A raft of US economic data hit the market this morning and it was a mixed bag of information.

CPI data came in at expected levels, which were still the highest price increases experienced in the last year.  The only major concern to inflation numbers moving forward should be energy prices as the other components in the CPI seem to be moderating.  The subset March CPI energy numbers jumped nearly 6% and oil prices have stayed at the same level and even trended slightly higher into April.  These energy price increases will eventually begin feeding through the supply chain and significantly affecting PPI and CPI figures moving into the next few months.  We expect that inflation figures should begin increasing into the second half of the year.  The question then becomes, will growth stagnate enough to keep rate hikes on hold or even allow for a rate cut with significantly increasing inflation figures?

ECB gold sales were updated this past week and we've finally seen levels dropping back to the 2-3 tonnes per week of sales.  One captive ECB bank sold 1.9 tonnes of gold into the market last week.  We believe this is the resumption of the reduced sales trend and will remove the additional supply back off the market that had been increased over the past month.  This drastically decreased supply is a strong reason for gold's $20 rise since last week.

Lihir Gold Mining, an Australian gold company with operations in Papua New Guinea, announced a new equity raise that will use cash to close out gold hedges and a gold loan totaling nearly 1.5 million ounces.  Lihir cited investor and analyst calls for them to finally rid the company of hedges placed back at $300-400 gold prices.  Lihir is the latest mining company to recognize that investors don't consider hedges at $350 per ounce to be a particularly prudent management style.  After some recent dehedging announcements in 2007, the total hedge position left on the market is approaching 35 million ounces, or nearly 85 million less ounces hedged on the market since 2002.