 35.4424 versus the euro, compared with 38.4550 previously."

"Elsewhere, China over the weekend hiked its interest rates by 0.27 percentage point for the third time in less than a year to retrain credit and investment and promote balanced growth. The People's Bank of China raised its one-year deposit rate to 2.79% and its lending rate to 6.39%."

"Gold futures posted a small gain Monday, taking their three-session win to almost $12 an ounce as traders eyed upcoming U.S. economic data as well as a decision by the Federal Reserve on interest rates due later this week."

"'Traders were on economic-data watch,' said Jon Nadler, an analyst at Kitco Bullion Dealers. But 'buoyancy in the dollar kept a lid on fresh longs.'"

"The Federal Open Market Committee, the Fed's policy-setting panel, starts its two-day policy meeting on Tuesday. Economists believe the Fed will almost certainly keep monetary policy on hold for the sixth consecutive meeting, maintaining its federal funds rate target at 5.25%. The Fed will announce its decision at 2:15 p.m. Eastern on Wednesday."

"Nadler said a rate adjustment is not expected at the coming Fed meeting, thought a cut is possible at the next meeting. 'There is no doubt that the folks with their fingers on the interest rate faucet are having a tougher time steering the economy by relying on old tricks,' Nadler said."

"Gold for April delivery rose 40 cents to close at $654.30 an ounce on the New York Mercantile Exchange, its strongest level since March 8. Prices peaked at the $656 level earlier. The contract had also dipped to a low of $652.80 Monday as the dollar rose against major counterparts in the foreign-exchange market."

"Other metals prices climbed along with gold. April platinum rose $13.50 to close at $1,234.70 an ounce and June palladium added $1.70 to end at $354.10 an ounce, while May silver closed at $13.233 an ounce, gaining 1.8 cents."

"'We've seen gold and silver prices stabilize after the market turmoil from the past two weeks and resume their upward trends,' said Neal Ryan, director of economic research at Blanchard. 'Investors are reentering the precious metals market and we could see some significant gains into the end of the week as positions are established in front of what is seasonally one of the strongest periods for precious-metals markets,' he said."

Reuters reports on the US dollar. "The dollar fell to a three-month low on Friday, hurt by concerns that crisis in the U.S. subprime mortgage market could curb growth in the world's biggest economy. The U.S. currency pared some losses after factory output exceeded expectations."

"Late on Friday, the euro traded up 0.6 percent against the dollar at $1.3311. Against the yen, the dollar traded down 0.6 percent at 116.74 yen."

"Sentiment on the greenback, which fell broadly, had soured overnight, with investors suspecting the crisis in the U.S. market for subprime mortgages, extended to borrowers with risky credit, could seep into other markets and parts of the economy, particularly after former Federal Reserve chief Alan Greenspan warned of such a risk on Thursday."

From MarketWatch. "Gold futures climbed Friday to close at their highest level in more than a week, boosted by a weaker U.S. dollar and uncertainty surrounding the outlook of the U.S. economy."

"'With stable equity markets, gold is able to concentrate on the declining dollar spurred by inflationary data,' said Peter Spina, a chief investment strategist at GoldSeek.com."

"And 'despite a truckload of new gold bears and many gold bulls openly licking their wounds, gold has once again shown its internal strength by consolidating its overbought condition and now resuming its climb to $700+,' said Peter Grandich, editor of the Grandich Letter."

"Gold for April delivery rose $6.80 to close at $653.90 an ounce on the New York Mercantile Exchange. It climbed as high as $656.50 earlier, a level not seen since last Friday, though it hasn't closed at a level this high since March 8. Gold's benchmark contract finished $1.90 above the week-ago closing level."

"'Gold finds itself once again pushing the $655-$660 resistance,' said Spina. 'A break above should bring in additional momentum and extend its rally.'"

"But 'with the subprime debacle resonating in the background, the threat of another market sell-off does remain a concern for the metals, which have become vulnerable on such strong selling pressures -- a rush for liquidity,' he said. For now, 'stable equity markets do allow gold to return its focus on the fundamentals and we see this today with the U.S. dollar back testing important technical support levels,' he said."

"'The terminally ill U.S. dollar and the mounting economic and political woes in the U.S. are only added reasons to expect $700 faster than most could imagine,' said Grandich."

"And 'it is encouraging to see gold reacting once again to a decline in the U.S. currency,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'Whether such a reaction becomes as reliable as it previously was remains to be seen.'"

Bloomberg reports on currencies. "The yen fell against the euro and the dollar on speculation investors resumed borrowing in the Japanese currency to invest in higher-yielding countries. The yen dropped against all of the 16 most active currencies including the Australian and New Zealand dollars on expectations investors will resume what is known as the carry trade. U.S. stocks advanced for a second straight day."

"'Equities are the leading indicator of investors' risk appetite right now and their willingness to re-establish the carry trade,' said C.J. Gavsie, managing director for foreign- exchange trading in Toronto at BMO Capital Markets."

"The yen fell 0.53 percent to 155.64 per euro and dropped 0.40 percent to 117.56 per dollar at 4:49 p.m. in New York."

"The dollar weakened against the euro after Federal Reserve reports showed manufacturing grew in New York state at the slowest pace since May 2005 and unexpectedly stalled for a second straight month in the Philadelphia region."

"'We're starting to see some very strong signs that the decline in the housing market is seeping into the manufacturing and retail sectors,'' said Boris Schlossberg, senior currency strategist in New York at Forex Capital Markets LLC 'If that theme continues to play out, the Fed lowering rates just to salvage a decline in housing becomes very real.'"

"The dollar fell 0.12 percent to $1.3239 per euro. The U.S. currency may weaken to $1.36 per euro before year's end, according to Schlossberg."

