Gold Investments Market Update

By: Mike_Clark

Mark O'Byrne writes: Spot gold was trading at $668.00/668.50 an ounce as of 1215 GMT.

Gold has traded sideways to slightly up in Asia and Europe after yesterday's very slight sell off.
Previous resistance at $660 is now the first level of support and very strong support is seen at $640. The next level of resistance is at $675 which we believe will be challenged in the coming weeks in gold's seasonally strong period.

Risk aversion is increasingly the order of the day due to deteriorating US housing market which resulted in falls in stock markets in the US, and some Asian and European stock markets this morning. Further weakness in the USD, due to the likely reduction in interest rates, will likely be supportive of gold (see FX Commentary below).

News of the new Japanese Gold ETF indicates that investor appetite for gold remains good. The ETF is the first of it's kind in Japan and according to sources familiar with the matter, the ETF can be exchanged for the actual physical precious metal itself. This is a sign of further investment demand.

Analyst Adrian Douglas, pointed out in Le Metropole Cafe that there is some very interesting data in the current gold options data. "In the October contract the largest PUT Open Interest is 5016 at strike $650. The largest CALL OI is 6696 at Strike $700. Looking at December contract the largest PUT Open Interest is 10060 at strike $600. The largest CALL OI is 19679 at Strike $800. There are also CALL OI of 18598 @ $700, 11285 @ $850, 3935 @ $900 and 7161 @ $1000."

He explains that it is "absolutely stunning that the CALL Open interest in December Strike $1000 exceeds the OI in October Strike $700. It is also very significant that the largest position is $140 higher than the price today. It is not Joe & Jane six-pack who buy gold options. This is a way for serious money to get a big position in gold without blowing the roof off the price when they purchase. If the price moves into the strike price the options can be exercised for futures contracts or gold bullion."

Silver
Spot silver is trading at $11.81/11.83 an ounce (1215 GMT).

P GMs
Platinum was trading at $1258/1263 (1215 GMT).
Spot palladium was trading at $328/332 an ounce (1215 GMT).

Currencies, the USD and Gold
The euro gave back some of its recent gains overnight after comments from the ECB's Trichet late yesterday appeared to lessen the chances of a rate hike at next week's ECB policy meeting. While the bank is still leaning towards further policy tightening, Trichet hinted that the bank may hold off on a September move if markets remain volatile. Eurozone money supply growth surged to an all time record high in July at 11.7%, indicating that monetary policy tightening is not finished. M3 money supply is an important indicator of future inflation for the ECB. The US no longer reports M3 but it is believed that since Treasury Secretary Paulsen's confirmation in July 2006, the broad M3 money supply has expanded at a 13% annualized clip, its fastest in 30-years.

Expectations that the Fed is close to cutting US interest rates will likely put further pressure on the USD.

Weakness in the US stock market yesterday looks likely to result in a further decline in risk taking. Investor jitteriness was seen in Japan with a flat Nikkei and in falling stock markets in Europe this morning. The weak existing home sales report and huge housing inventories added to the concerns about the US housing markets and consumer spending going forward. The FT reports today that US consumers are reported to be defaulting on credit-card payments at a significantly higher rate than last year, which may reflect rising credit card debt because of the serious problems in the housing finance market. Late payments also rose. Analysts at Moody's said the trend could be related to the slowdown in the US property market and a fall in the number of borrowers rolling their mortgage debt into cheaper home loans.

The dollar also came under pressure versus the yen sinking as low as Y115.33. The minutes of the July Bank of Japan meeting showed members concurring that interest rates should be gradually raised. The unravelling of the huge yen carry trade will put increasing pressure on the USD and be very supportive of gold.

Markets will be looking to this evening's release of the minutes of the last FOMC meeting (7 August) for any policy steer. Ahead of that, markets will be looking to see if recent events on financial markets have had any impact on global sentiment with the German Ifo survey coming weaker than expected and US consumer confidence due for release later.

Oil
Oil prices rose on Monday as refinery outages in the United States stoked supply concerns again as the end of the summer driving season neared. US crude settled up 88 cents at $71.97 a barrel, after jumping $1.26 on Friday. London Brent rose 33 cents to $70.95 a barrel, with trading volumes lighter than normal due to a holiday in Britain.

Mark O'Byrne,
Director (Irish Office)
Gold and Silver Investments Limited
63 Fitzwilliam Square
Dublin 2
Ireland 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.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.