Gold Continues to Surge to New Highs Against All Currencies

By: Gold_Investments

Gold
Gold was up $8.80 on Monday from $748.10 to $756.90. It has rallied in Asian and early European trade to fresh 28 year record highs and was trading at $762.00/ 762.50 at 1200 GMT.

Gold continues to surge in terms of all currencies and is trading at €536.59 (from €530 yesterday) and £373.82 (from £370.41 yesterday). Gold is only a few pounds below its all time high in GBP of £380 reached in May 2006 and is up by more than 105% in GBP terms since January 2001. With central banks wanting to keep their currencies undervalued relative to other currencies there are increasing concerns of competitive currency devaluations.

In order to see how all currencies are now falling in value in terms of gold:
http://www.gold.org/value/stats/statistics/dailyshort2000.html
Safe haven buying is contributing to a further increase in gold prices with the new Turkish-Iraqi dimension to geopolitical instability in the Middle East. Oil prices surged to new record highs and the NYMEX October contract reached as high as $87.95 late this morning. Oil is up due to the rising tensions between Turkey and Iraq, and deteriorating relations between Turkey and the U.S. Washington sent envoys on a surprise visit to Ankara this weekend, to urge restraint, as the Turks threaten to attack Kurdish separatists in Northern Iraq.

The deterioration in relations between Turkey and Iraq seems to be more than the usual storm in a teacup. Bloomberg reports that the Turkish Prime Minister Recep Tayyip Erdogan said he expected parliament to meet tomorrow and approve a possible military incursion into neighboring Iraq. There is a "common will'' among lawmakers to sanction the cross-border attack, which Turkey may implement under international laws governing self-defense, Erdogan told a meeting of his lawmakers at the assembly in Ankara today. The Turkish government is threatening to send troops into Iraq, saying U.S. and Iraqi forces have failed to act against about 3,500 militants from the PKK, or Kurdistan Workers' Party, sheltering there.

- Many analysts continue to point to the Commitments of Traders report as an indication that gold is overbought in the short term. At first glance and superficially this appears to be the case but it may not be. The COTs showed a similar structure in September 2005 when gold rallied from $450 to $730 by May 2006. The same may happen again and a pullback may not come until gold reaches $800, $850 or higher.

Dan Norcini, writing in Jim Sinclair's informative JS Minesite writes that, "what these numbers tell us is that the longs are currently in control of the gold market and are driving the bears out from behind their successively higher defense lines. Top pickers continue to come in and they continue to get beaten back as buyers are currently in no mood to run. They are adding on each time the market experiences a short term pull back. This is classic bull market price and open interest action."

Successful traders make the trend their friend and the gold's trend remains firmly up. Norcini writes "there is an old adage among those of us who have learned the hard way trying to impose our will on the markets.

– “Top pickers and bottom pickers eventually become cotton pickers. We have learned to listen to the market and ignore everyone else." Wise words indeed.

There is the potential for a massive gold short squeeze when the large speculators with massive concentrated short positions find their positions under water and incurring huge losses decide to cut their losses and close out and buy back their huge short positions thereby propelling the gold price towards a four figure price.

- News that the Japanese investment public with their huge surplus of savings is entering the gold market is very bullish. The Telegraph reports that gold has soared to a fresh 28-year high of $760 (£372) an ounce on fears of global currency disorder and a surge of buying by Japanese investors using trading signals and sophisticated charting techniques. "Traders report a sudden burst of activity on the TOCOM gold futures markets in Tokyo as the price breaks through the psychological barrier of 3,000 yen (£12.52) per gramme, the measure used by the Japanese to trade gold. The country's irrepressible grannies rely heavily on Ichimoku "cloud charts", multi-faceted indicators designed to give support/resistance levels in various markets, which have issued a powerful buy signal in recent days. John Reade, head of precious metals at UBS, said the Japan can be a major driver of the gold price. "Japanese buying can come out of the blue, but it is too soon yet to tell whether they are about to take over the gold market," he said. "When the Japanese public move in with reckless abandon, everybody else gets out of the way."

- The IMF chief commented that the dollar is likely to fall further and this is bullish for gold. After a week of saying the dollar had fallen too far recently, International Monetary Fund chief Rodrigo de Rato now says the dollar has more room to fall over the next several years. Over the "medium term," which is three to five years in IMF parlance, "we still see room for further depreciation," Mr. de Rato said. The euro, he said, is "very near" its equilibrium value. Mr. de Rato first said the dollar had fallen too far last week in an interview with the Financial Times. He repeated that in Madrid and in a session with The Wall Street Journal. He said he was referring to the decline of the dollar compared with a "weighted" average of currencies over the past several years. The dollar gained slightly against the euro after his remarks.

Forex and Gold
The USD has strengthened and is trading at 1.4154 (from 1.4240 yesterday) and 2.032 (from 2.0405 yesterday) against the EUR and the GBP respectively.
This morning the U.S. dollar is up to 78.20 (from 77.98 yesterday). Support is at its all time record low at 77.657. Should support fail at this level the dollar will likely sell of aggressively to 75.00.

Silver
Spot silver was trading at $13.63/13.65 (1200 GMT).

PGMs
Platinum was trading at $1410/1416 (1200 GMT).
Platinum should remain elevated due to the continuing concerns regarding supplies from South Africa and continuing strong global demand.
Spot palladium was trading at $364/368 an ounce (1200 GMT).

Oil
The oil price spike to new record highs (NYMEX October contract reached as high as $87.95 late this morning) was not solely due to the Turkey-Iraqi tension. OPEC raised its forecast for oil demand during the coming winter in the northern hemisphere. It predicted in its monthly oil market report that demand would hit 31.4 million barrels a day in the fourth quarter, up 100,000 barrels from a previous estimate, and rise early next year as well. This, despite a deteriorating housing market in the United States that has roiled global credit markets. Also there is a developing cyclone in the Gulf of Mexico.

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