"The Swiss franc, another currency used in the carry trade, fell less than the yen against higher-yielding currencies. The Swiss central bank today raised interest rates for a sixth time since late 2005 to keep an expanding economy from stoking inflation. The Swiss currency dropped 0.19 percent to 1.6116 against the euro, 0.06 percent to 1.2173 against the dollar, and 0.13 percent to 2.3586 against the pound."

"The New Zealand dollar was the biggest gainer against the yen among the most active currencies, rising 0.98 percent to 81.85 per yen, as central bank Governor Alan Bollard suggested the country may have to raise its benchmark rate from 7.50 percent. The yen fell 0.80 percent against the Australian dollar to 92.84."

From MarketWatch. "Gold futures logged their first gain in five sessions on Thursday, after producer price data showed a surprising surge in U.S. wholesale inflation for February, bolstering the metal's appeal as an inflation hedge. Gold for April delivery closed up $4.60 at $647.10 an ounce on the New York Mercantile Exchange."

"The release of February's PPI showed prices up 1.3%, outpacing expectations for a 0.6% increase. Excluding food and energy prices, core PPI rose 0.4%, twice the 0.2% gain that was expected."

"'The big problem is that the economy is showing some significant signs of slowing right now and the real estate/homebuilder/mortgage debacle isn't helping,' said Neal Ryan, director of economic research at Blanchard. The real question is 'can the Fed continue to walk down the middle of the road on the growth or inflation equation without being hit by trucks traveling in both directions?'"

"'With the current relationship of the equity markets and gold locked together on sharp sell-offs, investors will soon see a nasty divorce take place,' said Peter Spina, chief investment strategist at GoldSeek.com. At some point, gold will benefit from the 'subprime fiasco,' Spina said: 'The implications it holds for the real estate market and the general economy will drive additional safe-haven investors into the metal.'"

"Other metals prices were mixed. May silver rose 24.5 cents to close at $13.075 an ounce and April platinum added $14.70 to end at $1,215.70 an ounce, while June palladium fell $1.80 to close at $351.70 an ounce."

From Fitch Ratings. "Fitch Ratings has today downgraded Iceland's foreign and local currency Issuer Default ratings to 'A+' and 'AA+' from 'AA-' (AA minus) and 'AAA' respectively. The Outlook on both ratings is Stable. The Short-term foreign currency rating is also downgraded to 'F1' from 'F1+' and the Country Ceiling is lowered to 'AA-' (AA minus) from 'AA'."

"'The downgrade reflects new data on the balance of payments and the international investment position that points to a material deterioration in Iceland's external balance sheet, amplifying concerns about external debt sustainability' says Paul Rawkins, Senior Director in Fitch's Sovereign team in London."

"Significantly higher net investment income outflows - primarily external interest payments - contributed to an unprecedented current account deficit of 27% of GDP in 2006, up from 16.3% in 2005, while net external debt rose to over 200% of GDP and 429% of current account receipts, compared to Fitch's previous end-2006 forecasts of 161% and 323% respectively."

"'Such elevated ratios depict a highly leveraged economy poorly positioned to surmount a prolonged bout of global risk aversion and/or higher international interest rates' says Mr Rawkins. 'Moreover, with the current account deficit having continued to deteriorate during the course of 2006, it is becoming increasingly hard to conceive of a smooth unwinding of Iceland's macroeconomic imbalances.'"

"A macroeconomic policy mix which exhibits little appetite for fiscal tightening in an election year - the general government surplus is set to decline to 1.1% of GDP in 2007 from 5.3% in 2006 - leaves monetary policy to shoulder most of the burden of policy adjustment in the guise of ever higher interest rates. Set against this background, Fitch believes that the risks of a 'hard landing' - entailing a severe contraction of private sector demand over a sustained period - have increased."

"Fitch says that with interest payments now accounting for more than half the current account deficit, the magnitude of external adjustment - a swing of some 15% of GDP in the primary (non-interest) balance - required to stabilise the net external debt/CXR ratio would exceed anything that Iceland has experienced in the past."

"Few countries have attained this degree of adjustment without sustaining a period of low or negative growth and the agency expects Iceland's current account deficit to remain in double digits for some time to come. Meanwhile, Iceland's negative net international investment position of 119% of GDP in 2006 (up from 84% in 2005) now ranks among the highest of any sovereign in the 'AA'/'AAA' rating ranges."

"The rising cost of servicing external liabilities relative to the return on external assets also intensifies concerns about the sustainability of higher external borrowing, chiefly by Icelandic banks, to fund investments abroad."

"The agency cautions that countries with seemingly sound public finances cannot afford to be indifferent to private sector-driven macroeconomic imbalances and spiralling net external indebtedness, particularly when banks are the main obligor."

"Fitch takes comfort from the fact that Icelandic banks have addressed concerns about a bunching of foreign debts maturing in 2007, but points out that their net external liabilities remain high at 168% of GDP, while their domestic operating environment could become more difficult, should a 'hard landing' materialise."

Bloomberg reports on currencies. "The yen weakened against the euro and the dollar, as investors regained some appetite for riskier assets and U.S. stock markets rallied. The yen fell against all of the most active currencies as traders increased bets investors will resume borrowing in the Japanese currency to finance investments in riskier assets, a practice known as the carry trade. The dollar got a boost as U.S. stocks rebounded from their earlier declines."

"'When the equity markets rallied, traders saw some room for taking risks, and carry trades started to come back,' said Brian Taylor, chief currency trader at Manufacturers & Traders Trust. 'The yen lost ground.'"

"The yen fell 0.88 percent to 154.79 per euro at 3:18 p.m. in New York. It dropped 0.69 percent against the U.S. dollar to 116.97 and 1.07 percent against the Australian dollar to 91.86."

"The Bank of Japan's benchmark interest rate of 0.5 percent is the lowest in the industrialized world. The spread between the 10-year German note and a comparable Japanese bond widened 3 basis points to 2.91 percent. The difference between the German note and the benchmark U.S. Treasury widened 2 basis points to 0.62 percent."

