Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Corona Virus Wuhan Global Pandemic 2020 Deaths Forecast and Market Consequences - 28th Jan 20
Palladium Surges above $2,400. Is It Sustainable? - 27th Jan 20
THIS ONE THING Will Tell Us When the Bubble Economy Is Bursting… - 27th Jan 20
Stock Market, Gold Black Swan Event Begins - 27th Jan 20
This Will Signal A Massive Gold Stocks Rally - 27th Jan 20
US Presidential Cycle Stock Market Trend Forecast 2020 - 27th Jan 20
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Rumours of Fed Emergency Rate Cuts To Avert Serious Economic Downturn

Commodities / Gold & Silver Jan 15, 2008 - 09:56 AM GMT

By: Gold_Investments

Commodities Best Financial Markets Analysis ArticleGold's strong performance continued yesterday and gold was up $7 to $901.90 per ounce in trading in New York yesterday and silver was up 6 cents to $16.29 per ounce. Gold surged in Asian and European trading to new record highs at $914 per ounce before selling off in U.S. trading.

Gold has traded in a range between $900 and $910 per ounce in Asia and early European trading. The London AM Fix yesterday was at a new record high of $911.50 (up from $887.85 the previous day). The London AM Fix was at $904.75. Gold's resilience and close above the psychological $900 price level is bullish. Gold consolidated near record highs in other major currencies. At the London AM Fix gold was trading at £460.76 (up from £464.32 yesterday) and €609.05 (up from €612.16 yesterday).


Dollar weakness, oil and commodity strength and the continuing credit crisis were again driving forces in the gold market yesterday. The dollar hit a new low versus the Swiss franc yesterday and is near record lows against the euro (see FX below) as the credit crisis appears to be deepening in the U.S. Traders will be looking at important U.S. data today which includes January's Empire State Index, PPI and retail sales reports for December, as well as business inventories for November.

There are rumours of emergency rate cuts and even of a possible drastic full 100 basis point. A leaked client note by HSBC added fresh fuel to the rate excitement, suggesting that Fed may now have to slash a full percentage point by month's end to fend off a serious downturn.

However the Federal reserve is caught between a rock and a hard place. Commodities including base metals and soft commodities surged again yesterday and the CRB went up 5.07 to an all-time high of 370.22. Thus there are deepening fears of inflation and stagflation and this is leading to inflation hedging and safe haven buying of gold.

The Daily Telegraph reports in an article entitled 'ECB warns crashing dollar may stop Fed cuts' that rumours of an emergency rate cut over coming days by the U.S. Federal Reserve have swept the global markets, setting off a fresh plunge in the dollar. Lorenzo Bini-Smaghi, a member of the European Central Bank's executive council, warned that the tumbling dollar may now start to foreclose the option of U.S. rate cuts and force the Fed to keep monetary policy tighter than it would like. "I would not be so sure about the movements of the Fed. There is a serious problem with the dollar in America. We will see what margins they have for further rate cuts," he told Italy's La Republica newspaper. It is the first time that a top central banker has openly aired concerns that dollar weakness could constrain U.S. economic policy.

The FT reports that John Hill, an analyst at Citigroup in New York, said that gold prices were likely to test the $1,000-an-ounce level in 2008. Key gold traders such as UBS, Mitsui Precious Metals, Barclays Capital and The Bank of Nova Scotia expressed a similar view. "Prices could explode to multiples of these levels in the event of a full-blown U.S. recession," he added. David Holmes, head of precious metals at Dresdner Kleinwort in London, added that investors were already buying option contracts that would be profitable only if gold prices surged to levels above $1,000 an ounce to as high as $1,500 an ounce.

FX
A combination of carry trade unwinding and safe haven buying has seen an appreciation overnight in the low yielding Swiss franc and Japanese yen. Both of these currencies have retested the November 07 lows against the U.S. dollar, in Asian trading. The sharp appreciation of the Swiss Franc against the dollar is bound to create unease in the corridors of power at the SNB (Swiss National Bank) as their economy slows. Resistance at 107.20 in USD/JPY and 1.0880 USD/CHF, if breached could trigger another sharp move to the downside, and cause further carry trade unwinding against sterling, the euro and high yielding currencies.

The euro continues to appreciate against sterling closing at a new all time high of .7610 yesterday. While our medium term target of 0.7700 is still very much on the cards, this currency pair is well overdue a short term correction. Against the dollar, the single currency is hovering below its all time high of 1.4970, however yesterday it yet again failed to close above 1.4900 which would be required to maintain the bullish momentum and target 1.5000.

The continuing commodity price appreciation helped the Australian dollar reach a level not seen since November 07, closing just over 0.9000. Resistance remains at 0.9070 and a breach of this level opens up a retest of the all time high of 0.9400. If commodity prices continue to remain strong it is only a matter of time before this occurs, however any short term commodity price correction will keep this currency pair in check.

Support and Resistance

The psychological level of $900 has now been attained and while a correction and consolidation is likely and expected the market has a habit of doing what is least expected. Bernanke's likely aggressive interest rate cuts and further use of 'cheap money' despite inflationary pressures will likely support gold and result in any correction being short and shallow. The moniker 'Helicopter Bernanke' is looking more and more apposite by the day.

While gold's fundamentals remain sound and have indeed strengthened, 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' and would be wise to gradually assume positions and use all dips as buying opportunities. This is especially the case in the current macroeconomic and geopolitical climate where all portfolios should have at least a 10% allocation to gold.

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

6 Critical Money Making Rules