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Belated Present for Gold
By Jon Nadler

Gold bugs opened one last surprise present the day after Santa left town and found...an invigorated price for their favorite metal.

While spot prices opened only marginally higher in New York this morning, adding $2.40 to $814.60 on the bid side, the trade took the $1.50 (at one point $2.50) crude oil price spike and corresponding slide in the US dollar (to 77.14) on the index as tradable news and acted upon them. Spot bullion finished quite strong, rising $12.60 on the day, to settle at $824.80 per ounce -practically at the day's highs. Oil rose to $95.66 amid renewed strikes by Turkish forces on Kurdish positions within Iraq, while the greenback declined on perceptions that the holiday shopping season was, indeed, a dud, and that home prices in the US have now shown their largest decline on record for through end-October. Silver rose 15 cents to $14.67 while platinum was off to the races, gaining $13 to $1539.00 a new record, amid 10%+ lease rates seen in the market.

An integral part of today's boost for gold was the following news, as seen on Marketwatch:

"Home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shiller price index released Wednesday by Standard & Poor's. Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3%, reached in April 1991. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index."

Any wonder then, that the Washington Post reports: "A surge in [holiday shopping] spending over the weekend may not have been enough to rescue Target, Sears Holdings and Macy's from the slowest holiday spending season in five years." Indeed, a 3.6% rise in spending over last year pales in comparison to the 6.6 and 8.7 percent gains we've seen in the past two years.

Americans remain pessimistic about their economy, are lukewarm about the merchandise they find in stores, and prefer to click their computer mice for online shopping as $3+ gasoline has all but grounded their fleet of behemoth SUVs this winter. At the end of the day however, much of this reluctant behavior is probably attributable to the palpable sense of shrinking wealth which was ignited by the real estate mess. When a US homeowner looks out the window and sees a sea of "FORECLOSURE" and "LIQUIDATION" signs in the neighborhood and then looks up property values for his own McMansion on Zillow, the last thing on the list of to-dos is shopping 'till dropping.

Meanwhile, in a Bloomberg piece we learn that:

"The yen traded near a seven-week low against the dollar on speculation the Bank of Japan will refrain from raising interest rates after policy makers said risks to global economic growth are increasing."

Japan's yen has weakened against nine of the 16 most-active currencies this year as the nation's central bank kept its benchmark lending rate at the lowest among major economies, prompting investors to seek higher yields elsewhere. Japan's economic growth is slowing and policy makers need to carefully examine statistics and financial markets before determining interest rates, Bank of Japan board member Hidetoshi Kamezaki said today in a speech in Yokohama, near Tokyo.

"Global financial markets continued to be unstable and there was uncertainty regarding global economic developments," most BOJ members agreed at their Nov. 12-13 policy meeting, according to minutes released today. Some members said the risk the U.S. economy will lose momentum "had increased somewhat."

Watch for continuing volatility amid thinly-traded markets but keep an eye on closing levels for the remainder of the year as on-going strength may bode well for the first quarter of 2008.

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