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Gold Falls to Test Strong Support at $875

Commodities / Gold & Silver Apr 25, 2008 - 12:38 PM GMT

By: Mark_OByrne

Commodities Gold was down $19.40 to $886.80 per ounce in trading in New York yesterday and silver was down 50 cents to $16.66 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $883.50, £446.51 and €566.38 (from $900.75 £455.85 and €572.09 yesterday).


Gold again fell below short term support at $900 and we are now retesting support at the early April lows of $870. We expect strong support at these levels but there is a possibility that should gold close below $880 we could retest previous resistance at the 1980 nominal high of $850 per ounce. It is important to remember that even after gold's recent sharp selloff it remains up for the year to date and up strongly for the last 52 weeks unlike major equity indices (as seen in the table).

The speculative froth has been removed from the market and the downside appears very limited from these levels. But the important adage is to “never catch a falling knife” and value investors should wait for a highly daily close prior to buying again.

While the economic data yesterday was less worse than usual, the dollar's strength and oil's weakness led to further selling in the gold market. Gold was overbought in the short term (understandably given the confluence of very bullish fundamentals driving the market) and with the dollar strengthening significantly (from above 1.60 to below 1.56 in a few days) it is not surprising that this resulted in the gold price correcting quite sharply.

Data released in the U.S. yesterday was not particularly bad, yet there can be no denying that the American consumer is under massive pressure as falling house prices eliminate the wealth effect and healthcare, gasoline and food prices soar. This should be reflected in the Michigan final Sentiment survey for April released today.

EU and International Money Supply Growth and Gold
Euro zone M3 money supply grew at a slower pace of 10.3% from the prior year in March, the European Central Bank, or ECB, indicated Friday. The growth eased from 11.3% registered in the previous month. Money supply increased less than 10.6% expected by economists. Money supply internationally continues to soar and this will remain supportive of gold due to its finite reserve currency status. Bizarrely, the U.S. stopped publishing their money supply statistics leading to worries that the recent quantative easing and bail out of banks may have led to an unprecedented surge in the money supply which will lead to even greater inflation in the coming months.

Sterling and UK GDP due Today
Sterling may come under pressure again today from the release of the key Q1 GDP data. Growth is being forecast to slow to 0.5% pace, resulting in the annualised pace pulling back to 2.6% from 2.8%.
The UK looks likely to face what is being called a “mortgage famine” as more banks follow First Direct's decision to slam the door on new borrowers. Experts fear we could be heading back to the bad old days of mortgage rationing as the worldwide credit crunch tightens. A recession in the UK looks inevitable – the question as in the U.S. is how deep and how long is the recession.


http://www.research.gold.org /prices/daily/

Prices to Watch
$848 – Support 22nd Jan and Resistance previously 8th Nov

$871 – Support of the April lows

$820 - 200 Day Moving Average

$954 – Resistance from 21st Feb, 26th Mar and 17th Apr

Silver
Silver is trading at $16.60/16.70 per ounce at 1200 GMT.

PGMs
Platinum is trading at $1992/2002per ounce (1200 GMT).
Palladium is trading at $437/441 per ounce (1200 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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