Gold Soars to $1027 on Bear Stearns Collapse

By: Mark_OByrne

The London AM Gold Fix at 1030 GMT this morning was at $1023.50,  £508.45 and €649.51  (up from $997.00, £491.617 and €641.158 Friday).

We are at new record nominal highs in gold in most major currencies and gold has surged through £500 per ounce (GBP) with sterling falling significantly against major currencies especially the euro (0.79).

With financial markets under massive pressure with the Bearn Stearns collapse and significant and increasing systemic risk, gold has again surged in price (and rose as high as $1,027.20). The path of least resistance is clearly to the upside as unfortunately, financial and economic news continues to deteriorate by the day.

The financial system itself is under siege and it is no exaggeration that this is akin to the much clichéd “perfect financial storm”. Besides the Bear Stearns collapse, oil has surged to a new record high ($111.80) and the dollar has fallen against the majority of currencies and a new record low against the euro (1.5882).

The Federal Reserve overnight cut the discount rate for banks by 25 basis points to 3.25 per cent and created a new lending facility for other financial institutions in an attempt to boost market liquidity. However, as we have been pointing out for some weeks now – this is no longer a liquidity issue rather a solvency and systemic issue.

Given the extent of increasing macroeconomic and systemic risk, our forecasts of gold surpassing its inflation adjusted high of $2,300 per ounce in the coming years look conservative indeed. Especially as gold remains the preserve of the smart money with the vast majority of the public of the western world remaining blissfully unaware of the importance of real diversification and of investing in gold.

Support and Resistance
Gold's support is now at $960. Resistance is at today's new record nominal high of $1027.

Silver
Silver is trading at $20.80/20.84 at 1200GMT.

PGMs
Platinum is trading at $2010/2020 (1200GMT).
Palladium is trading at $488/494 per ounce (1200GMT). 

Happy St Patrick's Day !

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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