Gold
Gold continued to soar yesterday and was up $18.20 to $877.50 per ounce in trading in New York and silver was up 52 cents to $15.68 per ounce. Gold continued to rally in Asia and early European trading and the London AM Fix was at $887.85 (up from $873.25). The psychological level of $900 looks increasingly like a possible near term target prior to a correction and consolidation. Traders like big round numbers (witness $100 a barrel oil) and thus $900 could prove a similar magnet to traders, as will $1,000 in the coming weeks and months.

Gold has again surged to new records in all major currencies. At the London AM Fix gold was trading at £452.15 (up from £441.57 yesterday) and €603.53 (up from €593.81 yesterday). Gold thus hit record record all time non inflation adjusted highs in both currencies.

The dollar was marginally weaker and against the euro and is in a tight trading range around $1.47 overnight. The euro has made only modest gains on more negative data from the U.S. housing market and growing fears of a recession. Meanwhile oil has rallied again to back over $97 per barrel. The big news is the arrival of the Chinese gold futures market in China which soared on its first day of trading. It should lead to increased demand in the emerging superpower (see below). Also, there is speculation regarding official sector or central bank buying of gold and speculation that a large gold producer may have been initiating a hedge buy-back program and closing significant short positions.

Activity in the gold futures market has been called frenetic and in a 'frenzy'. Futures markets can be speculative at the best of times and highly leveraged players with short term horizons can lead to some froth and frenzy. However, physical demand for gold remains robust and gold is far from frenetic in the physical market with investors with more long term horizons, retail and institutional alike, yet to participate in a significant way. Only a tiny minority of more aware, prudent and risk conscious investors have invested in gold. This is changing and will continue to change as the bull market progresses. There is no 'gold rush' like a gold 'gold rush' and mania akin to NASDAQ in 1999 will be seen but not for a few years yet.

Support and Resistance
Support is at previous resistance at around $840 to $850, below that at the 50-day moving average at around $817 and the previous psychological level of $800. Momentum remains with gold and the $900 mark is being cited as a realistic short term target prior to any pullback.

Investment Funds Moving Aggressively into Precious Metals
Investment funds are moving into precious metals in order to gain diversification and to hedge against burgeoning inflation and macroeconomic risk. However, this is only the early stages as it is estimated that in the world only some 0.3% of investment capital is invested in commodities versus equities, bonds, currencies, property etc.

The mass of the investment public remains unaware and largely ignorant of the precious metals market and have yet to participate in the bull market as they did in the mid and late 1970s.

China and Gold - Shanghai Futures Exchange
China gold futures contracts surged to the daily 10 percent limit on Wednesday, minutes after the official debut trading started at 9 a.m. on the Shanghai Futures Exchange (SFE). "The launch of gold futures is very welcome as investors are eagerly looking for new investment tools given the stock market's high valuation and volatility, and the property market is under severe control," Hu Yanyan, a gold futures analyst with Shanghai Jiuheng Futures Brokerage, said.

Bloomberg reported that the start of trading in Shanghai was "the biggest event in the gold market since the launch of the gold exchange-traded funds over the past few years,'' John Reade, analyst at UBS Ltd. in London wrote in a report. "Futures will allow leveraged investment in gold from Chinese investors and speculators.''

ETFs enable investors to bet on price changes without having to trade futures or take delivery of commodities. The global gold price gained 31 percent in 2007 on a declining dollar and concern the U.S. would cut interest rates to avert a slowdown. Gold has more than tripled since 2000. "Chinese investors obviously have enthusiasm for gold and the futures provide them with a leveraged, low-cost exposure to bullion,'' Zhu Bin, head of research at Nanhua Futures Co., said by phone from Hangzhou. "Given the wobbly equities market and gold's continuous climb in the past seven years, everyone seems to think that gold is a good investment.''

Middle Eastern Gold Demand Continues to Surge
Gold demand in Saudi Arabia in 2007 was up 17%. Gold sales rose almost 17 percent in volume and 30 percent in value in 2007 from the previous year. "The economy of Saudi Arabia, especially after the euphoria of the stock market cooled off, grew and that helped the gold demand in the country," said Moaz Barakat, managing director of the World Gold Council (WGC) in the Middle East, Turkey and Pakistan. "According to our preliminary estimates, gold demand in Saudi rose by almost 17 percent volume and 30 percent in value in 2007 compared to the previous year, and I think the market still looks positive," he told Reuters in an interview.

Silver
Silver has surged and rallied to $16.08/16.10 at 1130 GMT.

PGMs
Platinum was trading at $1558/1564 as per above (1130 GMT).
Palladium was trading at $374/380 an ounce (1130 GMT).

Oil
Oil remains at elevated levels above $95 per barrel and NYMEX light sweet crude oil (FEB08) was trading at $97.16 a barrel.