Gold falls as money supply surges

Gold continued to fall from the London PM Fix at $619.25, lacking direction from the currency markets – and also lacking gold dealers at their desks to do any gold deals.

Christmas started last week judging from the action in London and the Comex today. It's silly season for currency analysts, too.

"The Fed is not going to drop rates," said one analyst in Illinois after US producer price inflation was reported at a 32-year high yesterday. "The Dollar will remain steady and gold will eventually come down..."

Speaking to the European Parliament, meantime, Jean-Claude Trichet – head of the European Central Bank (ECB) – said Eurozone inflation is likely to rise in 2007. His comments saw the Euro rise to a fresh record high versus the Yen...

And Sterling today hit a two-week high against the US Dollar, driving gold lower for British investors even as the Bank of England revealed that its policy committee voted unanimously to keep rates at 5.0% when they met earlier this month.

"Sterling sentiment is still strong overall," said a currency strategist at HSBC, noting the sharp rises reported today in retail sales (the fastest in 2 years) and net mortgage lending (fastest monthly growth on record).

Little-reported by the mainstream financial press, all this spending and home-buying took new borrowing by the private sector in Britain up 16.4% in November from 12 months before. That's the fastest rate of growth in new debt since August 1990, according to the Bank of England's data.

And yet the BBC still has to ask on its website: "Why is it so expensive to buy a house?"

Maybe Mervyn King or his friends Jean-Claude Trichet and Ben Bernanke can answer that! And to find out what the flood of money pushing all boats higher means for volatility in the global financial markets, click here and read on...