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Gold Strong Bull Market in Pounds and Euro

Commodities / Gold & Silver Nov 26, 2008 - 11:49 AM GMT

By: Mark_OByrne

Commodities

Gold was largely unchanged yesterday after rallying to as high as $830 and has traded sideways in Asian and early European trading.

Open interest levels in gold and silver on the COMEX have fallen to extremely low levels showing that nearly all the speculative froth has been liquidated and remaining longs are "strong hands". The gold open interest fell a very sharp 5533 contracts to 282,978 which is a new low and low levels such as these usually portend lows in the gold price and subsequent rallies.


Gold has rallied by $135 per ounce in recent days and yet the open interest has gone down showing that much of the move was created by shorts closing their positions. This will encourage more long interest to enter the market and should contribute to markedly higher prices in the coming weeks.

Especially as the supply demand situation remains extremely bullish with gold mine supply continuing to fall, western central bank gold sale supply falling and with investment demand and central bank demand (particularly creditor nations such as Russia and China) continuing to increase their gold holdings (see http://blog.goldassets.co.uk).

Quantitative easing, humongous money printing and the massive injection of trillions of dollars, pounds, yen, euro and other fiat currencies into the global economy is very bullish for gold in the medium to long term as the purchasing power of all fiat currencies is likely to fall sharply in the coming months and severe inflation will likely ensue once the vicious deflation seen recently abates.

An example of one such currency that is already coming under significant pressure is the British pound which has fallen sharply in recent months. The dollar has rallied on massive deleveraging and dollar debt liquidation in recent months – this has seen the euro and sterling fall sharply against the dollar. Since gold surged to record highs of $1,030/oz at the outset of the crisis, gold priced in dollars has fallen some 21% (from $1030 to $816). But it is important to remember that the euro fell 18% and the pound by an even larger 22% against the dollar.

Stock markets have fallen far more sharply with many down by more than 35% as seen in our performance table and by even more when calculated (as they should be) in local currency terms.

So while gold has fallen from record highs by some 21% against the strongest currency in the world in recent months – other currencies have fallen by as much or by far more (eg. Iceland and other emerging markets). Gold priced in pounds, euro and other currencies has rallied to new record highs and thus non US based investors have been doing very well in recent months despite the financial and economic crash.

Since January 2nd 2008, gold is up 10% in euro terms and 26% in pound sterling terms (EURGOLD €573 to €630 and GBPGOLD £424/oz to £534/oz ) proving once again that gold remains an important diversification and an important safe haven asset in the medium to long term.

Gold has done exactly what it should do in a financial and economic crisis – it has outperformed other asset classes and preserved the wealth of those who have prudently diversified.

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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