Gold rose to its highest in a week on Monday before trimming gains as the dollar strengthened against the euro and oil prices eased, analysts said.

“It is mostly a story about the U.S. dollar, equity markets and inflation at the moment,” analyst Eugen Weinberg at Commerzbank said.

Gold had little incentive to move higher, with oil prices sliding, but firm buying once prices moved towards $800 an ounce created a floor, he said.

Gold rose as high as $845.55 an ounce, its highest level since Jan. 12, before trading at $831.85 an ounce by 1516 GMT, down 1.2 percent from $841.85 in New York late on Friday, as oil prices reversed course and slipped.

Demand from the jewelry industry was seen weak this year, accounting for 70 percent of total demand for gold, and falling inflation would also cap prices, Commerzbank’s Weinberg said.

Gold is traditionally bought as an inflation hedge and with inflationary pressures diminishing interest could fade.

“Whilst we recognize the likelihood of spikes above $1,000 an ounce during 2009, we believe that weaker physical demand limits the potential for a sustained rally in the metal,” Investec Securities said in a report.

The bank forecasts gold prices at $825 an ounce for 2009, falling to $800 in 2010 and $750 for 2011, the report said.

A firmer dollar weighed on gold as dollar-priced commodities tend to fall as the dollar strengthens because it makes them more expensive for holders of other currencies. The euro eased to $1.3139 against the dollar on worries about the health of the euro zone economy after a ratings downgrade on Spain and grim economic forecasts from the European Commission.

OIL WEIGHS

Oil edged lower to around $34 a barrel, having risen 3 percent in the previous session.

Sinking oil prices weigh on gold as the metal typically moves in line with crude, because it is often bought as an inflation hedge, and the direction of the oil market is an indicator of interest in commodities.

But dealers said record bullion holdings in SPDR Gold Shares supported sentiment. Gold holdings in the world’s largest gold exchange-traded fund jumped another 5 tonnes to 795.25 tonnes last week.

Platinum was trading at $946.50/951.50 an ounce, down from $946.50 late on Friday. More than 60 percent of platinum use goes to autocatalysts to clean exhaust fumes.

More bad news for automakers emerged on Friday as manufacturers in Japan, Europe and the United States all warned their businesses continue to struggle and outlooks remained uncertain.

“Given this negative dynamic, support for platinum metals prices from its most important demand sector is foreseeably going to be missing this year,” precious metals group Heraeus said in a report.

“Despite this, we do not expect a complete collapse in the platinum-metals prices. As we have been seeing for some months now, new production is going to slow down as well.”

Silver eased to $11.06/11.14 against $11.21 and palladium traded at $181/186 versus $183 late on Friday.

New York gold futures added $32.5 an ounce to $846.8.

Source: LONDON, Jan 19 (Reuters)

Pickens wasn’t the only person who got 2008 wrong. There were plenty of others.

When it comes down to it, anybody can make predictions. It’s not very hard. But it is hard to make ones that do what they purport to do: predict.

My advice is to take them with a grain of salt. If predicting the markets were so easy to do, most of Wall Street’s brightest fund managers wouldn’t have lost 40 percent or more last year.

I’ve made my share of predictions in the last couple of issues, “A Preview of 2009?” and “Six Predictions for 2009″.  So I decided to go back a year and look up my predictions at the end of 2007 – to see just how foolish my prognostications were. Here is what I said on December 31st, 2007…

“No, it’s not the overall returns that are most worrisome. It’s the economy. The problems that came to the forefront this year – housing, a credit crunch, weak dollar, slowing economic growth and a tired consumer – aren’t going to disappear with the New Year. In fact, some of those problems – like the credit crunch – will get much worse before they get better.”

And here is what I said the week before, on December 24th…

“If the financials won’t lend, all bets are off. The economy is doomed. The market will fall…
But the credit crud is just starting to gum up the works of the finance sector. It’s far too early to call off the crisis… or to say (or hope) the worst is over.

The fact is, the banks still don’t have any idea how to price their mortgage-backed securities. They’re not nearly through writing off billions and billions of dollars.  They’re still going to need more cash infusions as they transfer their off-book losses to their balance sheets.

And to further complicate things, the insurance companies who have been guaranteeing bonds are being downgraded. Next to get a rating downgrade will be the bonds themselves…

Plus, the global economy hasn’t been immune to credit problems of its own. The subprime slime is reaching far and wide.

The fact is, we’re not at the beginning of the end of the credit crisis. There’s no light at the end of the tunnel here. We’re simply at the beginning. And it’s a deep and convoluted banking mess that will take all of next year to unwind.

It won’t be a pretty process.”

As it turned out, I got lucky and pretty much hit the mark. I was a little easy on the economy though. While I was probably more pessimistic than about 99 percent of the other prognosticators, the economy (and banks) did even worse than I expected.

The crowd is saying that the economy will make a comeback in the second half of this year. And once again, I find myself far more pessimistic than the crowd.

I believe we’ll have to wait until 2010 for any comebacks.

Source: Not All Predictions Are Created Equal