Gold Investments Weekly Update - Strong Support Suggests Shallow Correction

By: Mark_OByrne

Gold was due a much needed breather and a correction after the 10% increase in value in January. Considering the speed of gold's move up in recent weeks it is surprising that gold has only sold off by a small margin today ( by less than 2%). Compared to the sell off in equities in recent weeks gold's sell off has been orderly and less sharp.

Normally, there is follow through on gold's sell off and it can often fall by some 2 to 4 days in a row prior to bottoming and consolidation. The old Wall Street adage to “never catch a falling knife” is very wise and prudence should be the order of the day in the coming days.

But as ever in this secular bull market gold's sell off will likely be shallow and short and there is support at $900 and strong support at $850 and the 50 day moving average at $846.16. The monthly close above $900 is positive from the technical point of view and should result in very strong support at $850. This is especially the case as the fundamentals remain sound due to safe haven demand because increasing inflation and increasing macroeconomic and systemic risk.

It is interesting that platinum and palladium remain very strong (up 2.2% and 5.2% respectively) today with the real and present supply worries in particularly South Africa and but also Russia being very supportive.

Have a good weekend.

By Mark O'Byrne, Executive Director

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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