Gold Investments Market Update

Gold
Gold is up in London this morning. Gold was up $2.60 to $927.80 per ounce in trading in New York yesterday and silver was up 2 cents to $17.79 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $932.75, £472.40 and £586.27 (from $931.75, £473.55 and €588.30 yesterday).

With oil and commodities surging, the dollar continuing to weaken (see below) and economic growth slowing – gold’s best friend stagflation is a real and growing threat to much of the global economy.

Oil has remained near record levels above $114 per barrel (it reached a new record at $114.50) and this will mean that the worrying inflation statistics of recent weeks will soon get worse, making central banks’ jobs even harder and continuing to make gold an important part of a properly diversified portfolio.

More evidence of slowing economic growth and rising inflation was seen in EU data showing annual inflation across the euro zone hit an all-time peak in March. Inflation in the euro zone reached an annual rate of 3.6% in March, the highest since the launch of the euro in 1999.

The euro hit a record high against both the dollar and sterling. The euro hit a new high of $1.5957 by late morning while it also reached a new high of 80.70 pence sterling.

The US CPI report for March is due for release today and if it comes ahead of expectations (as the PPI report did) the dollar may come under pressure and gold rally. Another strong inflation report is likely to push markets closer towards the view that the Fed will only cut rates by 0.25% at its meeting at the end of the month. Later today the Fed issues its Beige Book on economic conditions which will shed light on the Federal Reserve’s thinking as to handle the growing threat of stagflation.

The UK economy looks set for a serious economic correction. TDX Group, the debt management analyst that provides services to the corporate sector, has published an alarming report that suggests nearly 600,000 Britons will be unable to refinance their debts this year. According to the report, around one million Britons have collectively amassed £25 billion of unsecured debt that they cannot repay, giving an average financial headache of £25,000. In 2007, around 400,000 people remortgaged their property or applied for new credit cards or personal loans, to pay off existing debt. Also last year, approximately 300,000 consumers opted for bankruptcy, debt management plans or individual voluntary agreements (IVAs).


London, as one of the leading financial capitals of the world looks set to suffer significantly in the coming months. Total job losses in London’s City financial district are likely to hit 40,000 due to fallout from the U.S. subprime crisis and global credit crunch, analysts at JPMorgan, doubling their previous estimates. The shakeout equates to 5 percent of jobs compared with losses of 7 percent after the dotcom bubble burst in 2000-01.

Support and Resistance
Support is at $905 and strong support is at $880.

Recent resistance at $950 is likely to be challenged in the coming days as investors realize that inflation is not some short term phenomenon but rather a medium and possibly long term problem yet to be priced into the market.

Silver
Silver is trading at $18.09/18.13 at 1215 GMT.

PGMs
Platinum is trading at $2000/2010 (1215 GMT).
Palladium is trading at $459/464 per ounce (1215 GMT).

Mark O'Byrne

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