Gold Gains with Dollar as Long-Dated Bonds Fall on Fed Minutes, Auction Fears & Obama's New Housing Plan

From Chris Mullen at GoldSeek.com...

Gold traded higher in Asia and London on Wednesday, dipping $6.50 to $960.40 an ounce by the New York open, but then racing higher for the rest of the day.

Ending near its high of $977.77, Gold Bullion finished with a gain of just over 1.0%, adding to its increase in after-hours access trade.

Data showed new housing starts in the United States falling in Jan. to a record low on the official series at 466,000 annualized. Building permits also fell sharply, while Industrial Production sank 1.8% on top of Dec.'s 2.4% loss.

President Obama unveiled a new $275 billion housing plan, aimed at cutting mortgage payments for up to 9 million struggling buyers to stem foreclosures, as well as expanding the role of ex-private, now government-owned agencies Fannie Mae and Freddie Mac.

Minutes from the Federal Reserve's Jan. 28th meeting showed the Fed thought the US economy was weakening further, and that a gradual recovery isn't likely until the second half of 2009.

Capacity Utilization for Jan. was reported down at 72.0%. US import prices fell 1.1% overall, but the price of US exports rose unexpectedly, adding 0.5% against analysts' predictions of a 1.0% drop.

Oil fell slightly as more bad data reinforced expectations for a further fall in demand.

The US Dollar index found slight gains and Treasuries dropped while the major US stock indices ticked lower.

The Gold Price in Euros rose to a new record high above €777 an ounce, platinum gained $4.50 to $1089.50, and copper rose slightly to about $1.43.

Gold Mining and silver equities fell over 3% in the first half hour of trade, but they quickly rebounded and climbed steadily higher to end the day almost 2% up.

Silver rose 34 cents to $14.34 in Asia before it fell back to unchanged a little before 08:00 in London. Silver it then rallied back higher in New York and touched $14.34 again before closing with a gain of 2.3% for the session.

Thirty-year Treasury bonds dropped within minutes of the Fed minutes' release, as officials agreed to wait before buying government bonds as part of its "quantitative easing". On Thursday the Treasury will announce next week's auctions of short- to medium-term notes, likely totaling $97 billion according to analysis from Wrightson ICAP.

The US central bank also took a step toward setting a target for inflation as its main policy goal when chairman Ben Bernanke - in a speech to the National Press Club –said the Fed will publish projections beyond the current three-year forecast horizon.

Thursday at 13:30 GMT brings Initial US Jobless Claims for last week, expected at 615,000, plus Producer Price Inflation for last month – expected up by 0.2%.

At 15:00 GMT the US Leading Economic Indicators report for Jan. is expected to come in flat, while the Philadelphia Fed survey is expected at -25.0.