Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19
Crude Oil Price Fails At Critical Fibonacci Level - 15th May 19
Strong Stock Market Rally Expected - 15th May 19
US China Trade Impasse Threatens US Lithium, Rare Earth Imports - 15th May 19
Gold Mind Reader's Guide to the Global Markets Galaxy: 'Surreal' - 15th May 19
Trade Wars and Other Black Swan Threats to Your Investments - 15th May 19
Our Long-Anticipated Gold Momentum Rally Begins - 15th May 19
Defense Spending Is Recession Proof - Defense Dividend Stocks - 15th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

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