1. Dollar Continues to Dive
2. Survey: Gold Prices May Rise as Inflation Hedge

1. Dollar Continues to Dive

With U.S. trade figures due out on Tuesday and forecast to show the deficit widened to $59 billion in February, the country's second biggest on record, the dollar took another dive Monday.

Reuters noted that the dollar this year has gained over four percent against the euro and five percent against the yen as hawkish comments from the U.S. central bank and signs of economic recovery have bolstered expectations of higher U.S. rates.

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But despite the Federal Reserve move, the dollar continues to remain weak against other global currencies.

This means the Fed will have to continue raising rates to make the U.S. debt attractive to foreign purchasers.

More pressure for higher U.S. rates may come from Europe.

All 25 European Union finance ministers will meet this Tuesday. In a bidding war to keep the euro stronger than the dollar, expect interest rate increases from the EU.

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2. Survey: Gold Prices May Rise as Inflation Hedge

Bloomberg reports that gold may rise for a third week on speculation accelerating inflation will boost the allure of the precious metal as a hedge.

Twenty-two of 43 traders, investors and analysts surveyed April 7 and April 8 advised buying gold futures for April delivery, which rose 50 cents last week to $428.80 an ounce on the Comex division of the New York Mercantile Exchange. Eleven recommended selling the metal, and 10 were neutral.

"High inflation is inevitable, and that will eventually benefit gold," said Stephen Leeb, president of New York-based Leeb Capital Management Inc., which oversees $110 million, including 5 percent in gold equities. Higher prices for airline tickets "or what you're paying at the gas pump: That's just flat - out inflation, and we're seeking hedges," he said.
 
The gain in gold futures last week was expected by the majority of analysts in a survey March 31 and April 1. Prices gained $3.50 the previous week. Gold reached a 16-year high of $458.70 on Dec. 2 in part because U.S. consumer prices rose 3.3 percent in 2004, the most in four years.

Despite Federal Reserve efforts to contract inflation with interest rate increases, the move may be too little too late.
As the dollar continues to slip this week, gold may find another reason to bounce.

More favorable gold news: Bloomberg reports "on speculation the U.S. will veto any attempt to sell gold owned by the International Monetary Fund, the third-largest bullion owner after the U.S. and Germany."

"The IMF owns 2.1 percent of the world's bullion, worth about $44 billion at current market prices. The fund has kept the value of its gold at less than $41 an ounce since 1971. A revaluation would enable the IMF to forgive debts or suspend loan repayments to combat poverty in Africa."

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