Safehaven | 'The Economist' and the Biggest Property Bubble in History

June 20, 2005

'The Economist' and the Biggest Property Bubble in History
by Mark O'Byrne

Weekly Markets
Precious Metals - HSBC, Barclays Capital & UBS.
Gold is Undervalued.
Oil - Oil surge continues
Other Commodities - Marc Faber & John Myers
Currencies - USD & EUR verses Asian Currencies
Bonds - New Record US Current Account Deficit
Stocks - Broad market rallies

Weekly Commentary
'The Economist' on Global Property - "The Biggest Bubble in History"

Gold & Silver Investments Limited on CNBC Europe

Opinions
The Economist, Robert Novak, New York Times, Sunday Tribune & Sunday Times

Performance (% Change)

"The Euro price of oil is up nearly 30% in 4 weeks"

Weekly Markets
Stock markets were up for the week.
Bond markets were volatile but largely flat.
Gold continued it's rally in all currencies. Oil and the majority of commodities were up.

Precious Metals

Gold was up $10.80 or 2.53% for the week. From $426.90 to $437.70 per ounce.

Silver was up from $7.27 to $7.31 per ounce or 0.83% for the week. Silver is up 6 weeks out of the last 7.

Platinum (July) was up nearly 2%; from $874 to $891 per ounce.

Gold extended its gains to make new 7 week highs and ended Friday's session higher by $2 to $437.70.
Gold for August delivery reached as high as $441.30.

For the week, gold is higher by $10.80 or 2.53% for its 4th straight week of gains and silver is higher by $0.06 or 0.83% to give it its 6th winning week in 7.

Euro gold again traded near all-time highs Friday, trading over EUR360 at one point.

Gold is below it's long term average and is undervalued

Gold has been trading between $340 and $455 or EUR300 and EUR362 per ounce for the last year.

The following figures put the current price of gold in historical perspective:
From 1979 to 1999, the Average Annual Low for the price of gold was $340 per ounce.
From 1979 to 1999, the Average Annual price of gold was $386 per ounce.
From 1979 to 1999, the Average Annual High for the price of gold was $455 per ounce.
In 15 out of the last 20 years, gold exceeded $400 per ounce.

The price of gold is actually trading at less than half of its all-time high of $890 in 1980 and around one quarter of it's all time high of $1,590, adjusted for the significant inflation of the last 24 years.

Recent developments in the currency and gold markets have provoked some serious thinking and even reevaluations among professional gold commentators. In an interesting note HSBC said during the week that "had gold continued to act as a slave to the currency markets, the gold price should have fallen to around USD390/oz, given the ongoing strength of the dollar . . . gold has also outperformed most other major currencies, suggesting the recent strength is not just a rejection of the dollar and the euro, but is perhaps the beginnings of a more sustained independence from the currency markets. Specifically,

- In Swiss Francs, yesterday’s high of CHF548/oz was the highest level since April 1994.
- In Japanese Yen the overnight high of Y1,506/g was the highest level since August 1992.
- In Sterling the high of £238/oz was just £3/oz off the nine year high of £241/oz seen in September 2003.

Barclays Capital which has long subscribed to the slightly dubious notion that upward movements in the gold price were purely to do with dollar weakness and Euro strength and thus the movement of the price of the Euro and the gold price were massively correlated is also reassessing previous assumptions:

"The commodity that has gathered the most media coverage from its break from dependency from the euro-dollar exchange range has been gold. Gold continues to see the most attention with many getting excited by the gains being seen in euro gold which yesterday pushed briefly above EUR356 before softening back towards EUR354. Despite this trade becoming "flavour of the month", there appears to be heavy resistance between EUR350 and EUR360, partly due to delta hedge selling. However, there does appear to be an increasing appetite to test the EUR360 level and this has the potential to push US$ prices back above $430".

"The euro/dollar exchange has disconnected from gold in the last couple of weeks,'' said UBS analyst John Reade.

The realisation that gold may continue moving up in all currencies independent of US dollar weakness should provide strong support beneath the market and lead to higher prices in all currencies.

Euro Gold EUR350 - Hamilton, Zeal Intelligence, 20-06-05
Gold hits 6-week high in Europe, funds buying - Reuters, 17-06-05
Gold Prices Climb to Seven-Week High as Energy Costs Gain - Bloomberg, 17-06-05
M'sia To Convince More OIC Countries To Use Gold Dinar - Malaysian National News
Metals pushed higher by renewed fund interest - CBS Market Watch, 16-06-05
COMEX gold, silver climb on fund buying, PGMS rise - Reuters , 16-06-05
Gold mining in worst crisis for the past 44 years - Finance 24, 15-06-05
Yawns greet gold's euro move - Brimelow, CBS Market Watch, 16-06-05
Gold- Euro Correlation: The End of a Beautiful Friendship - Royal Bank of Canada, 15-06-05

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Mark O'Byrne
www.goldassets.co.uk

Brief Profile
Mark O'Byrne is Executive Director of Gold and Silver Investments Limited (www.goldassets.co.uk). He is regularly quoted and writes in the international financial media and was awarded Ireland's prestigious Money Mate and Investor Magazine Financial Analyst of 2006. He is a financial analyst who believes that due to the current macroeconomic and geopolitical situation, saving and investing a small portion of one's wealth in precious metals is both prudent and wise. Gold and Silver Investments Limited believe that hard tangible assets and monetary assets such as gold and silver, the world's oldest forms of money, will once again become the safe haven assets of choice in the coming years. The increasing economic and geopolitical uncertainties at the dawn of the 21st Century mean that gold, silver and platinum will become increasingly important in the new century as a means of preserving financial wealth.

Gold & Silver Investments Limited is a precious metals brokerage company which sells and buys a wide variety of gold, silver and platinum numismatic and bullion products to all class of investor, companies and institutions in Ireland, the UK and internationally taking payment in all major currencies. We assist our clientele in diversifying their assets with a comprehensive range of precious metal coin and bar products and by allocated and unallocated precious metal storage facilities licensed by the Chicago Board of Trade (CBOT), Comex and Nymex and by other precious metal storage programs.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important weekly financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth. We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles precious metal savings and investments. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

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