Gold Investments Market Update

Gold
Gold is up to $920 per ounce in London this morning. Gold was up $2.50 to $914.70 per ounce in trading in New York yesterday and silver was down 46 cents to $17.34 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $920.75, £464.21 and €576.98 (from $915.75, £461.64 and €577.40 yesterday).

Gold continues in a tight range between $910 and $930 but the path of least resistance looks to be to the upside, especially with oil above $118 a barrel on supply concerns. Safe haven demand continues to remain robust with the global credit crisis rumbling on with continuing revelations from Bank of America yesterday and Royal Bank of Scotland today. Royal Bank of Scotland said this morning that it had suffered $11.7 billion in additional losses and was forced to raise $23.9 billion in new capital to cover exposure to toxic U.S. loans.

Goldman Sachs has warned that UK sovereign bonds could be adversely affected by the latest Bank of England bail out. Bonds’ safe haven role may come increasingly into question as some central banks use their sovereign debt to prop up ailing banks.

Gold Continues to Outperform All Currencies and Asset Classes
Many investors, advisers and others in the financial media incorrectly assume that gold’s strength is purely a function of dollar weakness. Nothing could be further from the truth. Dollar weakness is just one of the myriad of strong fundamental factors driving the gold price.

Gold has rallied from €260 (EUR) in 2000 to over €575 (EUR) today. Thus in the last 8 years gold is up 120%. In 5 years gold is up some 90% in euro terms. More importantly since the emergence of the global financial crisis, gold has rallied from below €500 (EUR) to above €570 (EUR) or up by more than 15% in just 6 months. This is an incredible performance especially considering the euro has been the strongest major currency in the world during these periods.


http://www.research.gold.org/prices/daily/

Given the fact that the global financial crisis and global inflation and possibly stagflation is now beginning to affect the international economy and the eurozone economy, we are likely to see gold continue to perform strongly vis-à-vis the all major currencies including sterling and the euro in the coming months and indeed years. This, the worst financial and economic crisis seen in generations, will not be sorted out in a matter of a few short months and by early 2009 as blithely predicted by the usual (commission driven) vested interests.

Support and Resistance
Support for gold is at $910 and $905 and strong support is at $880. Resistance is now last week’s high at $950.

Silver
Silver is trading at $17.65/17.70 per ounce at 1215 GMT.

PGMs
Platinum is trading at $2050/2060 per ounce (1215 GMT).
Palladium is trading at $460/464 per ounce (1215 GMT).

Mark O'Byrne

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