Stagflation is not kind to paper currencies and paper assets. Gold is surging in price not just in terms of the USD but in moving up in price of all paper currencies and has been very strong in EUR, GBP, CHF and JPY terms as well. Gold easily surpassed the strong resistance seen at the psychological €500 EUR mark. Gold in EUR terms is now trading at €531.72 and in GBP at £370.41, both near 16 month highs.

- Ambrose Evans Pritchard writes in the Telegraph that the world faces a new kind of currency crisis and large hedge funds are targeting currency pegs: "The wolf packs are circling. Fifteen years after George Soros smashed the sterling and lira pegs of Europe's Exchange Rate Mechanism, central banks have invited hedge funds to pounce again. This time on a global scale. Sitting ducks are on offer across Eastern Europe, the Middle East and emerging Asia, each offering an irresistible one-way bet for speculators with deep pockets. What the candidates all have in common is inflation, the ever-higher penalty they pay for chaining their destinies through currency pegs and dirty floats to the dollar and the euro, the currencies of two enfeebled blocs – one a fat roué at the end of his credit, the other a stooped old gentleman with a stick. The global M3 money supply is growing at 10.6pc as stimulus from America, Europe – and Japan, through the carry trade – leaks out to the vibrant parts of the world economy. Money is expanding at 18pc in Saudi Arabia, 19pc in China, 24pc in India, 36pc in the United Arab Emirates, 41pc in Russia and 69pc in Venezuela. With the usual lag, inflation has at last hit. Prices are rising at 6.5pc in China, 9pc in Russia, 9pc in Vietnam, 11pc in the UAE and 12pc in Qatar – to name a few. . . .

We face a new kind of currency crisis. Post-war bust-ups have usually been on the fringes. This time the capitalist core is rotten. Neither Western Europe nor the United States are strong enough to support the twin pillars of the world's currency system. Nobody else is ready."

- The Wall Street Journal reports how the world's largest financial institutions are planning huge emergency funds in order to attempt to stem the credit crunch and stop it impacting on the global economy.

"In a far-reaching response to the global credit crisis, Citigroup Inc. and other big banks are discussing a plan to pool together and financially back as much as $100 billion in shaky mortgage securities and other investments. The banks met three weeks ago in Washington at the Treasury Department, which convened the talks and is playing a central advisory role, people familiar with the situation said. The meeting was hosted by Treasury's undersecretary for domestic finance, Robert Steel, a former Goldman Sachs Group Inc. official and the top domestic finance adviser to Treasury Secretary Henry Paulson. The Federal Reserve has been kept informed but has left the active role to the Treasury."

- The Times of London reports that the U.S. wants to curb the emerging and huge state sovereign funds. The U.S. is to call for draconian rules to control sovereign wealth funds, the vast state-backed financial powerhouses that hold assets worth about $2.5 trillion. The United States is to call for draconian rules to control sovereign wealth funds. The proposal will be made this week in Washington at the meeting of G7 finance ministers and central bankers, The Times reports. But observers question whether such regulations will be able to rein in the vast, opaque, state-backed financial powerhouses that hold assets worth about $2.5 trillion (£1.2 trillion). There is increasing concern in Britain over the influence of sovereign funds. About half the shares in the London Stock Exchange are held by Qatar and Dubai, with the former close to acquiring J Sainsbury, the supermarket chain. Temasek, of Singapore, and the Chinese Development Bank both have stakes in Barclays.

- The FT features an opinion piece by Martin Feldstein, former chairman of the President's Council of Economic Advisers and now a professor at Harvard University, which may represent official thinking in the U.S.. The much vaunted 'strong dollar' policy seems increasingly obsolete. Given the fundamentals of the U.S. economy are weak and weakening and the dollar looks set to weaken further there is an attempt to 'spin' this as a virtue. Feldstein maintains that the dollar should be allowed to decline in value to balance international accounts and that this can be accomplished without sparking inflation in the United States. This is very unlikely and wishful thinking, especially with oil at over $85, copper at over $3 and wheat at over $9.

Forex and Gold
The USD is again showing weakness and is trading at 1.4240 (from 1.4177 on Friday) and 2.0405 (from 2.027) against the EUR and the GBP respectively.

This morning the U.S. dollar is down to 77.98 (from 78.26 on Friday). Support is at its all time record low at 77.657. Should support fail at this level the dollar will likely sell of aggressively to 75.00.

Silver
Spot silver was trading at $13.99/14.01 (1200 GMT). Silver is again outperforming gold and this should continue in the short to medium term.

PGMs
Platinum was trading at $1428/1433 (1200 GMT). Platinum hit a new all time record high at $1,413 on concerns regarding supplies from South Africa and continuing strong global demand.
Spot palladium was trading at $378/383 an ounce (1200 GMT).

Oil
The price of New York crude smashed through $85 per barrel for the first ever time here on Monday. Geopolitical risk with increasing tension between Turkey and Iraqi Kurdistan may be the primary factor for this recent move.

Paul J. Harris, Head of Natural Resources Risk Management, Bank of Ireland Global Markets was quoted in Finfacts.com: "Fresh impetus to the upward move in global crude oil prices was afforded by growing fears that Turkey would move to invade the Kurdish region of Northern Iraq in pursuit of terrorists associated with the Kurdish Workers Party who have killed 15 Turkish soldiers in recent attacks. Whilst the action would have no direct impact upon oil production we have seen, through events such as the Israeli attacks in Lebanon last year, how destabilising influences in the Middle East, with no direct bearing oil production, result in a bullish move in crude prices. As a result of the news WTI rose to a record $84.05 and Brent hit $80.55.