Euro Gold Technicals Look Near Perfect

By: GoldCore

Today’s AM fix was USD 1,664.25, EUR 1,325.04 and GBP 1,051.66 per ounce.
Yesterday’s AM fix was USD 1,663.50, EUR 1,325.18 and GBP 1,053.52 per ounce.

Silver is trading at $30.79/oz, €24.62/oz and £19.54/oz. Platinum is trading at $1,519.10/oz, palladium at $630.80/oz and rhodium at $1,025/oz.

Gold edged up $3.30 or 0.2% in New York yesterday and closed at $1,667.20. Silver slipped in Asia then hit a high of $30.985 in New York and finished up 0.59%.

Gold is hovering near its highest price level in four months due to safe haven demand on concerns about global economic growth and the unresolved euro debt crisis.

The possibility of Ben Bernanke and Mario Draghi announcing further money printing and monetary easing is also supporting gold. The US Fed chairman speaks this Friday and may or may not choose Friday to announce QE3. However with a Fed meeting set for September, it is unclear when further stimulus measures will be announced.

XAU/EUR Exchange Rate – (Bloomberg)

Should Bernanke fail to announce further QE Friday then we would expect sharp falls in stock markets and gold could again suffer some short term weakness.

Zero level interest rates and a QE3 announcement will be extremely bullish for the yellow metal.

Monday’s figures showing US consumer confidence fell in August to its lowest in 9 months was positive for gold as it shows that the US economy remains in bad shape and is deteriorating increasing the likelihood of the current policy response of choice – money printing.

XAU/EUR Exchange Rate – (Bloomberg)

The technical picture for Euro gold looks near perfect now.

Gold has been trending higher since May. The long term charts show a series of higher lows and higher highs and even in the correction of recent months there have been a series of higher lows and gold gradually consolidated between €1,200 and €1,400/oz.

Gold is now comfortably above the 50, 100 and 200 day moving averages.

In the last four years, there have been 3 periods of correction and consolidation which have lasted 12 to 13 months (see boxes in first chart) and we appear to be coming to the end of another such period.

Break outs from such consolidations often lead to sharp moves higher and thus new record highs above €1,359/oz and possibly over €1,600/oz should be seen before the end of 2012.

The fundamental back drop of the unresolved Eurozone debt crisis , deep divisions in the ECB and a high degree of uncertainty regarding the euros long term future strongly suggest that the euro will continue to fall against gold in the coming months.

Further confirmation of robust demand for gold is seen in figures showing that exchange-traded products backed by the gold expanded to a record. Smart money from Paulson to Soros to PIMCO continues to diversify into gold.

Gold ETFs holdings have now surpassed Italy to become the world’s third-largest gold holdings when compared with national gold reserves.

Investors now own 78.99 million ounces in ETPs, exceeding Italy’s 78.83 million ounces, according to data compiled by Bloomberg and the International Monetary Fund. Only the USA, and Germany hold more. ETP assets rose 4.3 percent this year

The gold ETF holdings and national gold reserves remain tiny when compared to the massive debts of most western nations and the massive foreign exchange reserves of many creditor nations.

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Yours sincerely,
Mark O'Byrne
Exective Director

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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