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Gold Retraces Following Post Election Profit Taking

Commodities / Gold & Silver Nov 06, 2008 - 05:01 AM GMT

By: Mark_OByrne

Commodities Gold gave up some of the Election Day gains yesterday on profit taking due to sharply lower oil (WTI $Dec down $5.23 to $65.30) and commodity prices ( the CRB Commodities Index fell 10.25 to 267.97) on fears of significant demand destruction due to a protracted global recession. Silver was the exception and was more robust and continued to rise after the previous day's sharp gains.


With open interest levels in the gold and silver futures market at very low levels – levels that usually presage lows in the price – it appears that shorts are aggressively closing their positions at these levels in anticipation of a rising price in the coming weeks. Speculative interest has been decimated in recent weeks and many of those who to coin a phrase ‘know the price of everything but the value of nothing' have had their heads handed to them on a plate.

The reality of a likely sharp global recession is setting in due to the increasingly gloomy outlook for the global economy. With the Bank of England and ECB likely to aggressively cut interest rates  today (possibly as much as 100 bps in the BoE's case) central bankers are attempting to inflate their way out of a deflationary slump. All that is missing is Bernanke's monetary helicopters showering dollars on the US citizenry in order to prevent an economic crash and Depression.

Bernanke is not the only central banker who might choose to use the “nuclear option” of the monetary helicopters. An editorial in the FT has warned that such drastic monetary measures may be needed internationally. “If ordinary policies fail to avert slump and deflation, the monetary printing press is the final tool at the disposal of policymakers. The government could borrow directly from the central bank and distribute the newly created money to households and firms. This worst-case scenario is a long way off. Yet events in recent months have validated the most pessimistic predictions.”

Indeed they have and with such drastic, unprecedented measures now being advocated  – a scenario of severe stagflation and possibly even hyperinflation looks like an increasing possibility in the coming years.

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
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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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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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