Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Technically Damaged

Commodities / Gold & Silver May 28, 2008 - 11:21 AM GMT

By: Mark_OByrne

Commodities Gold's sharp sell off yesterday (Gold closed at $907.40 down $18.60; Silver at $17.45 down 79 cents) has continued. Gold traded sideways in Asia before selling off again late in Asia and in early trading in Europe. Stock markets in Asia were mixed overnight but European markets have recovered from early losses and the FTSE is up nearly 0.5% in the session so far.

A lot of technical damage was done to gold (and silver) yesterday and further selling could be seen by momentum traders and the shorts pressing their advantage to inflict maximum pain on weak speculative longs with short term aims who may be forced to capitulate thereby intensifying the sell off. However, strong physical demand internationally (see below) is likely to cushion the sell off and result in gold finding strong support again between $850 and $870.

28-May-08 Last 1 Month YTD 1 Year 5 Year
Gold $      893.25 0.19% 7.19% 36.37% 146.00%
Silver       17.22 1.26% 16.55% 33.24% 271.81%
Oil      126.58 6.52% 27.64% 95.85% 342.89%
FTSE       6,060 -0.49% -5.82% -7.76% 48.82%
Nikkei      13,709 -1.33% -10.19% -22.05% 66.49%
S&P 500       1,385 -0.79% -5.65% -8.60% 45.33%
ISEQ       6,086 -3.49% -12.23% -38.69% 43.62%
EUR/USD      1.5682 0.17% 7.52% 16.59% 33.41%
© 2008

The weekly CFTC data was very bullish showing that longs have begun to significantly rebuild their positions after the recent sharp sell off. Net gold longs increased to their highest position since August 2005 prior to the sharp increase in prices witnessed subsequently ($432 in early August and then increased to over $700 by May 2006).  While yesterday's and today's sharp sell off may slowed the longs gallop it seems likely that this sell off will again be another sharp sell off prior to gold's primary bull market trend reasserting itself.

With oil falling nearly 5% for the week so far, gold was bound to come under pressure and should oil continue to fall then gold may come under pressure. However, gold is likely to outperform oil in the medium to long term.

Today's Data and Influences
Later today Durable Goods for April will be released in the US. They are expected to be weak and could thus provide some support to gold.

Gold Charts in GBP

Demand for Gold as Inflation Hedge Surging in Emerging Markets
(as seen in Vietnam)
In recent days we have noted the surge in demand for gold in China and in the Middle East through Dubai. Further news of surging demand for gold as an inflation hedge in emerging markets came from Vietnam yesterday. Vietnam's retail investment in gold in the first quarter this year amounted to 31.5 tons, making the country the biggest gold consumer in the world, the World Gold Council says in its most updated quarterly survey Gold Demand Trends.

Vietnam's arrival into pole position in the retail investment sector ousts India from the top slot with 31 tons, a decline by half from the first quarter in 2007 as Indian purchasers withdrew from the market and waited for lower prices. The report says the surge in Vietnam's demand was partly a response to soaring inflation, which hit 11.6% in 2007 and prompted a rush to buy gold, reflecting its perceived qualities as a hedge against inflation.

Demand was also spurred by the performance of gold relative to other investments such as equities and real estate, which have declined in value over recent months while gold has strengthened.

Furthermore, gold investments have been increasingly marketed by Vietnamese banks. High interest rates enable local banks to offer an interest rate on gold deposits since they can profitably sell the gold for dong, lend the dong out at high interest rates and hedge their gold position by entering into a forward buying agreement with an international bank. Many Vietnamese prefer to hold gold rather than dong and the fact that this gold can earn interest from commercial banks makes it still more appealing as for investment option, says the report.

Vietnam spent 1.2 billion U.S. dollars importing some 43 tons of gold in the first four months of this year, said the Vietnam Association of Finance Investors.  The State Bank of Vietnam has decided to allow gold dealers and banks to import additional 3.5 million tons of the precious metal this year. Vietnam's gold consumption is forecast to exceed 80 tons in 2008, doubling that in 2005, according to local experts. The country now houses some 8,000 gold businesses.

Yesterday's Action
There was no obvious reason for gold to be down some 2% yesterday. Gold started to fall sharply in price prior to oil's sell off (indeed oil was up 0.17% when gold started to sell off aggressively). Similarly, the dollar was only slightly up (up 0.3% against the EUR and GBP and actually down 0.4% against the CHF and down 0.6% against the JPY ) when gold began its sell off.

A more likely reason was early profit taking which was subsequently exacerbated by the sell off in oil and another tentative dollar rally. Gold was up 3% last week and silver surged nearly 8% and thus profit taking would be expected in the early part of this week.

If the dollar closes below EUR 1.60 we could see some sharp dollar selling and another steep fall in the dollar. The last thing the U.S. government needs is a run on the dollar at this sensitive financial and economic time and it is possible that there was market intervention, possibly by the Working Group on Financial Markets.

As we pointed out in our market rap yesterday evening, a good way to support the dollar is to short the anti-dollar or gold. Talking heads and more gullible pundits on the financial networks will point to the falling price of gold as proof that inflation is not an issue, the dollar is fine and all is again perfect in the economic world and investors can go back to sleep. If only it were that simple.

Gold is likely to be well supported at these levels, especially as physical demand internationally continues to surge (as seen in the latest gold demand figures from Dubai which were up 73% and by surging demand and record imports into Vietnam).

Silver is trading at $17.27/17.35 per ounce at 1200 GMT.


Platinum is trading at $2035/2045 per ounce (1200 GMT).
Palladium is trading at $435/440 per ounce (1200 GMT).

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ph +353 1 6325010
Fax  +353 1 6619664
Gold Investments
Tower 42, Level 7
25 Old Broad Street
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708

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 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

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in