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Gold Very Oversold, US Dollar Very Overbought

Commodities / Gold & Silver Sep 12, 2008 - 06:46 AM GMT

By: Mark_OByrne

Commodities Gold was down again yesterday and fell to new 11 month lows at $742. Gold recovered in afterhours electronic trading and in Asian and early European trading today it has risen to over $755/oz. The dollar has fallen from recent highs against the euro of 1.3879 to less than 1.41 and oil has risen again on fears that Hurricane Ike may do more damage than expected to oil production facilities in the Gulf of Mexico.


The sentiment in the gold market remains very negative, long positions have been reduced dramatically and gold is the most oversold it has been since the commencement of the bull market in 2000. There are very few analysts willing to put their necks out and call the bottom of this market and the sharpness and steepness of the selloff has created doubts even in the most ardent gold bugs mind. This is bullish from a contrarian perspective and may portend that we are near the lows of this sell off.

Especially a much of the selling has been done by speculative elements in the leveraged futures markets rather than by investors who have led to physical demand

Further gains for the dollar are likely to be limited and today's Commerce Department report is expected to show that US retail sales fell in August adding to signs of a slowing US economy. Weak data will fuel worries that the US economy is faltering and feed negative dollar sentiment and lead to safe haven demand for gold. The USD looks very overbought and buying may have reached a saturation point (especially in light of the appalling trade deficit figures yesterday) and a sharp retracement is very likely.

With Lehman Brothers and Washington Mutual looking like being the latest casualties of the growing solvency crisis, gold's safe haven qualities will come into their own in the coming months.



Today's Data and Influence
Markets await the release of retail sales for August at 13:30 GMT and then the Producer Price Index. The University of Michigan's Confidence Index is due for release at 15:00 GMT.

Gold and Silver
Gold is trading at $754.90/755.50 per ounce (1130 GMT).
Silver is trading at $10.84/10.91 per ounce (1130 GMT).

PGMs
Platinum is trading at $1171/1181 per ounce (1130 GMT).
Palladium is trading at $243/249 per ounce (1130 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 and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
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.

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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.

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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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