"'The yield outlook still favors the euro and the dollar over the yen,' said Michael Malpede, a senior currency analyst at Man Global Research."

"'The dollar is hooked up with the equity market,' said Grant Wilson, a currency trader at Mellon Bank. 'When the equity market weakened, the yen gained strength and people tried to get out of the dollar.'"

From MarketWatch. "Gold futures fell Wednesday to close at the lowest level in more than a week, tracking losses on Asian and European stock markets as fears over increasing mortgage defaults escalated and investors sold commodities in pursuit of liquidity."

"The benchmark contract has now fallen over the last four sessions, tallying a loss of $13 an ounce, or 2%, for the period."

"Gold for April delivery fell $6.90 to close at $642.50 an ounce on the New York Mercantile Exchange, recovering modestly following a drop to a low of $637.70. The contract hasn't traded or closed at levels this low since March 5. May silver fell 1%, slipping 13 cents to close at $12.83 an ounce, while June palladium lost 50 cents to end at $343.50 an ounce and April platinum dropped $22.60 to close at $1,201 an ounce, a 1.9% retreat."

"'Once again, gold remains tied to severe sell-offs in the general markets,' said Peter Spina, chief investment strategist at GoldSeek.com. 'The sell-off in the markets is actually bullish for gold as a four-letter word absent from investors' vocabulary returns,' he wrote."

"All the same, gold faces a 'short-term dilemma,' Spina said. 'As we see relentless selling in the general markets, a move to raise cash occurs and gold is not immune.' In the end, however, this 'presents an opportunity for those who seek shelter who can purchase this asset at discounted prices.'"

"'Gold has come under renewed external pressures, as a string of negative news keeps global investors and their assets in search of a quick escape route,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'Three weeks ago, it was the yen carry-trade going into full reverse that made the headlines and ostensibly dragged gold down with it,' Nadler said."

"'Now comes the crumbling U.S. subprime lending market and the huge shadow it is throwing on the shares of financials and home builders,' he said."

From Reuters. "'We turn from oil and currency watching to stock watching. We expect more stop loss triggers and more downside,' said Michael Kempinski, vice-president at Commerzbank. 'Gold really needs some fresh buying from the investor side, but as long as they are losing money on stocks, there will be no new money for investment in gold.'"

"Behind the sell-off is a perception that the liquidity created by cheap money, which has fuelled the commodity and stock market bull run for years now, is about to dry up. Cheap money has come in the form of the yen, which investors have been borrowing for years at low interest rates to invest in higher yielding assets. But Japanese interest rates are rising."

"'The price action in the gold market continues to question the theory that gold is an asset that performs well during periods of risk aversion,' JPMorgan said in a research note. 'The reality is that gold -- like all assets -- is subject to positioning adjustments and with the speculative community long, any position squaring exercise by its very nature will hurt the gold price somewhat.'"

"The latest trigger for the sell-off in equity markets was the mounting crisis in U.S. mortgage lending. Those jitters would normally spark a flight to precious metals, but investors are already holding a lot of gold, which may have to be sold to cover losses on equity markets."

"'The renewed round of equity sell-off...is not based on rumours but on longer-lasting economic developments,' Dresdner Kleinwort said. 'A slowdown of the US economy with an increasing risk of slipping into recession would also reduce the appeal of gold as a hedge against inflation.'"

"U.S. gold speculators cut their net long positions by 28 percent last week to 101,698 contracts and expectations are of further sell-offs. Investors who use exchange-traded gold funds have also reduced their exposure. The New York-listed StreetTRACKS gold fund, the world's largest gold ETF, which accounts for about 80 percent of the metal jointly held by such funds, fell by four tonnes between last Friday and Monday."

"Prices of U.S. imports rose less than forecast in February, held down by lower costs for metals and machinery that may help keep a lid on inflation. The cheapest imported business equipment in almost a year is among factors that may make it easier for the Federal Reserve to keep interest rates unchanged. Policy makers will see reports on wholesale and consumer prices in coming days as they prepare for next week's interest-rate meeting."

"'This is definitely a Fed-positive report,' said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. 'It supports the case for the Fed to sit tight and continue to watch inflation pressures recede.'"

"The shortfall in the current account, the broadest measure of trade because it includes transfer payments and investment income, followed a record $229.4 billion third-quarter gap."

"The deficit may narrow this year for the first time since 2001 as U.S. exports rise and oil prices stabilize, economists said. Even with the improvement, the U.S. needs to attract about $2.1 billion a day to fund the gap, an imbalance that threatens to undermine the dollar and boost interest rates in the event foreign investors shy away from American assets."

The Associated Press reports on currencies. "The dollar traded mostly lower against the other major currencies Tuesday as investors sweated over the troubled subprime mortgage sector and U.S. retail sales data came in short of expectations. The 13-nation euro bought $1.3196 in late afternoon trading, up from $1.3187 late Monday. The British pound fell to $1.9303 from $1.9318, while the yen dropped to 116.52 yen from 117.61 yen."

"The Mortgage Bankers Association reported that mortgage delinquencies and foreclosures rose in the last quarter of 2006, indicating widespread problems in the industry. The mortgage troubles sent the Dow down 242.66, or 1.97 percent, to 12,075.96, according to preliminary calculations. The index is now down more than 710 points, or 5 percent, from its record close reached Feb. 20."

"The dollar's weakness against the yen renewed worries about traders unwinding their yen 'carry trades,' or pulling money out of high-yielding dollar assets bought with the low-yielding yen, said Michael Woolfolk, senior currency strategist at the Bank of New York."

"Also dragging down the dollar was a Commerce Department report that showed U.S. retail sales inched up by only 0.1 percent in February amid bad winter weather, well short of economists' forecast of a 0.3 percent rise."

From MarketWatch. "Gold futures closed lower Tuesday after earlier strength stalled at the $650-an ounce level, stretching the precious metal's losing streak to three sessions as traders eyed moves in the U.S. dollar and oil in the hope of predicting the precious metal's next direction."

