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Gold Remains Strong with Near Record Crude Oil Prices and Near Record Low Dollar

Commodities / Gold & Silver Nov 02, 2007 - 12:06 PM GMT

By: Gold_Investments

Commodities Gold
Gold was down $1.50 to $790.20 in New York yesterday. It has traded sideways in Asian and European trading and is trading at $793.50 at 1200 GMT. Gold has corrected in other major currencies and is trading at £380.42 GBP (down from £381.50) and €547.50 EUR (down from €549.46) but remains near record nominal highs in terms of GBP and EUR respectively.


The record high London Gold Fix in euros is at €561.40. Gold has only been fixed in euros since 1st January 2000, before that date it is shown in two currencies only, the pound sterling and the U.S. dollar.
On Wednesday 10th May 2006, gold reached its highest price since 1980 in pound sterling. The morning London Gold Fix was £378.249, beating the previous peak of £371.066 on 21st January 1980. The London a.m. Fix on October 29th was £385.12 in pound sterling, a new all time record high.

Gold is remaining strong with near record oil prices and near record low dollar prices despite the serious stock market decline yesterday. There was much misguided talk that gold was now correlated with the wider equity markets when it sold off briefly in the early stages of the credit crunch. Some suggested that "the nature of gold has changed from a safe-haven asset to a trader's asset" and that as a lot of "fast money" and hedge fund money had entered the gold market that gold was now correlated with the wider markets. More recently, gold has remained resilient despite market sell offs and its non correlation is reasserting itself over the medium and long term. This is precisely why it remains the ultimate safe haven asset as used by the central banks of the world.

Credit Suisse reaffirmed this safe haven status and the continuing importance of gold as an essential monetary reserve to central banks in their recent report which said that gold would surge to $1,000 per ounce in the next 4 years. Credit Suisse analyst David Davis said "we find that over the last 18 years, apart from on three occasions, the supply of gold has been in deficit. This primary deficit has been masked by the secondary supply of gold into the market mainly from central bank sales. We believe central bank sales will wither going forward and the banks could become net buyers of gold."

Forex and Gold
The dollar remains under pressure trading near record highs versus the euro at 1.4480 and at 2.0850 versus sterling.

Risk aversion again became paramount yesterday. The dollar fell sharply against most currencies on a move out of riskier assets as stock prices fell over renewed concerns about the global financial sector. The Dow Jones index tumbled by 362 points following a brokerage downgrade of Citigroup and news that the Fed had pumped $41bn of temporary liquidity into the banking system. A weak U.S. manufacturing ISM survey added to pressures on the dollar.

The U.S. Federal Reserve being forced to pump another 41bn USD into money markets yesterday is extremely bearish for the U.S. dollar. It was the largest injection since the 50bn put in after the September 2001 terrorist attacks on New York and Washington, prompting fears that the world's banking sector may be into further multi-billion dollar write-downs.

Market attention for the day will be on the payrolls figures. A negative figure could lead to further sharp declines in the dollar and safe haven buying of gold.

Silver
Spot silver was trading at $14.29/14.31 (1130 GMT).PGMs
Platinum was trading at $1442/1446 (1130 GMT).
Spot palladium was trading at $369/372 an ounce (1130 GMT).

Oil
Oil prices rose Friday in Asian and European trading after the previous session's decline prompted fresh buying amid expectations that crude futures will continue to test new records because of tight supplies. U.S. crude rose $1.10 to $94.59 a barrel, having fallen by $1.04 yesterday after striking a record high of $96.24. Brent crude was up $1.32 to $91.04, off its record high of $91.71 from the previous session. The contract on Thursday fell $1.04 to settle at $93.49 a barrel after rising as high as $96.24, a new trading high.

Gold Investments
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Gold Investments
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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.

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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.

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