Gold struggled after a drop to its lowest in nearly two weeks at $891.65 an ounce on Monday as investors booked profits from last week’s record high of $936.50 an ounce. But the yellow metal is still on track to touch new highs due to uncertainties in the dollar’s outlook. Gold has gone up by as much as 12 percent this year and physical dealers expect buying from jewellers though trading has begun to slow down in Asia ahead of this week’s Lunar New Year celebration. The price of gold is likely to peak at just over $1,000 per ounce in 2008 and benefit from any weakening of the US economy as investors seek new havens for their funds. The possibility of further US interest rate cuts in coming months, maybe some further fragility in the US dollar, concerns over potential inflation are factors that might see gold being very volatile at higher level. Short – term market participants have decided to liquidate their gold holdings before the Chinese New Year. They prefer not to have any position over the long weekend. Besides the said factors, gold held near $910 an ounce after Thursday’s news that producers were reducing their hedge books.

World stocks hit high on Monday and emerging market assets rallied as last week’s news of major company deals that eased concerns about the credit crisis might be hurting corporate and economic activity. Optimism has grown since Friday’s news that China teamed up with US aluminium producer Alcoa to buy a $14 billion stake in Rio Tinto and a move by Microsoft to bid $44.6 billion for Yahoo. The dollar was relatively stable after being curbed last week by the bearish impact of the interest rate cut and weak economic data. The Bank of England cut interest rates to 5.25 percent on Thursday and the European Central Bank held interest rates at 4.0 percent on Thursday, as expected. The euro dropped against the dollar on Thursday after European Central Bank President Jean Claude Trichet said euro zone growth risks are to the downside, paving the way for lower interest rates this year. The euro is now on track for its biggest weekly decline against the dollar in two and a half years. In contrast to the United States, Canada and Britain, the ECB has not yet gone down the path of cutting interest rates due to price pressures in the 15 countries using the euro. In January, euro – zone inflation hit a record high. Recent signs of staggering growth in Spain, Italy and elsewhere in the bloc, suggest the ECB may soon have to switch its attention to supporting the euro zone economy. The euro remained under pressure against the dollar after Trichet’s speech and was little changed from late US trade on Thursday at $1.4475

Oil rebounded more than a $1 to over $90 a barrel on Monday as dense sea fog slowed crude imports into the Houston Ship Channel, the waterway to the busiest US petrochemical port. Disruptions to imports into the Houston Ship Channel can lead to sharp downs in commercial crude inventory levels and can occasionally force oil refiners to slow output. Adding some support on Monday, the White House said it would spend some $584 million by the end of September to buy crude oil for the Strategic Petroleum Reserve. Forecasts for normal or slightly above normal temperatures in the US Northeast for the next six to 10 days were also keeping oil prices stable. The fear of a US recession that could dampen oil demand in the world’s top consumer was keeping prices well below the record high of $100.09 hit at the start of this year. The US Northeast next week looks to be cold, therefore oil may get a boost. Prices had also been supported by production shutdowns in the North Sea and in Nigeria, where Royal Dutch Shell said on Thursday it was halting 130,000 barrels per day because of pipeline leaks. World oil demand growth is set to lose momentum in 2008 as high prices and an economic slowdown in industrial nations hit demand.