Gold
Spot gold was trading at $661.30/661.80 an ounce as of 1215 GMT.

Gold has traded sideways in Asia and early European trading after yesterday's flat close in New York at $659.30. Gold appears to have broken out of the recent tight trading range between $653 and $660 but we will need a weekly close above $660 to confirm this. The next resistance is seen at $666 and then $675.

Gold's summer sleepy season is coming to an end with the coming of gold's time of seasonal strength and peak demand from India and the Middle East and the Christmas jewelry season in the western world.

It is interesting to note last year's movement in the gold price. Gold rallied in August and sold off in September before a significant move up in early October. From early October, gold rose some 23% from $560 to $690 by the end of February 2007. Subsequently, gold gave up some of the gains and sold off dropping to $640 and has consolidated in a range between $640 and $695 since. This is a classic period of strong consolidation, 'taking a breather' and forming a very strong base or foundation prior to the next stage in gold's bull market.

RIA Novosti, Russian state media, reported that "the Russian government is preparing to take control of gold mining, another "strategic sector" of the national economy where profits are expected to soar."

The threat of Russian nationalisation of the gold mining industry should be kept on the radar as it could lead to materially higher gold prices should Moscow choose to limit exports into the international market . Putin and the Russians have already shown 'form' in using key strategic resources such as natural gas for political purposes. This was clearly seen in the stand off with Ukraine which raised fears in western Europe that dependence on Russian natural gas should not be taken for granted and is an Achilles heel of western European countries.

President Vladimir Putin holds a
gold bar at a mineral resources exhibition in
Madagan in the Russian Far East, Nov. 22, 2005.
Itar-Tass photo.

RIA Novosti reported that as a first move of the Russian government towards taking control of the gold mining sector, billionaire Mikhail Prokhorov will sell his 22-percent stake in Polyus Gold, the country's largest gold producer. Russia is the sixth largest gold producer in the world, yet holds the world's second largest gold reserves (after South Africa). It is therefore safe to assume that Russia's "golden age" is only just beginning. It makes sense that the Russian government has begun its offensive with the largest player on the national gold market, Polyus Gold. After Prokhorov sells his stake to Alrosa, the government may offer a similar deal to Potanin, a law-abiding (or at least Kremlin-obliging) oligarch who has never yet rejected a government offer. As a result, the government will hold a 44 percent stake in the gold mining company. If it then purchased the 7 percent stake held jointly by Prokhorov and Potanin together, the government could increase its share in the company to a 51 percent controlling stake.

Silver
Spot silver is trading at $11.71/11.73 an ounce (1215 GMT).

PGMs
Platinum was trading at $1240/1244 (1215 GMT).
Spot palladium was trading at $321/336 an ounce (1215 GMT).

Oil
Oil remains near record highs with demand internationally remaining robust and lingering concerns regarding Hurricane Dean's impact on oil refineries in the Gulf of Mexico.

Currencies, the USD and Gold
US markets fell for the first time in six days yesterday as the CEO of Countrywide, the beleaguered mortgage lender, said that the economy is heading for a recession. “This is one of the greatest panics I’ve seen in 55 years in financial services,” Angelo R. Mozilo, chief executive of Countrywide Financial, the nation’s biggest mortgage lender, said in an interview on CNBC.

He predicted that the housing crisis would lead to a recession. “I just don’t see a light here at the moment,” he told CNBC. “I can’t believe when you’re having this level of delinquencies — equity is gone, the tide has gone out — that this doesn’t have material effect on the psyche of the American people and eventually on their wallets.”

The Yen rallied overnight benefiting from the heightened risk aversion after a slide in Asian stocks reminded investors that problems in the US housing and credit markets may yet hurt the global economy.

The ECB issued tender for 40 billion Euro worth of three month funds to banks across Europe yesterday, emphasising the extent to which liquidity matters remain to the fore. The tender was three times oversubscribed as 146 banks requested a total of 125.8 billion Euro. This marks the latest intervention by central banks worldwide as they attempt to counteract the global liquidity squeeze.

EUR/USD has continued to retrace losses from last week, having bottomed out at 1.3360 last Thursday. Interestingly, Goldman Sachs yesterday released a note which raised its forecast for the euro against the US dollar to 1.43 within three to six months as housing weakness slows the world’s largest economy. The previous forecast was 1.35.

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