"'Gold and the rest of the precious metals have seen another day of directionless two-way trade as players seem torn between looking to oil, the dollar and equities for direction,' James Moore, an analyst at TheBullionDesk.com said in afternoon comments."

"Gold for April delivery fell 90 cents to close at $649.40 an ounce on the New York Mercantile Exchange. The contract has now lost $6.10, or 0.9%, from Thursday's closing level of $655.50."

"'Gold's reversal momentum from last week has waned and is finding difficulty moving past the resistance in the mid to upper $650s,' said Peter Spina, chief investment strategist at GoldSeek.com. 'A bit of cautiousness has entered after the recent volatility. Investors are looking for direction; consolidation is the current market theme,' he said."

"In the short term, 'direction is still unclear and gold may have to weather further weakness, particularly with sliding energy costs reducing inflationary concerns, before reaching a level at which investors and speculators are happy to re-establish positions in the market,' said James Moore, an analyst at TheBullionDesk.com."

"'A little of the apprehension surrounding the direction of equities values has also resurfaced among bullion investors,' analyst Jon Nadler said. 'Stories of a hedge fund in difficulty added to the cautious tone across several trading markets.'"

"The gold-price target that 'needs to be conquered is in the area of $665 to $670,' he said. But support for prices remains 'decent near $645.'"

"Against this backdrop, most metals prices lost ground. May silver fell 12.5 cents to close at $12.96 an ounce while June palladium shed $2 to close at $354 an ounce, but sister metal platinum saw its April contract tack on $9.80 to close at $1,223.60 an ounce."

From Bloomberg. "Gold prices fell in New York for the third session in a row as declines in global equity markets revived concern that investors will sell commodities to cover losses."

"Gold has dropped 5.9 percent since Feb. 27, when Chinese stocks tumbled the most in 10 years and the selling spread to Japan, the U.S. and Europe. 'Gold's got a little more weakness to come,' said James Moore. 'Investors had their fingers burned in a lot of areas, and they're sort of trading cautiously for now.'"

Reuter reports on currencies. "The Canadian dollar edged higher against the U.S. currency on Monday, helped by the sale of higher-yielding currencies such as the greenback, while Friday's strong domestic data stoked optimism in Canada's economy."

"The currency finished at C$1.1702 to the U.S. dollar, or 85.46 U.S. cents, up from C$1.1723 to the U.S. dollar, or 85.30 U.S. cents, at Friday's close."

"Robust jobs and trade data released late last week continued to drive the currency, which touched its highest level in eight sessions on Monday. It also benefited from the sale of higher-yielding currencies in the wake of the recent selloff in global equity markets."

"The 30-year bond climbed 38 Canadian cents to C$126.45 to yield 4.095 percent. In the United States, the 30-year treasury yielded 4.699 percent. The three-month when-issued T-bill yielded 4.18 percent, unchanged from the previous close."

From Bloomberg. "The yen may weaken against the dollar on expectations a government report will show U.S. retail sales rose in February, prompting traders to reduce bets the Federal Reserve will lower borrowing costs. 'The U.S. retail data is going to support the swing away from believing in an interest rate cut by the Federal Reserve,'' said Meg Browne, a foreign-exchange strategist at Brown Brothers Harriman. 'That could weaken the yen.'"

"The yen traded at 117.73 per dollar at 6:06 a.m. in Tokyo, little change from 117.74 yesterday in New York."

"The yen gained against the dollar yesterday on speculation investors will unwind trades financed with the Japanese currency as losses in the U.S. subprime mortgage market ease demand for riskier assets."

"'There's a significant pool of funds looking at entering back into the carry trades,' said Mike Moran, senior currency strategist at Standard Chartered Bank. 'It's a matter of when they'll pull the trigger.'"

From MarketWatch. "Gold futures ended a volatile session Monday with a modest loss, pressured by uncertainty over global precious-metals demand and falling oil prices. Even so, gold still managed to finish above the $650-an-ounce level for a fourth session as dollar weakness and declining supplies of the metal provided support."

"'Gold seems directionless,' said Kevin Kerr, editor of Global Resources Trader. 'We need some more of these economic numbers to get a clear direction of some kind.'"

"Gold for April delivery fell $1.70 to close at $650.30 an ounce on the New York Mercantile Exchange. It traded between $647 and $654.30 for the day, but it has closed above $650 in each of the trading sessions since Wednesday."

"'The gold market had a significant amount of bullish information out this morning from Buenaventura dehedging announcements, continued slumping mine production from Australia, dollar weakness and more,' but oil prices had been putting the market under some pressure, said Neal Ryan, director of economic research at Blanchard."

"For now, 'volatility is not off the radar; neither are crude oil (down at the moment) or geopolitics,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'However, investors are exhibiting patience and some are evidently holding out for a possible visit to a lower level of the proverbial bargain basement.'"

"Other metals prices in New York ended Monday's volatile session main higher, with the exception of a modest decline in palladium prices. May silver added 11.5 cents to close at $13.085 an ounce, April platinum added $10.10 to finish at $1,213.80 an ounce, but June palladium shed 40 cents to close at $356 an ounce."

Bloomberg reports on currencies. "The dollar touched the highest in more than a week against the yen and strengthened versus the euro after a government report showed stronger-than-forecast U.S. job growth, reducing expectations for Federal Reserve rate cuts. The U.S. currency's gain started as a rise in emerging-market assets pushed investors to bet on a drop in the yen, which today is the world's worst-performing currency."

"'The U.S. economy is still growing at a decent pace,' said Mike Moran, senior currency strategist at Standard Chartered Bank. 'The dollar is benefiting from that.'"

"The dollar rose to 118.17 yen at 2:07 p.m. in New York, from 117.18 yesterday. It touched 118.38, the strongest since March 1. It also strengthened to $1.3111 per euro from $1.3133."

