Gold Investments Market Update

Gold
Gold was down $2.30 to $918.30 per ounce in trading in New York yesterday while silver was up 12 cents to $17.07 per ounce. Gold has rallied in Asian trading and again in trading in London this morning. The London AM Gold Fix at 1030 GMT this morning was at $930.65, £467.24 and €598.57 (from $913.50, £461.60 and €591.15 last Thursday).

Gold has rallied on bargain hunting as gold’s short term overbought status has been corrected and some investors and speculators feel that the sell off is overdone and the metals may have become oversold in the short term. While there may be further consolidation at these levels, gold will likely resume its upward march sooner than expected and we will likely see gold back near (nominal) record highs above $1,030 before the end of April.

Despite the usual misguided and uninformed commentary there is no change in the long term fundamentals driving the gold market. Some of the superficial commentary is by those who came late and are recent converts to the precious metals markets. Many did not forecast or predict gold above $1,000 (nor did they predict oil over $100 or the dollar at $1.60 to the euro) and now they incorrectly assert that the ‘bubble’ is burst. This is a dangerous and deluded assertion especially as we are in the midst and likely the early stages of the worst financial crisis since the Wall Street Crash of 1929 and the Great Depression.

With the financial crisis set to continue, this is another short term healthy correction in gold’s bull market. While the severity of the sell off will have made newcomers to the market understandably nervous, it was not unexpected given the extent of gold’s surge in recent weeks. Indeed despite this latest sharp sell off gold remains up more than 11% so far this year unlike all major stock markets which remain down and some significantly.

Gold’s safe haven qualities can be clearly seen in the table above and chart below and these safe haven attributes will be realized by all in the coming months.

Gold below $950 and silver below $18 are table thumping buys and investors and diversifiers should use this short term correction to increase allocations to gold and silver.
Silver remains extremely undervalued (especially from an historical inflation adjusted point of view and the crucial supply demand point of view) and will likely outperform all other.

Rumours of supply shortages are rampant on the internet and in the financial mainstream (http://www.fool.com/investing/general/2008/03/24/dont-miss-the-silver-lining.aspx) . While the rumours are exaggerated there is some truth to them. Silver in a smaller bar format (1 ozt and 10 ozt bars) is extremely tight and some of the larger suppliers and wholesalers have sold out. Silver bags, silver 100 ozt and 1000 ozt bars and silver eagle coins and maple coins remain available for delivery from wholesalers.

There certainly is tightness in the marketplace and should the supply issues being seen in smaller silver bars spread than silver could quickly soar to new record highs in the coming weeks and challenge the 1980 record high of $50.00 per ounce in the coming months.

Support and Resistance
Gold’s support is now at $900, $885 and previous resistance at the 1980 record nominal high of $860. Resistance is at the recent new record nominal high of $ $1030.80 and $1000.

Silver
Silver is trading at $17.45/17.50 at 1300GMT.

PGMs
Platinum is trading at $1950/1960 (1300GMT).
Palladium is trading at $447/452 per ounce (1300GMT).

Mark O'Byrne

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