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Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Grim Economic Outlook Drives Gold and Equities Lower

Commodities / Gold & Silver Jul 08, 2008 - 10:58 AM GMT

By: Mark_OByrne

Commodities Gold finished trading in New York yesterday at $925.90 , down $6 and silver fell to $17.85 , down 43 cents . Gold then sold off somewhat in the New York Globex electronic market before rising again in Asian and early European trading to over $930 per ounce. A lessening likelihood of a military confrontation with Iran contributed to the fall in oil and gold's slight sell off.


However, risk aversion is reasserting itself with the ominous news regarding the U.S. financial sector. Fannie Mae and Freddie Mac face further writedowns and likely need fresh capital infusions and Lehman Brothers may also need to raise more capital. These issues led to weakness in equity markets in the U.S. , Asia and saw sharp falls in Europe this morning.

The FTSE was not helped by the British Chambers of Commerce stark warning that Britain's current economic situation is "grim and ominous". Nor was it helped by the Royal Bank of Scotland report which said that an expected 20 per cent drop in house prices over the next two years could destroy up to 100 per cent of the value of land banks held by Britain's embattled housebuilders, threatening their very survival. Royal Bank of Scotland  predict a 70 per cent fall in land prices, compounding even bleaker outlooks from Merrill Lynch and Cazenove over the past week.

Oil is flat < $141.30- Light Sweet Crude Oil Future - AUG08> after yesterday's fall in price and the dollar has not moved against the euro after yesterday's fall < 1.5726 > and thus gold will likely seek direction from equity markets. Gold's inverse correlation to equity and bond markets over the medium to long term has clearly been shown in recent months and this inverse correlation will likely continue in the coming months.

Safe haven buying on continuing financial and economic worries will continue and should increase as there are  real and genuine concerns of another Bear Stearns situation developing with obvious attendant systemic risks . In just two months, the price of buying insurance against the default of large regional banks has more than doubled.

Gold tested the 100 day moving average at $915 yesterday and as posited yesterday it proved strong support and $915 and $900 should continue to provide strong support.

Today's Data and Influences
Fed eral Reserve  Chairman Ben Bernanke will speak today  but he is expected to confine his comments to financial market regulation. As there is  little economic data of note today the market will continue to watch oil for the dollar's near-term direction.

Data out of the UK continue to disappoint. The most recent survey shows UK firms are facing the worst cash flows on record showing a real risk of recession.

Silver
Silver is trading at $1 7. 80 /1 7. 8 2 per ounce (1 1 00 GMT).

PGMs

Platinum is trading at $ 19 88 / 19 98 per ounce (1 1 00 GMT).
Palladium is trading at $4 47 /45 1 per ounce (1 1 00 GMT).

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
Tower 42, Level 7
25 Old Broad Street
London
EC2N 1HN
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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