"The odds the Fed will cut borrowing costs from 5.25 percent to 5 percent in August fell to 74 percent after the payroll report was released, from 100 percent yesterday, according to interest-rate futures. 'Traders have to take off their bets on Fed rate cuts,' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products. 'The short-dollar positions are under some water.'"

"The Swiss franc, another funding currency for the carry trade, dropped against all most-active currencies except the yen."

"'The payroll report is the first green light to put back on carry trade,' said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments. 'Risk appetite is coming back.'"

From MarketWatch. "Gold futures fell from a one-week high near $660 an ounce Friday as a rise U.S. payrolls met most market expectations and the trade deficit narrowed, boosting the dollar and easing investment demand for precious metals. But after climbing over the last three sessions, gold futures finished the week with a more than 1% gain."

"Early Friday, the market was on its way higher 'but the market perceived economic data as dollar friendly,' said Peter Spina, chief investment strategist at GoldSeek.com."

"Gold for April delivery closed down $3.50 at $652 an ounce on the New York Mercantile Exchange. The contract had traded as high as $659.80 earlier in the session. It closed at $644.10 last Friday, so it was up $7.90 for the week."

"'I think the fact we have had a $10 jump in oil prices in February compared to January will significantly impact the trade deficit numbers on the negative side moving forward,' said Neal Ryan, director of economic research at Blanchard. The U.S. trade deficit narrowed again in January, adding to the sense that the trade gap has at least stabilized and may be starting on a downward trend, a government report showed Friday."

"'Technically, gold and silver need to complete their consolidation after the financial tsunami of last week,' said Julian Phillips, an analyst at GoldForecaster.com. 'Oil favors gold and the dollar, whilst stronger than earlier this week, is still looking anemic. Gold is still building a foundation, and waiting for triggers to send it higher,' he said."

"'The key to key to gold's performance over the next few weeks is how emerging market equity indices behave ... because the biggest per-capita purchases of gold are made by people in countries like India, China, Malaysia, and in some Middle Eastern countries,' said Steven Jon Kaplan, a senior editor at TrueContrarian.com."

"In the shorter term, however, it appears unlikely that the U.S. Federal Reserve will cut interest rates, he said. That would mean that reduced buying from India, China and elsewhere would not have any positive offset and gold prices will probably fall for the next few months, he said."

"But once the Fed starts to cut rates, this should cause gold prices to rise, he said. Kaplan said the market will likely see the lower price for gold in May or June, possibly about $575 an ounce, 'and then gold will set a new all-time high in 2008 or 2009,' he said."

""May silver shed 15 cents to close at $12.97 an ounce, nearly unchanged from the $12.96 level it closed at a week ago. June palladium rose $3.35 to end at $356.40 an ounce, up 1.7% for the week, but sister metal platinum saw its April contract pull back by $10.80 to close at $1,203.70 an ounce, down 0.7% for the week."

Bloomberg reports on currencies. "The Australian dollar is headed for its second weekly decline against the U.S. currency and yen after a slump in equity markets prompted investors to sell riskier assets paid for by borrowing in Japan. The local dollar declined against 13 of 14 currencies in the Asia-Pacific this week after Asian stocks had their biggest fall in almost nine months March 5."

"'Most of the fall happened early in the week when we had more equity market upheaval,' said Greg Gibbs, currency strategist at ABN Amro Australia Ltd. in Sydney. 'The Australian dollar is definitely trading on the back of risk aversion and that's the reason it's lower this week.'"

"The Australian dollar bought 77.68 U.S. cents at 8:28 a.m. in Sydney compared with 77.78 cents late in Asia yesterday and 78.22 cents in New York a week ago. It could trade as low as 77.50 cents today, Gibbs said. The currency was at 90.97 yen, unchanged from late in Asia yesterday and down from 91.38 yen a week ago."

From MarketWatch. "Gold futures climbed for a third-straight session to end Thursday at their strongest level in a week. Still, a rise in the U.S. dollar put a cap on the metal's gains."

"The US dollar rose against major counterparts, putting some pressure on April gold, which touched a low of $652 during Thursday's trading session. The euro fell against the dollar after the European Central Bank raised its key interest rate by a quarter-percentage point to 3.75%."

"The yen tumbled against the dollar and other higher-yielding currencies amid market talk of renewed interest in carry trades, or the practice of borrowing or selling low-yielding currencies, such as the yen and the Swiss franc, and reinvesting in higher-return currencies and assets."

"Gold for April delivery closed up $2.60 at $655.50 an ounce on the New York Mercantile Exchange, the contract's highest level in a week. It's now gained $16.30 during a three-session climb, which followed a five-session losing streak that drew down prices by more than $50."

"'We received our expected bounce/reversal and that was the easy short-term call,' said Peter Spina, chief investment strategist at GoldSeek.com. 'Now we will watch in the coming sessions if these gains can extend.'"

"He said he believes 'this momentum will continue to take us back to the upper $600s.' But for now, 'a move past $655 is the first step before moving back up to the $675 resistance area.'"

"'There will be difficulty short-term if we find this reversal take a breather, and a period of consolidation may be needed before we can expect the next leg higher in gold to begin,' he said."

"'Sentiment has improved dramatically across the metals spectrum in the past 24 hours through a combination of fundamentals and external factors such as the dollar and oil,' said James Moore, an analyst at TheBullionDesk.com."

"It still remains to be seen whether the recovery is sustainable; however, if prices manage to stabilize above $656, the market might rise sharply, boosted by funds building fresh long positions, Moore said."

"'Overall, the next few days are likely to be nervous as the [metals] market digests why the recent sell-off rippled through so many markets and what it was telling us,' said William Adams, an analyst at BaseMetals.com."

From Reuters. "Oil fell below $62 a barrel on Thursday, pressured by comfortable crude supplies in the United States, the world's top energy consumer. U.S. crude settled 18 cents lower at $61.64 a barrel, while London Brent crude was down 17 cents at $62.33."

