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Gold Strong as Safehaven in the Face of Worst Financial Crisis since 1987 Crash

Commodities / Gold & Silver Mar 18, 2008 - 10:27 AM GMT

By: Mark_OByrne

Commodities Gold was up $2.10 to $1000.80 per ounce in trading in New York yesterday while silver was down 25 cents to $20.36 per ounce. Gold surged on the open in Asia yesterday and reached a new record high ($1030.80 per ounce). Subsequently, with U.S. stock markets miraculously recovering, gold succumbed to profit taking and ended the day only slightly higher.


In Asian trading overnight gold traded sideways and then in early European trading, gold has showed some strength again and rose to nearly $1010.00 per ounce.

The London AM Gold Fix at 1030 GMT this morning was at $1005.75, £499.13 and €635.786  (from $1023.50,  £508.45 and €649.51 yesterday). Gold is surging in all major currencies as seen in the GBP/GOLD and EUR/GOLD charts below. Showing that gold's strength is not simply due to dollar weakness. Dollar weakness is just one of the many, many factors leading to higher gold prices in all (fiat) currencies.
18-Mar-08 Last 1 Month YTD 1 Year 5 Year
Gold $   1,005.65
10.98%
20.68%
54.07%
197.44%
Silver       20.20
17.92%
36.76%
54.19%
352.91%
Oil      106.67
6.68%
7.56%
86.78%
236.81%
FTSE       5,503
-7.45%
-14.47%
-10.23%
47.35%
Nikkei      11,964
-12.25%
-21.84%
-28.54%
50.41%
S&P 500       1,277
-5.43%
-13.06%
-7.95%
47.33%
ISEQ       5,735
-12.18%
-17.29%
-37.85%
45.10%
EUR/USD      1.5797
7.83%
8.31%
18.67%
48.38%
© 2008 GoldandSilverInvestments.com


Gold's fundamentals are as strong as ever as this, the worst financial crisis since the Wall Street Crash and the Great Depression, continues to worsen and deepen. (Although Weimar Germany might have more parallels than the deflationary Gold Standard constrained 1930's America).

Systemic risk has not been as great as this since after the crash in 1929 and the new fangled massively leveraged global financial system is in danger of unraveling.

While talk of ‘contagion' might be considered alarmist, so would talk of nationalisation of Northern Rock and bankruptcy of Bear Stearns some 6 short months ago. Global financial contagion (with its epicenter on Wall Street and in the U.S.) is now a real possibility as acknowledged by Anoop Singh, IMF director for the Western Hemisphere Department. He said yesterday that the mounting global credit crisis could result in financial "contagion" that could wipe $800 billion of value from the books of U.S. and global financial institutions. He cited a high likelihood of a U.S. recession and said he sees losses from the U.S. subprime mortgage market crisis resulting in widening losses for European banks. That is putting it mildly.

Traders and analysts are now looking at the next dominoes to fall with Citigroup and Lehman Brothers in the U.S. and HBOS, Alliance and Leicester and Bradford and Bingley in the UK looking vulnerable. Unfortunately, financial contagion looks increasingly likely and this would result in many more Northern Rocks and Bear Stearns and the value of many assets becoming worth fractions of their previous worth. A worst case scenario is a massive financial panic resulting in stock and bond market crashing, many runs on banks and the collapse and nationalisation of much of the banking system in the western world.

Gold remains the ultimate safe haven and has retained and will retain its value throughout history. Particularly with history having a terrible habit of repeating itself.

Blind fate in central bankers and politicians miraculous powers to rectify this situation is dangerous and delusional. Given the current financial crisis, all investors should have an allocation to gold bullion and the allocation should be at least 20% of a properly diversified portfolio. Holding 25% in gold, 25% in cash would be appropriate as an extremely cautious, defensive and prudent investment strategy is merited now more than.

http://www.research.gold.org/assets/image/research/img/charts/dailyshort_4.gif

http://www.research.gold.org/assets/image/research/img/charts/dailyshort_2.gif


Support and Resistance
Gold's support is now at $990 and $960. Resistance is at yesterday's new record nominal high of $ $1030.80.

Silver

Silver is trading at $20.37/20.40 at 1200GMT.

PGMs

Platinum is trading at $2010/2020 (1200GMT).
Palladium is trading at $481/486 per ounce (1200GMT). 

By Mark O'Byrne, Executive Director

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@www.goldassets.co.uk
Web www.goldassets.co.uk

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

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.

Mark O'Byrne Archive

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