Despite a slightly easier tone for oil, there is little to suggest any extended relief is in sight. In fact, Opec has warned that crude may continue higher and reach $200 a barrel. Opec contends that oil supplies are adequate and it is the weak dollar that is to blame for sky-high oil prices. They have therefore been uninclined to increase output.

Labor disputes and militant activities have in fact had a considerable impact on both North Seas and Nigerian crude outputs recently, resulting in the latest round of new record highs that approached $120 brl. Strong demand fundamentals, despite the prospect of a US recession, along with solid investor demand is likely to keep oil underpinned for quite some time.

Gold tends to be pretty closely correlated with oil, providing an excellent hedge against energy based inflation. Both gold and oil are negatively correlated to the dollar, which means that further dollar losses will increase their appeal as alternative assets. One can only imagine where the dollar and gold might be when/if crude reaches $200 brl.

Oil at $200 would be nearly a 72% increase from the current price. Even if corresponding moves in gold and the dollar were half as much on a percentage basis; that would equate to a plunge in the dollar index below 50.00 and would suggest potential in gold toward $1,200. However, given the extraordinary impact $200 oil would have on inflation, gold could end up significantly higher.

The UN has announced today that it is setting up a food crisis task force. Rapidly rising food prices, for which sharply higher energy prices are at least partially to blame, have plunged an estimated additional 100 million people into poverty.

The price of staples, such as rice, grain, oils and sugar are all at least 50% higher than the same period a year ago. Some are significantly higher. Rice prices in Vietnam for example have nearly doubled in the last two weeks, prompting officials to ban speculation.

The UN's Special Rapporteur on the right to food accused the US and the EU of taking a "criminal path" with respect to using food crops to produce biofuels. The UN official said that the US had used a third of its corn crop last year to produce biofuels.

Meanwhile, in Kenya's Rift Valley, farmers are planting a third less of the land because the price of fertilizer has more than doubled.

The head of the World Bank, Robert Zoellick, urged countries not to impose export controls as a means of protecting domestic food stocks.

"These controls encourage hoarding, drive up prices and hurt the poorest people around the world who are struggling to feed themselves," he said.

Evidence that global food production may have peaked is growing, while the world's population continues to swell. Population projections suggest that the global population will reach 7 billion in 2011 and another billion people will be added by 2024.

Despite efforts from many quarters to control the inflationary spiral, it seems that the food crisis is worsening. Rioting has already been seen in Haiti, Indonesia, Egypt and Cameroon. There are plenty of other hot spots around the globe. Along with the its inflation hedging capabilities, gold also offers protection from global political and social unrest stemming from this crisis.

Gold Market Movers:

US consumer confidence index for Apr dropped to 62.3, better than the market was looking for, but still a significant drop from a revised Mar figure of 65.9.

US S&P Case/Shiller home price index for Feb dropped 2.6% for 20 cities.

FOMC meeting begins today.

UK CBI retail survey index for Apr fell sharply to -26, much worse than market expectations, versus +1 in Mar.

Population explosion means oil at $100 a barrel is here for years

Opec warns oil could reach $200

HBOS and Deutsche write down more

Bear Stearns: Fed's bailout questioned by ex-staffer

Homes facing foreclosure more than double in Q1 from 2007

UK: Mortgage approvals hit record low