"'Energy's fundamentals are uncertain at best,' wrote Edward Meir of Man Energy. 'Stock levels are comfortable despite the recent draws.'"

"U.S. and Brent crude rose by well over a dollar on Wednesday after the United States said crude stocks fell by 4.8 million barrels last week, against forecasts for a rise."

MarketWatch reports on currencies. "The yen rose against the dollar Wednesday, as traders continued to nervously eye developments in the stock markets after the week-long unwinding of yen carry trade positions. 'There is a nervous calm in the foreign exchange market,' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. 'The recent price action has sapped participant's confidence and many are not sure if the carry trade unwinding and asset market spasm is over.'"

"In New York trading, the dollar was quoted at 116.27 yen, compared with 116.53 yen late Tuesday. The euro stood at $1.3175, compared with $1.3121. The British pound traded at $1.9337, compared with $1.9313. The dollar changed hands at 1.2171 Swiss francs, compared with 1.2239 francs."

"David Brown, an analyst at Bear Stearns, said while the last few days have been 'quite sedate' and volatility has eased back down, it's premature to draw conclusions that the recent market turmoil has ended. 'Is this the end of the carry-trade rout or just the eye of the storm? We suspect it is the latter,' he said, in a note to clients. 'We believe that this decline in dollar/yen, which started in earnest a week ago, is likely to reach 110 before any sort of dust can really settle."

"'One thing to bear in mind here is that the mere drop in financial markets last week is likely to beget at least some bad economic news,' he said. 'We suspect that the market will latch onto any 'bad' news for dollar/yen, such as weak U.S. payrolls on Friday or more sub-prime tensions in the U.S., a lot more readily than it will react to 'good' news.'"

"Gold futures closed higher Wednesday to score a two-session gain of nearly $14 an ounce, finding support in a rebound in global stock markets and a broader recovery in commodity prices. Gold for April delivery closed up 1%, or $6.70, at $652.90 an ounce on the New York Mercantile Exchange."

"The contract has now climbed $13.70 in two sessions, after breaking a five-session losing streak that drew down prices by more than $50. 'We still believe we can see $700 in the first quarter of 2007 and expect gold to average $725 for the year, topping out at $825-$850 at some point,' Neal Ryan, director of economic research at Blanchard said."

"Contributing to gold's climb Wednesday, gold production in South Africa declined 7.5% in 2006 compared to a year earlier, recording its lowest level since 1922, the Chamber of Mines of South Africa said on Wednesday. South Africa is the largest producer of gold in the world."

"'We have seen similar reports from the United States, Australia, Canada and a few other countries throughout 2006 and should expect to see continued weakness in production from these countries,' said Ryan. 'More and more production will have to come from politically unstable, geologically more hostile regions as the four largest producers over the past three decades (Australia, Canada, South Africa and United States) continue an irreversible downtrend for annual production,' he said."

"Jon Nadler, an analyst at Kitco Bullion Dealers, said: 'Although a bullish fundamental component, the South African production data is currently offset, perhaps even overpowered, by questions about the demand side of the gold equation.'"

"'An apparently slowing U.S. economy, a strong whiff of stagflation in the air, and turbulent global stock markets have given the bears and the bulls a renewed chance at a fierce wrestling match,' Nadler said."

"Other metals prices finished higher along with gold, with the exception of platinum. April platinum lost $6.30 to close at $1,192.50 an ounce. May silver added 12 cents to close at $13.105 an ounce and June palladium tacked on $1.85 to end at $353.75 an ounce."

From Bloomberg. "New Zealand's central bank raised the benchmark interest rate a quarter-point to a record 7.5 percent and said it can't rule out another increase because an expanding economy may stoke inflation."

"'The current policy tightening is aimed at reducing the risk of an unsustainable rebound' in spending, Reserve Bank Governor Alan Bollard said in a statement released in Wellington today. 'Depending on the persistence of the current upturn, further tightening may be required.'"

"New Zealand's key rate is the second-highest after Iceland's among nations with the top credit rating at Moody's Investors Service, helping the currency surge 5.2 percent the past six months. Bollard today said a buoyant housing market and sustained consumer spending suggested inflation may exceed his 1 percent-to-3 percent target range unless rates were increased for the first time in 15 months."

"'The recent pick-up in housing and domestic demand may gain momentum,' Bollard said. 'A return to a moderating trend in housing and domestic demand will be essential is we are to see a reduction in medium-term inflation pressures.'"

From Reuters. "A popular investment strategy where investors borrow cheaply in yen to buy higher-yielding assets elsewhere can only continue for so long, former Federal Reserve Chairman Alan Greenspan said on Wednesday."

"The strategy, known as the yen carry trade, is still going strong, but 'at some point it's got to turn,' Greenspan told a trading technology conference."

"Japanese patriotism was partly behind the pattern, he said. Government debt is owned predominantly by domestic investors in Japan, despite offering some of the lowest rates in the world."

"'The people who are getting the carry trade spread are being subsidized by Japanese consumers,' Greenspan added."

Bloomberg reports on currencies. "The yen fell the most in more than two years versus the euro as global stocks rebounded, increasing concern that investors may resume selling the Japanese currency to finance purchases of higher-yielding assets. Japan's yen also had the biggest one-day slump in five months against the dollar as signs that shares are stabilizing may prompt traders to return to the carry trade, taking advantage of the lowest borrowing costs among major economies."

"The yen gained 2.6 percent against the dollar over the past three trading days as a rout of global stocks and emerging-market assets triggered the unwinding of the carry trade. 'The unwinding of yen carry trade is running out of steam,' said Jens Nordvig, a senior currency strategist at Goldman, Sachs & Co. 'Risk reduction is fading. The dollar and euro are helped by the equity markets.'"

