Buy This Gold Dip As $2,000/oz Possible

By: GoldCore

Gold’s London AM fix this morning was USD 1,636.00, EUR 1,243.16, and GBP 1,035.97 per ounce. Yesterday's AM fix was USD 1,656.00, EUR 1,248.21 and GBP 1,042.95 per ounce.

Silver is trading at $31.80/oz, €24.17/oz and £20.14/oz. Platinum is trading at $1,617.50/oz, palladium at $669.75/oz and rhodium at $1,425/oz.

Cross Currency Table – (Bloomberg)

Gold rose 0.08% or $1.40 in New York yesterday and closed at $1,649.30/oz. Gold traded flat in Asia overnight and fell in European trading which now has gold now trading at $1,638.23/oz.

Gold has broken below recent support at $1,640/oz and reached as low as $1,632.45/oz this morning - below its recent low and its lowest price since January 16. Gold looks like it will go lower on technical weakness and the next level of support is $1,600/oz. Below that again support is at $1,523/oz - the low seen December 29.

Gold 1 Year - (Bloomberg)

Gold may be supported at these levels as demand in India is expected to increase due to the 5 day closure of jewelry shops which has led to pent up demand on the sub continent.

Gold is also likely to be supported by inflation pressures. Fed Chairman Ben Bernanke said before congress that rising oil prices could lead to “short-term inflation pressures”. Retail-gasoline prices have skyrocketed 18% this year to a 10 month high of $3.864/gallon.

Higher fuel costs “act as a tax on household purchasing power and reduce consumption spending, and that also is a drag on the economy”, the Fed chief said to the House Committee on Oversight and Government Reform.

Bernake also warned that Europe must further support its banks, and warns its financial and economic situation ‘‘remains difficult,’’ even as stresses have declined.

The global economy remains on shaky ground. China’s manufacturing activity contracted for its 5th straight month, the US recovery is still very early to call, and the euro zone debt crisis may not be finished. Eurozone PMI data is due later today which will show how the economy is doing after Greece averted default earlier this month.

Thomson Reuters GFMS have said that gold at $2,000/oz is possible - possibly in late 2012 or early 2013.

Thomson Reuters GFMS Global Head of metals analytics, Philip Klapwijk, featured on Insider this morning and advised investors to "buy this gold dip”.

Gold should be bought on this correction especially if we go lower still as we may need a shake-out of "less-committed investors."

Klapwijk suggested that a brief dip below $1,600 is on the cards but the global macro environment still favours investment, notably zero-to-negative real interest rates and he would not rule out further easing by either the ECB or the Fed before year end.

The Osborne gold comments were gold friendly despite the UK Treasury denying that the UK has any plans to rebuild their gold reserves.

Osborne was obviously scoring cheap political and economic points at his predecessor Gordon Brown and the opposition Labour party. However, the comments underlined the increasing importance of gold reserves to all nations - especially one's whose credit ratings are at risk due to appalling fiscal situations.

While the UK adding to its gold reserves seems a remote possibility now it is a possibility as gold reserves would help protect sterling from a currency crisis. Also, most of the UK's current foreign exchange reserves are in fiat currencies which also face the risk of devaluation in the coming years.

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Yours sincerely,
Mark O'Byrne
Exective Director

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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