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Gold Fell Sharply in Dollars but not in Euros and Pounds

Commodities / Gold & Silver Aug 14, 2008 - 07:21 AM GMT

By: Mark_OByrne

Commodities Gold finished trading in New York on Friday at $825.50, up $15.80 and silver was up 37 cents to $14.81. Gold continued to rise in Asian and early European trading and is trading at $831.80/832.40 per ounce (1200 GMT).

The much anticipated bounce in gold occurred yesterday and continued overnight as the dollar weakened and oil prices firmed again.


Since the start of the credit crisis, one year ago, gold remains up 27% (from $650 to $830). It has thus outperformed all major equity indices all of which are down some significantly since the start of the credit crisis (see table).  With no end in sight to the credit crisis indeed there are many indications that conditions could deteriorate even more in the coming months, investors should be mindful of gold's outperformance and continue to focus on the long term. Risk aversion and wealth preservation should continue to be pursued.

Gold Fell Sharply in Dollars but not in Euros and Pounds
The recent sharp dollar rally is a contributory factor in gold's recent steep sell off. However, it is important to realize that the dollar's strength was more a function of concerns regarding the UK, Eurozone and global economy rather than any particular sudden confidence in the US economy and the US dollar.

This is reflected in the price of gold in terms of other major currencies including the euro and the pound.

British pound gold has only fallen from just over £500 in March to £444 pounds today or a decline of less than 13%. Euro gold has only fallen from €650 to €558 or less than 9% in the period.

Both charts look very healthy from a technical point of view and after healthy consolidations look set to continue their bull market in the coming months.

As central banks internationally are pressurized by inflationists (those who believe inflation is a not a bad thing and fail to realize the greater risks of stagflation and hyperinflation) to decrease interest rates to combat decelerating economic growth and clamoring for competitive currency devaluations, gold and silver will likely move up as strongly in euros and pounds in the coming years as they have already done in US dollars.

This is especially the case as the UK and Eurozone economies are increasingly being affected by stagflation which looks set to deepen in the coming months. Geopolitical risk is also being underestimated by markets and the increasing Cold War feel to relations between Russia and the West is likely to also dampen animal spirits in the coming months. Especially as Europe and the UK are massively dependent on Russian natural resources and a significant deterioration in relations could see more resource nationalism and the Kremlin using their resources as leverage against the UK and European countries this winter.

Today's Data and Influences
Today sees the release of US CPI figures for July and further signs of stagflation may be revealed. Economists expect a 0.4% rise compared with a 1.1% rise in June.

Gold and Silver
Gold is trading at $831.10/831.60 per ounce (1200 GMT).
Silver is trading at $14.86/14.90 per ounce (1200 GMT).

PGMs
Platinum is trading at $1503/1510 per ounce (1200GMT).
Palladium is trading at $319/323 per ounce (1200 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 and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
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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