"The Japanese currency also weakened 1.5 percent against the British pound, 1.5 percent versus the Australian dollar, 2.1 percent against New Zealand's dollar and 2.4 percent versus the South African rand."

"The U.S. currency fell to $1.9314 per pound from $1.9205 yesterday. The dollar also declined to $1.3126 per euro from $1.3090, and weakened to 85 U.S. cents versus the Canadian currency from 84.67 cents."

"The Swiss franc, which is also used to fund the carry trade, weakened versus 15 most-active currencies. 'The reversal of the recent sell-offs in the equity markets put a stop on the yen rally temporarily,' said Robert Fullem, vice president of U.S. corporate FX sales at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. 'Some players have started to put back on carry trades to test the water.'"

"Losses in the yen may be limited as strategists and traders including Fullem said the market is awaiting the U.S. payroll report on March 9, and how stock markets will perform over the next few days to see whether the unwinding of the carry trade has run its course. U.S. employers are forecast to have added 95,000 jobs in February, down from 111,000 a month earlier, according to a Bloomberg survey."

"'If employment in the U.S. falls apart, we will see more unwinding' of the carry trade, Fullem said."

From MarketWatch. "Gold futures closed higher Tuesday to register their first gain in six sessions as a rebound in Asian and European stocks as well as gains on Wall Street helped boost demand for the precious metal. Gold 'is looking at forming a base around the $640 level,' Emanuel Balarie, senior market strategist at Wisdom Financial, said in e-mailed comments."

"'The recent decline from the highs has put gold in an oversold position, and I would expect any type of stability in the global marketplace to spur an onslaught of fresh buying, especially out of Asia,' he said."

"Gold for April delivery closed up $7 at $646.20 an ounce on the New York Mercantile Exchange. The contract had declined 7.3% from the closing level on Feb. 26."

"'Investors that blink might be surprised to see the price of gold back at last month's highs within a relatively short period of time,' said Balarie. 'In light of continued inflationary pressures, a weak U.S. dollar, and geopolitical tensions, the decline of gold was fundamentally unwarranted.'"

"Looking further ahead, Peter Spina, chief investment strategist at GoldSeek.com said he sees two scenarios for this month. Gold could rebound strongly from these levels and consolidate around the mid-$600s, or it can reverse and power ahead, ending the month 'approaching or exceeding the $700 mark.' But he said it seemed unlikely the retreat 'will last very long.'"

"Still, 'questions and valid doubts remain about the near-term and intermediate time horizon prospects of the precious metal in the wake of recent events,' said Jon Nadler, an analyst at Kitco Bullion Dealers. 'A true resumption of the bullish march may have been set back by weeks, if not months,' Nadler said. 'Volatility will remain a defining feature for the time being, as investors are keeping a nervous grip on various triggers.'"

"James Moore, analyst at TheBullionDesk.com, wrote in a note to clients: 'Physical players and bargain hunters will be keen to take advantage of sub-$650 gold, but I think the yellow metal may have to weather a little more weakness before short-term sentiment improves.'"

"'The long-term outlook remains strong though, with the current dip likely to be viewed favorably by investors seeking to enter the market,' Moore said."

"Other metals prices also posted Tuesday gains, as May silver moved up 23.5 cents to close at $12.985 an ounce, April platinum added $18.20 to end at $1,198.80 an ounce, June palladium rose $4.90 to close at $351.90 an ounce."

"'The larger exposure of speculative players to silver will keep the metal in a more volatile mood in the coming sessions,' Moore said."

Bloomberg reports on currency trading. "The yen advanced to the highest level in almost three months against the dollar as global stocks extended a slump, prompting investors to unwind riskier investments funded by borrowing in Japan. The yen rose for a third day as investors exited so-called carry trades. The currency reached its strongest since October against the pound and the highest versus the euro since November."

"'Investors are cutting back their risk exposure,' said Max Tessier, vice president of currency management at CIBC Global Asset Management in Montreal, which manages $2 billion in currency assets. 'Carry trade is running against investors. There is no argument to sell the yen right now.'"

"The yen rose 0.9 percent to 115.77 per dollar at 4:05 p.m. in New York from 116.80 on March 2. It touched 115.15, the strongest since Dec. 8."

"The Japanese currency also advanced 1.7 percent to 151.59 per euro, from 154.10, after reaching 150.88, the highest since Nov. 24. The yen has rebounded from a record low of 159.65 on Feb. 23. The yen climbed 2 percent against the British pound, 2.4 percent versus the Australian dollar and 2.7 percent against the New Zealand dollar."

"Traders who borrowed the currency to finance their investments in foreign corporate bonds and emerging-market assets had to buy back the yen to pay their debt financed in Japan, pushing the unwinding of the carry trade. The rise in implied volatility, a measure of how much investors expect the yen to fluctuate, also discouraged the carry trade."

"The Swiss franc, another funding currency for the carry trade, gained against the pound and currencies in New Zealand and Australia as people exited the investment."

"'We may get a little bit more turmoil' in the short term, said Lara Rhame, a senior currency strategist at Credit Suisse Group in New York. 'There is no doubt that we are in a phase of correction, a phase of unwinding some of the risky trades that investors have had on.'"

From MarketWatch. "The Institute for Supply Management said earlier Monday that its nonmanufacturing index dropped sharply in February, down to 54.3% from 59% in January. Economists had been looking for the index to come in at 57.5%."

"Daniel Jester, an economist at Moody's Economy.com, said that the weaker ISM services reading, in combination with other data including housing starts and capital spending, suggested that economic growth for the first quarter 'has slipped further below potential.'"

"'At this point, it is still early to become overly concerned; as long as the economy continues to add jobs, the expansion will remain intact. However, as evidenced by the increase in market volatility over the past week, the risks to growth are building,' he said."

"Gold in New York fell, erasing this year's gains, as investors sold the metal to cover losses in global equity markets. Silver also declined."

