Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Peak Oil and Gold Short Squeeze

Commodities / Gold & Silver Nov 01, 2007 - 12:36 PM GMT

By: Mike_Clark

Commodities Best Financial Markets Analysis ArticleGold
Gold was up $7.30 to $791.70 in New York on Tuesday. Then, gold sold off initially on the FOMC's 0.25% interest rate cut but then turned around and rallied to new record highs at $798.80. It has drifted lower in Asian and European trading and is trading at $792.50 at 1200 GMT. Gold has again rallied in other major currencies and is trading at £381.50 GBP (up from £379.16) and €549.46 EUR (up from €543.86) and remains near record nominal highs in terms of GBP and EUR respectively.

The action in the gold market remains bullish with gold rallying in all major currencies. A new record monthly close is very important from a technical point of view and shows that this is not some short term speculative blow off in the dollar gold price as in 1980. Psychological resistance is at $800 while support is at the 10 day moving average at $772 and at $750.

There are now huge long and huge short positions in the gold market and there is a classic Mexican stand-off taking place. If the shorts win, which they have tended to do in recent years, the gold price could sell off sharply and retreat to lower levels. However, given the present macroeconomic environment with fears regarding record oil prices and increasing inflation, an increasingly likely serious U.S. recession and a possible sharp devaluation in the U.S. dollar, a massive short squeeze is looking increasingly likely.

A short squeeze is when the price of the stock, commodity, currency or traded asset rises and investors who have previously sold short rush to buy it to cover their short position and cut their losses. As the price of the market, in this case gold, increases, more short sellers feel compelled to cover their positions. The commercial shorts have lost billions on their gold short positions in the last two months and they are being served their heads on a plate. A massive and unprecedented short squeeze looks increasingly likely and this could propel gold above $1,000 per ounce in short order.

Forex and Gold
As expected the Fed cut rates 0.25% to 4.50% pushing the dollar to hit new record lows against many currencies. The dollar fell against the EUR and GBP (below $1.45 and $2.08 respectively). The strongest gainers were the Brazilian real, the South African rand and the Australian dollar.

In its policy statement the Fed stated that it now sees upside risks to inflation roughly balancing downside risks to growth, hinting that rates may now remain on hold for a while. The dollar needs strong U.S. economic data in the coming days to provide support. Manufacturing ISM, pending home sales, weekly jobless numbers, the core PCE inflation indicator and car sales figures will be important today. Oil prices, which surged overnight, will also be closely watched (more below).

The U.S. Dollar Index fell to a new record low overnight at 76.465 which is providing strong support for gold.


Spot silver was trading at $14.34/14.36 (1130 GMT).
Silver remains probably the most undervalued of all the commodities and is less than 29% of its 1980 nominal high of $50 per ounce. Silver will likely outperform most commodities in the coming years as investment guru, Jim Rogers, pointed out recently.

Interesting data from the Chinese central bank regarding silver shows that September YTD Chinese Imports of Silver were 586,972 kilograms, taking the nine-month YTD total to more than 4 million tons, with a year over year growth rate of almost +65%. Additionally, in the first nine-months of this year China was a net importer of silver, bringing in 600,000 tons more than they exported, a huge 1.3 million kilogram swing from last year's 9-month YTD net export total of 750.000 kilograms.

Platinum was trading at $1447/1451 (1130 GMT).
Spot palladium was trading at $371/376 an ounce (1130 GMT).


Oil surged $4.15 per barrel to $94.53 yesterday and hit a new high of more than $96 a barrel this morning, driven by renewed fears of fuel shortages this winter and the impact of rising demand from China and India. The price of a barrel of U.S. crude oil for December delivery reached $96.24 in Asian trading, having already gained 5% yesterday on the New York exchange. Brent North Sea crude also hit a new high of $91.63 a barrel.

There is no technical resistance to $100 and we will likely reach $100 in the coming days. Traders believe that even $125 per barrel is now highly possible. Bloomberg reports that Oil traders increased bets that December futures will reach $125 a barrel because of possible disruptions to Middle East supplies and rising demand. Traders held call options to buy 2,526 contracts, each representing the right to buy 1,000 barrels, of December oil at $125 in New York as of Oct. 29, from 1 lot on June 29, New York Mercantile Exchange data show. Bets on $100 oil are also surging: Traders held options to buy 49.7 million barrels of December oil at that price on Oct. 30, up from 30 million barrels on Jan. 2.

Peak oil, the view that supply has reached, or will soon reach a high point and then fall, is looking increasingly likely.

Leading figures from the Middle East oil industry added their voices on Tuesday to those warning that the world is struggling to sustain rising oil production."There is a real problem - that supply may not be possible to increase beyond a certain level, say around 100 million barrels," Libya's National Oil Corporation chairman Shokri Ghanem said at an industry conference. "The reason is, in some countries production is going down and we are not discovering any more of those huge oil wells that we used to discover in the Sixties or the Fifties."Sadad al-Husseini was a key architect of Saudi Arabian energy production policy for more than a decade whilst a top official at state oil firm Saudi Aramco. He was even more pessimistic, saying world oil production had already plateaued. "We are already three years into level production," Husseini also told the annual Oil & Money conference, a gathering of top executives.

The views are far more conservative than those of the International Energy Agency, adviser to consumer countries, that supply will rise to 116 million bpd by 2030 to meet demand, from about 86 million bpd now. Production is in decline in some regions, such as the North Sea, increasing the burden on other producers such as the 12 members of the Organization of the Petroleum Exporting Countries.

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

© 2005-2022 - 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