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Gold Recovers Earlier Losses On Clear Signs of Inflationary Pressures

Commodities / Gold & Silver Mar 06, 2008 - 12:28 PM GMT

By: Mike_Clark

Commodities Gold and silver recovered strongly from the previous days sell off and gold was up $21.70 to $987.50 per ounce in trading in New York yesterday and silver was up 88 cents to $20.64 per ounce. Gold and silver reached new nominal record and 27 year highs respectively at $992.10 and $21.17. In Asian and European trading, gold has consolidated near record highs and silver has been even stronger. The London AM Gold Fix at 1030 GMT this morning was at $986.25, £494.31 and €643.43.


06-Mar-08 Last 1 Month YTD 1 Year 5 Year
Gold $  
986.80
9.77%
18.42%
52.40%
177.26%
Silver    
20.93
27.06%
41.70%
61.49%
349.14%
Oil  
105.79
21.58%
6.67%
75.44%
185.91%
FTSE    
5,839
-0.61%
-9.25%
-4.87%
63.95%
Nikkei  
13,215
0.88%
-13.66%
-21.54%
57.90%
S&P 500    
1,334
0.54%
-9.17%
-4.42%
62.23%
ISEQ    
6,341
-3.54%
-8.55%
-30.96%
66.99%
EUR/USD  
1.5321
4.83%
5.04%
16.64%
39.62%
© 2008 GoldandSilverInvestments.com


With oil having surged to new record highs (at $105.95 per barrel) and with the dollar falling to new record lows against the euro ( 1.5346) , gold looks set to topple the symbolic and psychologically important $1000 per ounce mark in the coming days as hedging inflation and risk aversion leads to safe haven buying.

Clear signs of increasing inflationary pressure were seen on both sides of the Atlantic.

Yesterday while the ISM services data was not as bad as expected the ADP employment report showed a fall of 23,000 jobs in February which bodes badly for the non-farm payrolls report on Friday. The Beige Book hinted at stagflation and Cleveland Fed's Pianalto said the U.S. economy was 'highly vulnerable' to the credit crunch.

The chief economist for the National Association of Home Builders said Tuesday that housing is in its "deepest, most rapid downswing since the Great Depression." David Seiders said that it is now affecting the entire U.S. economy where before it was regional and he said that “the downward momentum on housing prices appears to be accelerating.”

Stagflation looks increasingly likely and the macroeconomic barometer that is gold has sniffed this out. Indeed the only thing that seems likely to halt the likelihood of stagflation is a significant global deflationary contraction which would create demand destruction in the energy and food complex.

http://www.research.gold.org/assets/image/research/img/charts/dailyshort_4.gif
http://www.research.gold.org /prices/daily/

Ambrose Evans Pritchard, the International Business Editor of the Telegraph remains ahead of the curve.
“The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed. Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter. The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe.”

Support and Resistance
Short term support is now at $950 below that at $930 and $915. Strong support in gold is now seen at $890 to $900. The $1000 price level remains a realistic short term price target and $1,200 remains a realistic possibility in the coming weeks.

Silver
Silver is trading at $20.80/20.84 at 1200GMT.
The commercial signal failure appears to be accelerating in silver.

Despite surging prices the silver open interest fell continues to fall showing that this is not a speculative bubble rather a possible commercial signal failure where the huge and unprecedented concentrated short positions in silver are being forced to cover their shorts and buy back silver in significant volumes. We could see the commercial shorts forced to panic cover en masse creating a massive surge in the silver (and gold) price. This eventuality is looking increasingly likely, especially in the light of the very significant macroeconomic and systemic risks facing the U.S. and many western economies.

Silver has now surpassed the predicted high of most silver analysts in the world who have failed to realize the massive growing supply demand imbalance in silver and how the humongous and unprecedented short position in silver would lead to prices being propelled to levels that may shock even silver's more bullish enthusiasts. This happens in most bull markets but will be a sight to behold in silver in the coming years.


PGMs

Platinum is trading at $2225/2235 (1200GMT).
Palladium is trading at $547/553 per ounce (1200GMT). 

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
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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.

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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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