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Peak Oil and Weak Dollar Driving Gold Higher

Commodities / Gold & Silver Apr 15, 2008 - 11:47 AM GMT

By: Mark_OByrne

Commodities Gold is up in London and is up in early trading in New York this morning. Gold was up $1.80 to $925.40 per ounce in trading in New York yesterday and silver was up 10 cents to $17.77 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $ 931.75, £473.55 and €588.30 (from $917.75, £464.80 and €580.854 yesterday).


With the dollar remaining weak (despite the G7 talk) and oil again closing at new record highs yesterday and surging to a near record price today (above $113.00), gold's role as hedge against inflation will likely see it supported at $900 and again challenge resistance at $950 in the coming days.

While supply disruptions in Mexico were the ostensible reason for the most recent spike in oil, the real reason as ever is an extremely tight global oil market where supply is finding it increasingly difficult to keep up with rampant demand, particularly in Asia. Indeed supply is falling in many large producers showing that the theory of ‘peak oil' is looking increasingly real.

This was evidenced in the front page story in the Financial Times which outlined how oil production in Russia may has peaked. Russian oil production peaked last year, the vice-president of Lukoil, the country's second largest oil group told the Financial Times. Leonid Fedun said Russia's oil production of 10 million barrels a day was the most he would see "in his lifetime".

With oil production declining sharply in Mexico and the North Sea and concerns that Saudi Arabia and other OPEC members are not being transparent in reporting their production numbers, peak oil seems to have arrived and this has obvious ramifications for the global financial system and economy.



Oil is an important factor but one of only a myriad of strong fundamental factors creating demand for gold. Sharply falling house prices, volatile currency and stock markets are also leading to safe haven demand. Also, in response to the global credit crisis, central banks have opened the monetary spigots and we are now in a world of massive and unprecedented money supply growth and credit creation. This is hugely inflationary. The finite currency that is gold will continue to outperform most assets given these risks and the increasing risk of stagflation.

The fundamentals driving the gold market remain  very sound with oil remaining near record highs, peak oil, the dollar and sterling under pressure, house prices falling and the credit crisis remaining a serious concern. Under these circumstances gold looks very well supported above $880 per ounce. We could see gold further consolidate between $870 and $950 in the short term prior to surpassing the psychological $1,000 level again in the coming weeks.

Gold is likely to continue to surprise to the upside and it remains a contrary non mainstream investor with only a tiny, tiny fraction of the world's investment public having invested in gold. We are a long, long way from the mass participation and then mass mania seen in property and stock markets in recent times.

Support and Resistance
Support is at $880 and $905. A close below $905 could see us retest the recent lows at $880. Resistance is now at $950 and $1,000.

Silver

Silver is trading at $17.76/17.86 at 1415 GMT.

PGMs

Platinum is trading at $1990/2000 (1415 GMT).
Palladium is trading at $459/464 per ounce (1415  GMT). 

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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