By Kishori Krishnan Exclusive To Gold Investing News

There is only one question doing the rounds – Will US President-elect Barack Obama be able to arrest the root of terrorism?

Obama’s tacit admission that “My administration will remain steadfast in support of India’s efforts to catch the perpetrators of this terrible act (the Mumbai terror attacks) and bring them to justice” has spurred talks that the U.S. is clearly with India in its hunt for killers.

Secretary of state Condoleezza Rice, who is reaching India’s capital New Delhi on Wednesday, to try and lower tension between India and her neighbors has maintained that, “this is a time for complete, absolute, total transparency and cooperation.”

But a major crisis could well be a lot closer than many people believe possible.

The ‘right’ trade on the India attacks would be two-fold: long gold, short oil. Oil could suffer because the attacks could impair growth in India. As the Indian economy is hurt by these attacks, it dampens demand even more.

Gold gets more attractive if one thinks that the terror attacks are a sign of things to come. Gold is a safety play. It is real. It also tends to move in line with crude because it is bought as a hedge against oil-led inflation.

In the US, trade in both gold and oil have been muted somewhat by the recent rise in the dollar and the fear of deflation. But gold could shoot up and oil collapse if the attacks in India are followed up by others or if they spark more tension between India and her neighbors.

On Monday, gold futures finished sharply lower in the US, pressured by tumbling oil prices and firmness in the U.S. dollar, as other metals also posted steep losses. The contract hit an intraday low of $769. Gold fell “on sharply lower oil prices and the dollar remaining firm after strong gains at the end of last week,” said Mark O’Byrne, executive director at Gold & Silver Investments Ltd.

Federal Reserve Chairman Ben Bernanke said that the Fed has lowered interest rates just about as far as they can go, but the U.S. central bank still has plenty of available firepower it could deploy to restore financial markets to normal.

That statement did not improve sentiment though. Precious metal prices fell across the board, with gold and silver hitting 10-day lows on Monday. Gold slipped nearly 5 per cent to its weakest level since November 21, while platinum and palladium tumbled 8 per cent as investors fretted over the outlook for demand.

The US stock market suffered one of its worst days since the financial meltdown, say AP, slicing 680 points off the Dow Jones industrial average, as Wall Street snapped out of its daydream of a rally and once again faced the harsh reality of a recession. The Dow closed at about 8,149. There have only been three days in market history with bigger point losses for the Dow — the Monday after the Sept. 11 attacks, and Sept. 29 and Oct. 15 of this year.

In a bid to boost demand, Treasury Secretary Henry Paulson said the Bush administration is looking for more ways to tap the $700 billion financial rescue program and will consult with Congress and the incoming Obama administration.

Diamantaires safe

The landmark Taj Mahal Palace, one of the several buildings in Mumbai, the financial capital of India, under attack by terrorists, was hosting a Diamond Trading Company (DTC) event. Diamantaires were also staying at the Oberoi Hotel Mumbai which was under attack. Everyone is reportedly safe. According to Stephanie Piper, spokesperson for London-based H. Goldie & Co., a number of diamantaires were in India for year-end meetings with the DTC. The Taj Mahal Palace is one of the most well-known hotels in India and is a popular spot for members of the jewelry industry.

Company News

Hawthorne Gold Corp., a Canadian-based gold exploration and development company with key properties located in British Columbia, Canada, announced it has closed a $633,500 non-brokered private placement. Hawthorne (TSX: HGC.V) said the proceeds from the Offering would be used to fund the Company’s 2009 field work on its projects in British Columbia.

Cogitore Resources Inc. (TSX: WOO) reported exciting results from its wholly owned Scott Lake Property near Chibougamay, Quebec. Hole SC-34 intersected three mineralized stratigraphic horizons, including a new horizon that assayed a spectacular 23.31 per cent zinc over 17.9 meters at a vertical depth of 400 meters, and 32.7 meters of 2.05 per cent copper and 6.57 per cent zinc which includes 13.4 meters of 3.73 per cent copper and 4.54 per cent zinc. Company president and CEO Gerald Riverin said: “We are pleased to see elevated gold and silver values with the base metals, as this is the first time we have seen such combined precious metal content.”

Hawthorne Gold Corp. (TSX-V:HGC) and Eureka Resources Inc. (TSX-V: EUK) have announced results from the first five diamond drill holes of the 2008 exploration program, consisting of 58 holes completed on the Frasergold property, which is located in the Cariboo Gold District of Canada. Of the 58 DDH, a total of 31 DDH intersected quartz/carbonate boudinaged ribbon vein systems containing visible gold. “The Frasergold property holds the potential for a significant gold resource,” commented Richard Barclay, president and CEO of Hawthorne.