Oil price rallied to as high as 48.59 Monday after better-than-expected existing home sales and leading indicator were released in the US. However, profit-taking made the black gold continue to falter below key near-term resistance at 50.47 and finally close at 45.62.

Existing home sales in December rose unexpectedly by 6.5% to an annualized 4.74M units from 4.45M units as 3 out of 4 major regions saw increases in sales. Leading indicators rose for the first time in 6 months by 0.3% in December. However, the main reason for the rise was a 0.99% increase in M2 money supply brought by the Fed's liquidity-pumping acts. Therefore, it's not yet time to say the US' economy is recovering.

Today in Asian morning, the benchmark contract changed little as investors are weighing demand destruction against OPEC's further output reduction. Yesterday, Venezuelan President Hugo Chavez, the usual oil price hawk, said that OPEC may need to further reduce production by 4M bpd. The cartel, controlling 40% of the world's oil supply, announced a 2.2M bpd cut in output in December 2008. Members are scheduled to meet again in March, though an emergent meeting before that is not impossible.

Gold price remained upbeat as investors seek inflation-hedge and safe haven. The February contract rose to 916.3, the highest level since mid October, and closed at 903.4, a gain of 5.2% throughout the day. The precious metal's near-term target is to re-test October's high at 936.3.

The dollar lost ground yesterday and today because good economic data increased risk-appetite and investors fled to higher-yield currencies such as Aussie and Kiwi. The dollar index plunged to 84 level yesterday and remains weak today. The rebound from 77.9 in mid-December may have ended at 86.81 2 days ago if the gauge dropped below 83.

USD's strength since the second half of 2008 was due to short-term interest-rate spreads (the Fed fund rate is virtually at 0%, its downside risk is limited while there are much rooms for other central banks to cut interest rates until they approach 0%) and risk aversion. However, the government's liquidity-injection plans are inflationary and eventually will cause the dollar to weaken and gold to rally in the long term.

Analysts from Deutsche Bank said last Friday that they forecast fold price to average $975/oz in 2Q09 with possibility to surge to $1000/oz.