Gold Investments Market Update
Gold was up in Asian trading to $946 per ounce before falling in London trading this morning to $936 per ounce. Gold was down $5.30 to $939.80 per ounce in trading in New York yesterday and silver was down 13 cents to $18.18 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $942.25, £472.19 &eur;592.31 (from $951.50, £481.04 and &eur;595.88 yesterday).
After a few days of rising prices, gold has sold off this morning but remains up for the week and looks set to have a higher weekly close which is important from a technical point of view. The slight rebound in the dollar (1.584 against the euro) and weakness in oil ($114.15) has led to some traders taking profits and making them reluctant to go long in the short term.
While risk appetite has increased in recent days as seen in buoyant stock markets internationally it is difficult to see how long this buoyancy can last given the litany of bad news emerging and the fact that the real economy in the U.S. is now in recession and earnings are already falling. The world's biggest bank - Citigroup - has announced a £2.5bn loss for the first quarter of the year. This compares with a profit of £2.5bn for the same period last year. Citibank blames the loss, which includes write-downs of £3bn, on the subprime mortgage crisis.
With the financial crisis ever present and beginning to affect the real economy with the emergence of stagflation any corrections and consolidation in gold are likely to be short in duration. Especially as the Federal Reserve is attempting to print its way out of the crisis which may affect the dollar's status as the global reserve currency in the coming years.
Jim Rogers and George Soros say Investors Shifting to Real Assets including Oil and Gold
As the great Earnest Hemingway once wisely wrote: "The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."
Inflation of a currency can lead to short term prosperity but can quickly morph into competitive currency valuation and debasement which more often than not leads to the massive devaluation of a currency in the form of stagflation or hyperinflation which destroys wealth and economies.
Jim Rogers outlines his fears regarding the dollar and why he owns hard assets such gold, oil and agricultural commodities in this excellent interview on Bloomberg's 'Morning Call' as seen on http://blog.goldassets.co.uk/.
Rogers former partner George Soros said overnight that he believes that commodities are not overvalued and that investors internationally are worried about the value of currencies and financial assets. "The euro, while it is obviously an alternative, is not a truly attractive alternative, and therefore there's a general flight from currencies," he said. "That's how you have the creation of sovereign wealth funds which are basically seeking to diversify from monetary assets to real assets," he said.
Billionaire George Soros said the boom in commodities is still in a "growth phase" after prices for oil, wheat and gold rose to records.
Mr. Soros said the dollar would reclaim its crown eventually, but for now the financial crisis is leading to a flight from all paper currencies, causing diversification into the safe havens of gold, silver, and oil.
Support and Resistance
Support for gold is at $905 and strong support is at $880.
Silver is trading at $18.12/18.15 at 1215 GMT.
Platinum is trading at $2030/2040 (1215 GMT).
Palladium is trading at $458/463 per ounce (1215 GMT).