Gold Investments Market Update – Gold’s Traditional July/August Seasonal Low

Gold

Gold finished trading in New York yesterday at $899.20, down $9.10 and silver was down 37 cents to $17.13. Gold continued to sell off in Asia and in early European trading.

Gold has sold off on oil’s steep falls and with sharp falls in many other commodity markets. The CRB Reuters Jefferies Commodity Index was down 3% yesterday, its largest one day sell off since last March (cocoa, natural gas and sugar were down sharply) and falling oil prices and a firmer dollar (back to 1.55 against the Euro) has led to gold’s sell off.

Asian stock markets were down overnight on continuing concerns about the health of the US economy, the world’s largest, but European stock markets are firm this morning.

Continuing concerns regarding the health of the US financial system and the global economy should result in gold remaining above strong support which remains at the 200 day moving average at $887. A close below $887 could see us retest support at $850-$860.

Also real concerns that the credit crisis is beginning to spread from subprime to credit card debt, car loan debt and to prime mortgage debt should result in gold again being well supported above the old resistance at the old all time nominal record high at $850.

Gold’s traditional July/August seasonal low will likely take place in the coming days. Last year, the low took place in the second week of August (as per the chart below) and we would not be surprised if another summer low is experienced in the coming days prior to the traditional seasonal rally into the autumn months. This should result in gold rising to at least $1,000/oz in the coming weeks.

Today’s Data and Influences

The Federal Reserve, caught between the credit crisis, mounting job losses and a slowing economy on one side and rising inflation on the other, is likely to sit tight and hope that the interest rate cuts it has already provided will be enough to heal a sick economy. The general view is that rates will remain on hold at 2.00% but the FOMC statement will be crucial in terms of setting the tone. Later in the week, the ECB and BoE are expected to leave rates unchanged.

Gold and Silver

Gold is trading at $885.20/885.70 per ounce (1100 GMT).
Silver is trading at $16.70/16.74 per ounce (1100 GMT).

PGMs

Platinum is trading at $1556/1566 per ounce (1100 GMT).
Palladium is trading at $345/349 per ounce (1100 GMT).

Mark O'Byrne

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