Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
Will Biden’s Neo-Populist Economic Doctrine Support Gold? - 25th Sep 21
Markets Deflationary Winds Howling - 25th Sep 21
Crude Oil Price Piercing the Sky: Where Will We See the Black Gold by Xmas? - 25th Sep 21
Cryptocurrency policy choices and consequences - 25th Sep 21
The Next Emma Raducanu UK Tennis Star Pleasing the Crowds at Millhouses Park Sheffield - 25th Sep 21
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Breaks Above Psychological Level of $900 - Short-term Correction Expected

Commodities / Gold & Silver Jan 14, 2008 - 10:21 AM GMT

By: Gold_Investments

Commodities Gold's strong performance continued last week and gold was up $4 to $894.90 per ounce in trading in New York on Friday and silver was up 8 cents to $16.23 per ounce. Gold was thus up 3.5% for the week and silver surged 6% breaking long standing overhead resistance to reach new 27 year highs.


Gold has again risen in Asia and early European trading and the London AM Fix was at a new record high of $911.50 (up from $887.85). The psychological level of $900 has now been attained and a correction and consolidation is likely. However, given the deteriorating economic situation in the U.S. and many economies internationally the safe haven flight to gold we have witnessed in recent weeks could continue and accelerate. Analysts and traders are already looking to the next even bigger psychological level of $1,000 per ounce as a likely price target. This new price target could be reached earlier in 2008 than most have anticipated. Traders and analysts like big round numbers (witness $100 a barrel oil) and thus $1,000 could prove a similar magnet to traders.

Gold surged to new records in other major currencies. At the London AM Fix gold was trading at £464.32 (up from £457.56 Friday) and €612.16 (up from €604.74 Friday). The notion that gold is being bought because it is 'cheaper' to holders of other currencies is a missapprehension and is wrong. Gold is surging in all currencies and this shows that gold's strength is not primarily a function of dollar weakness. All major currencies are weakening against gold. In the last 5 years, the euro is only up some 40% against the dollar whereas gold is up by more than 150% against the dollar. Or to put it more accurately the dollar is down by 40% against the euro but the dollar is down by some 150% against gold. Since 1999, gold has risen by some 140% in euro terms - from €250 to over €600 today. Since 2001, gold has risen some 170% in british pound terms - from £170 to £464 today.

Expectations that the Federal Reserve will aggressively cut interest rates despite inflationary pressures will likely support gold and result in any correction being short and shallow.

The Week Ahead
A 0.50% cut at the next meeting is now expected and with the ECB continuing to make hawkish sounds the dollar looks set to continue to weaken. There is a raft of important data this week with PPI, CPI and retail sales for December. Key housing markets reports are also scheduled and are expected to show deteriorating conditions in this sector. Latest industrial production figures are released and perhaps the most important data may be the net capital inflows reports. Also, there is important quarterly results in the U.S. and there is likely to be news of further fallout from the credit crisis with rumours that Citigroup alone may be about to announce another $24 billion in writedowns.

Large Capital Flows into Commodities to Continue
These inflationary pressures are leading to retail, institutional and pension fund investment in commodities. This diversification into commodities is expected to continue in 2008 and in the next few years as the very small allocations to commodities are increased. Globally only some $110 billion to $130 billion is vested in assets tracking commodities and many funds have less than some 1% to 2% vested in commodities. Some have no allocation whatsover to commodities and it is estimated that some $1 in every $1,000 of international investment capital is invested in commodities or some 0.1%.

Calpers, the largest U.S. public pension fund, said last month that they are widening their asset allocation for its $250 billion portfolio and will invest more money in inflation linked assets such as commodities. Ruth Sullivan in the FT reports that Calpers is devoting $13 billion or 5% of its portfolio into the category. ABP, the large Dutch pension fund, which was one of the first Dutch pension funds to invest in commodities in 2001, has increased its allocation in commodities from 2.5% to 3% in its strategic investment plan for 2007-2009. ABP like commodities because "they are a good diversifier in a portfolio" and "comparable to other asset classes, tend to have a relatively high correlation with inflation, which is beneficial for a pension fund with indexed liabilities such as ABP."

Support and Resistance
While gold's fundamentals remain very sound in the medium to long term, in the short term we may be overbought and thus we could experience a healthy short term correction. Support is at previous resistance at around $840 to $850, below that at the 50-day moving average at around $820. However, traders and investors would be wise to continue to 'make the trend their friend'. Especially in the current macroeconomic and geopolitical climate.

Markets had anticipated $900 per ounce and now analysts are looking forward to the $1,000. There may well be a short term correction however $1,000 now seems more likely in the first half of 2008 than in the second half.

FX
The combination of a hawkish ECB and a dovish Federal Reserve help lift the euro back above 1.4900 since last week. Traders will now start to eye the November 23rd all time high for the single currency against the greenback of 1.4965. Current momentum suggests that a breach the psychological level of 1.5000 is imminent. However, it is not just against the U.S., dollar that the Euro is appreciating, as new lifetime highs have been set against sterling too. At the time of writing the Euro is trading against the Pound at just below 0.7600 and now opens up an intermediate target of 0.7700.
While the Euro has remained relatively strong against the Japanese yen, both the U.S. dollar and sterling have weakened considerably against yen. This is driven by the mounting negative economic sentiment for both economies and the resulting outlook for interest rates. The carry trades which have been popular over the past number of years saw investors borrowing currencies with low interest rates (yen and Swiss francs) and investing in assets in higher yielding currencies. As the interest rate differential now looks to narrow and volatility increases a large proportion of these “carry trades” will have to be unwound, ultimately resulting in further yen and Swiss franc appreciation against the U.S. dollar, sterling and the euro.

Silver
Silver has continued to surge and rallied to $16.49/16.51 at 1130 GMT. Silver is now in unchartered territory from a technical point of view. Technicians will look to the nominal high in 1980 at $50 per ounce as a possible long term price target. Given the extremely strong supply/demand fundamentals in silver we continue to believe that silver will likely outperform every other commodity and outperform gold and the other precious metals - http://www.gold.ie/Articles_of _Interest/AOI_08-05-07_Why_the _Silver_Price_Is_Set_to_Soar .htm .

PGMs
Platinum was trading at $1585/1590 as per above (1130 GMT).
Palladium was trading at $380/385 an ounce (1130 GMT).

Oil
Oil is largely flat in European trading and NYMEX light sweet crude oil (FEB08) was trading at $92.71 a barrel.

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@goldinvestments.org
Web www.goldinvestments.org

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.

Fair Use Notice: This newsletter contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of financial and economic significance. At all times we credit and attribute the copywrite owner and publication.
We believe this constitutes a 'fair use' of any such copyrighted material as provided for in Copyright Law. The material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for economic research purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

Gold Investments Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in