Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20
Facebook (FB) AI Mega-trend Tech Stocks Investing 2020 - 10th Feb 20
The US Constitution IS the Crisis - 10th Feb 20
Stock Market Correction Continues - 10th Feb 20
Useful Tips for Becoming a Better Man - 10th Feb 20
Will CoronaVirus Pandemic Trigger a Stocks Bear Market 2020? Part1 - 9th Feb 20
Could Silver Break-out like it did in 2011? - 9th Feb 20
The End of the Global Economy - 9th Feb 20
Fed to Stimulate in Any Crisis; Don’t Let Short-Term Events Bother You - 9th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Benefits from Geopolitical Risks - Turkish-Iraq Tensions

Commodities / Gold & Silver Oct 17, 2007 - 09:39 AM GMT

By: Gold_Investments

Commodities Gold
Gold was up 30 cents on Tuesday in New York from $756.90 to $757.20. Since then it has traded sideways in Asian and early European trade and is up marginally to near fresh 28 year record highs at $759.20/ 759.70 at 1200 GMT.

Gold remained firm in other currencies and is trading at €535.70 (EUR) and £373.30 (GBP).

Probably the most important news pertaining to the forex and gold markets was the horrendous and unexpected sharp outflow of funds from the U.S. in August. Foreigners dumped a record amount of long-term U.S. securities amid August's market turmoil, raising the spectre of a flight from U.S. assets and the dollar (more below).

Geopolitical risk in the form of the growing Turkish-Iraqi tensions is creating some safe haven demand for gold. Turkey's Parliament is expected to approve a possible cross-border military incursion into northern Iraq today to chase separatist Kurdish rebels despite international calls for restraint. Oil prices remain near record highs above $87 per barrel. It is important not to overestimate the Turkish-Iraqi tensions factor in the surging oil price. As always supply and demand are the fundamental factor and as Barclay's Capital's Kevin Norrish pointed out “rapid tightening of global oil balances as the primary factor behind the move up in prices.”

Oil prices near record highs (especially in conjunction with record prices for most other commodities) and a falling dollar is very inflationary. Data on the U.S. housing market continues to disappoint to the downside and stagflation seems more and more likely.

• Probably the most important news pertaining to the forex and gold markets was the horrendous unexpected sharp outflow of funds from the US in August. Foreigners dumped a record amount of long-term U.S. securities amid August's market turmoil, raising the spectre of a flight from U.S. assets and the dollar.

During a period when the dollar was already falling sharply, the credit crunch, set off by concerns about the falling U.S. housing market, appears to have made foreigners even more wary about buying American assets. The data confirms that investors, particularly in Asia, are moving out of the dollar and this will likely lead to a longer term secular dollar decline. The August outflow exceeded the previous record decline of $21.2bn in March 1990. Japanese and Chinese investors were the biggest sellers with Asian investors dumping $52bn worth of U.S. Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

This could drive the dollar down, U.S. interest rates up and slow U.S. growth even further. It could even lead to a more disorderly collapse in the U.S. dollar akin to what happened to the British pound in 1992. This data is extremely bullish for gold and will likely lead to a large increase in large institutional and central bank diversification into gold, particularly from the U.S.' largest creditors.

• The FT reports that the World Gold Council has cut its forecast for India's gold consumption this year to 15-25% from 40%, in the first sign that record high gold prices are beginning to dent jewellery demand, one of the main supports of gold's recent price surge. The council said that it now expected India to consume 800-900 tonnes this year, instead of an initial forecast of about 1,000 tonnes.

While jewellery demand has been important to the gold price it is only one of the demand factors. In the 1970s, jewellery demand fell sharply as gold moved up from $35 to $200 in 1974, however this did not stop gold from continuing to rise for the rest of the decade and to $850 in 1980. Declining gold jewellery demand was superseded by investment demand for inflation and safe haven reasons and this is likely to happen again. This is especially the case with the advent of many ETFs internationally. Rising prices are more likely to dent demand for platinum and palladium than it is for gold due to gold's continuing and increasingly important investment and monetary status.

Interestingly, the Indian stock market (Bombay Stock Exchange's 30-share Sensex) was halted for one hour after the benchmark index plunged nearly 8 percent early Wednesday, a day after the market regulator moved to curb buying by foreign funds. Jewellery demand in India is not for adornment rather as dowries and for long term investment and saving and turbulence in stock markets will lead to further safe haven and saving demand.

• A clear illustration of how jewellery demand will likely be superseded by investment demand due to macroeconomic and geopolitical risk is seen in yesterday's news that the Japanese investment public with their huge surplus of savings is entering the gold market. Besides Japanese demand there is also increasing demand from other emerging markets, the oil rich Middle East, Russia and China. Emerging markets are experiencing significant economic growth and significant growth in their middle classes. In China alone by 2010, the number of Chinese who make at least $10,000 a year will double from 150 million to 300 million. A decade later, China's middle class will have more buying power than all of Japan.

• Bloomberg reported that 'As dollar sours and oil soars, investors turn to gold'. "Oil is at a record high and in the face of a slumping dollar, you've got a recipe for gold to shoot higher," said Matt Zeman, metals trader at LaSalle Futures Group in Chicago. "The dollar continues to weaken," said Dennis Gartman, economist and editor of the Gartman Letter based in Suffolk, Virginia, who recommended last week that clients buy gold. "Crude oil and other commodity prices continue to rise. And under those circumstances, gold shall continue to move from the lower left to the upper right on the charts."

• Highly respected analyst, Louise Yamada sees gold reaching $3,000 within a decade."Gold is the purest play against the dollar,'' said Louise Yamada, managing director of Yamada Technical Research Advisors LLC in New York, former head of technical research at Citigroup. Yamada is highly respected and was was voted Wall Street's best technical analyst from 2001 to 2004

Forex and Gold
The USD has weakened slightly and is trading at 1.417 (from 1.4130 yesterday) and 2.037 (from 2.0315 yesterday) against the EUR and the GBP respectively.

Despite the dreadful US TIC data, this morning the U.S. dollar is up marginally to 78.234 (from 78.20 yesterday). Support is at its all time record low at 77.657. Should support fail at this level the dollar will likely sell of aggressively to 75.00.

Spot silver was trading at $13.58/13.60 (1200 GMT).

Platinum was trading at $1414/1419 (1200 GMT).
Platinum should remain elevated due to the continuing concerns regarding supplies from South Africa and continuing strong global demand.
Spot palladium was trading at $367/372 an ounce (1200 GMT).

World oil prices remained at record peaks, holding above $87 in New York, as traders feared that more unrest in crude producer Iraq could further stretch global supplies, which are already stretched.

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ph +353 1 6325010
Fax  +353 1 6619664
Gold Investments
Tower 42, Level 7
25 Old Broad Street
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important 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 savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Fair Use Notice: This newsletter contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of financial and economic significance. At all times we credit and attribute the copywrite owner and publication.
We believe this constitutes a 'fair use' of any such copyrighted material as provided for in Copyright Law. The material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for economic research purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

Gold Investments Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules