Daily Market Update

GoldCore Update: Gold Volatility to Rise as Phase II of Global Credit Crisis Unfolds

Gold touched $1,179/oz overnight but has since dropped slightly. Gold is currently trading at $1,171/oz and in euro and sterling terms, gold is trading at €778/oz and £709/oz respectively.

There are concerns that we may be on the verge of the second stage of the global financial crisis. Not to mention concerns that the continuing unprecedented fiscal and monetary policies will lead to inflation and the debasement of currencies. An already creaking financial system, attempting to clear up the toxic balance sheets of banks internationally, is now be faced with the risk posed by the increasingly toxic balance sheets of many sovereign governments.

Volatility is set to remain high and likely to increase in the next phase of the credit crisis in the gold market and in all markets. This means that a passive buy and hold strategy rather than speculative leveraged trading will be increasingly prudent. Gold could see further weakness in the short term as the nervous short term traders book profits. Robust investment demand (hedge funds, pension funds and central banks) mean that the correction will likely be reasonably shallow with very strong support above $1,000/oz. Indeed strong support is likely to be in the mid $1,000/oz which is the price region that the Indian central bank bought 200 metric tonnes (purchases occurred over two weeks prior to October 30th when gold was trading between $1,030 and $1,070/oz). Chinese central bank and investor demand alone has the potential to propel prices to far higher levels. China increased its gold reserves by 76 percent to 1,054 tonnes since 2003 but officials are on record as saying they wish to at least double their gold reserves from current levels.

$1,200 remains a viable price target by year end and calls of for gold to reach $1,500/oz and $2,000/oz in 2010 are increasingly plausible.

Silver was as high as $18.45/oz overnight. Silver is currently trading at $18.16/oz, €12.07/oz and £11.01/oz.

Platinum Group Metals
Platinum is trading at $1,454/oz and palladium is currently trading at $369/oz, while rhodium is at $2,800/oz.

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Mark OByrne


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