"Gold is little changed this year after gaining as much as 8.5 percent. Prices fell 6.2 percent last week following a global sell-off of equities wiped out $1.8 trillion in world market value. Investors who own gold in StreetTracks Gold Trust, an exchange-traded fund, sold about $617 million last week."

"'You've got some wealth deterioration in the stock market,' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. 'Gold is a store of value and it's convertible. People who need cash raise it through gold.'"

"Gold futures for April delivery fell $2.90 or 0.5 percent, to $641.20 an ounce at 12:21 p.m. on the Comex division of the New York Mercantile Exchange. Prices earlier declined to $635.10, dropping for the fifth session in a row, the longest slump since mid-September."

"Silver for May delivery fell 20 cents, or 1.5 percent, to $12.76 an ounce. Prices have dropped 1.5 percent this year after climbing as much as 15 percent."

"Japanese stocks dropped today by the most in almost nine months, wiping out more than $166 billion in share value. Europe's Stoxx 600 index has fallen 7.7 percent since last week."

"'In this type of market, people get nervous,' said Graham Birch, who helps manage about $8 billion in precious-metals equities at BlackRock Investment Management in London. 'People are looking to put a bit of money back in the bank.'"

"Concern of a global slowdown may also hurt demand for gold, analysts said. About 67 percent of gold was purchased for jewelry last year, according to data from the producer-funded World Gold Council. 'Jewelry is not something people need, it's something people want,' said Leonard Kaplan, president of Prospector Asset Management."

"Gold also fell as oil dropped below $60 a barrel, reducing the metal's appeal as an inflation hedge."

"Gold can recover should 'stocks start rallying,' McGhee of Integrated Brokerage said. 'It's all based on liquidity needs.'"

MarketWatch reports on the precious metals market. "Gold futures dropped more than 3% Friday, suffering from a fourth-straight losing session and a weekly loss of more $42 an ounce with investors still rattled by this week's volatility in global stock markets as they eye demand for the precious metal in Asia. 'We have now witnessed a rout in bullion of a magnitude not seen since last fall,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Gold for April delivery lost $21 to close at $644.10 an ounce on the New York Mercantile Exchange. Prices have been falling from Monday's $689.80 level in the wake of Tuesday's global sell-off in stocks that triggered volatility across financial markets."

"Silver futures led the decline in the precious metals, with the May contract dropping 5.1%, or 69 cents, to end at $12.96 an ounce. The contract touched a six-week low of $12.80 and ended the week with a 12% loss."

"U.S. stocks weakened Friday with the Japanese yen's rally against the dollar and more bad news for mortgage lenders fueling the same anxiety that has sent stocks sliding all week."

"'This can no longer be called a delayed reaction to Tuesday,' said Nadler. 'There had to have been some inherent structural weakness in bullion at play here in addition to the oft-used 'quest for liquidity' excuse we keep hearing. Yes, it is oversold, but many other assets may soon in the same boat,' he said. Global investors remain 'extremely nervous.'"

"It makes sense, 'with stocks in China remaining under pressure, and with the Chinese notoriously involved in the gold market, it does not take a great deal of wisdom to discern that liquidation of profitable gold positions would be undertaken by those suffering material losses in their equity trades,' said Dennis Gartman, publisher of the Gartman Letter."

"'Then, we have Japan,' Nadler said. 'The unwinding of the yen carry trade will now go down in the history books as one of those epic shifts in investment behavior that altered the market landscape for years to come.'"

"April platinum skidded 2.7%, or $33.40, to close at $1,211.80 an ounce and was $25.80 lower for the week, while sister metal palladium saw its June contract lose $3.45 to close at $350.60 an ounce, ending $13.10 lower for the week."

"Over in the currencies market, the yen rose to a new 2 1/2-month high against the dollar as heightened volatility in global markets and increased aversion to risks prompted investors to unwind the so-called 'carry trades.'"

"'The carry unwinding' is a part of the reason for gold's decline, said Neal Ryan, director of economic research at Blanchard. That 'will eventually be positive for the market, but it'll sting a bit at first.'"

"'Combining the need for capital because of margin calls on funds, yen carry unwinding and some relentless selling and shorting from large commercials on the market who realized the precious metals were susceptible to these drops has hurt as well,' he said. 'Investors are retreating into cash and hiding until there are some signs that the volatility is dissipating from the market,' he said."

"Overall, 'gold's quite overbought condition has been largely eliminated thanks to this week's trading,' said Peter Grandich, editor of the Grandich Letter. 'Today is likely to mark an important bottom,' he said."

"'Widespread bullishness has been replaced with disappointment or outright bearishness, a condition that has signaled the end to previous short, but sharp, corrections the last several years,' Grandich said."

"He points out that gold was up for seven straight weeks, and 'funds had one of the net longest positions on the Comex versus commercial shorts. The activity in the financial markets allowed this spread to unwind faster than normal, but has created an illusion that gold is not performing like it's suppose to,' he said."

From CNN Money. "Bernard Hunter, director of precious metals at bullion dealer ScotiaMocatta, said that the ongoing liquidation in the stock markets triggered the sell-off in gold. 'It's one thing for people to run around and say it's a great diversifier and a safe haven to all the risks. But the fact is, when things start going bad, people tend to liquidate their gold holdings in order to pay for the bad stuff,' Hunter said. 'It really just highlights how fragile the rally has been,' he said."

"A COMEX floor trader said that the funds remained on the sidelines in the gold market, and he noted that the open interest in gold futures also increased. 'There're still massive longs out there, and they have not gone out yet,' he said."

"On the other hand, he said that fund selling was seen in silver, and that funds were getting out of their positions in the white metal."

"The silver futures also dropped 4 percent on Thursday. The May contract had rallied more than 17 percent from its 2007 low before this week's setback. Hunter said that silver was hit particularly hard, and waves of selling were to blame for its sharp decline."

"'The trouble is that when those waves come in, it's just not a lot of buying there to support it,' Hunter said."