Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

IMF Proposed Gold Sale Looks Doubtful

Commodities / Gold & Silver Feb 26, 2008 - 09:48 AM GMT

By: Mark_OByrne

Commodities Gold was down $7.30 to $937.40 per ounce in trading in New York on Friday but silver was up 10 cents to $18.08 per ounce. Gold continued to weaken in Asia but has strengthened somewhat in early European trading and is trading at $934.10 per ounce.

Another mooted IMF gold proposal (more below) may have led some weak longs to liquidate positions yesterday. But after recent week's surge in gold and last week's sharp (4.5%) increase in the price of gold, the market was overbought in the short term and ripe for a correction. It was interesting that silver has remained strong despite gold's less than 1% sell off.


Gold also fell in British pounds and in euro. The London AM Fix at 1030 GMT this morning was at $934.00 and gold fixed at £473.68 and €627.94.

More Proposed IMF Gold Sales
Counterintuitively, this newest in a long line of mooted IMF gold sale proposals (Gordon Brown among others mooted the possibility in 2005) may again be bullish for gold. When Gordon Brown telegraphed his sale of British gold reserves in 1999 the market was initially concerned that the sales could lead to falling gold prices. This concern was proven false and look how gold has performed since – rising from below $300 to over $900.

Similarly when the IMF has sold gold previously, gold has fallen initially and then rallied in price in the medium and long term. As Jim Sinclair of JS Mineset has noted, “it is important to note that their sales all have taken place at times when major bull markets were either just beginning or, as in 1976-1980, at the start of the major parabolic move to then all time highs.”

Also, it is important to note that there is considerable doubt as to whether this sale will take place. The IMF and Treasury do not decide, rather the U.S. Congress, who control the IMF, and they have been opposed to IMF gold sales in past and may be again. Marc Chandler, currency strategist at Brown Brothers Harriman & Co., said in a research note that he U.S. Congress could block the Treasury's initiative. "Previously Congress opposed IMF attempts to sell gold in both 1999 and 2005, but McCormick hinted at having Congressional support now."

Also Reuters have reported ( http://in.reuters.com/article /businessNews/idINIndia -32142520080225 ) that the timing of any possible sales is also in doubt. U.S. Treasury Under Secretary David McCormick said on Monday it was still unclear when the U.S. Congress would be asked to approve proposed International Monetary Fund gold sales and the move would depend on implementation of the IMF's reform agenda. There is no mention of when a vote on the issue might be made.

As usual the proposal was long on possibilities and hints and short on detail and concrete facts.

Finally, even if it proceeds, the sales will be staged in a manner similar to the 500 tonnes quotas of the Washington Agreement. In other words, it won't be dumped on the markets in one go and that is a specific concern that accompanies any major government gold sales. Indeed, there is an opinion that none of the gold will see public sales but be snapped up by governments who are quite prepared to shore up central bank reserves or sovereign wealth funds with inflation proof hard assets and the finite currency and monetary reserve that is gold.

So, the impact of any possible IMF gold sales is likely to be minimal. In fact, the markets may already be discounting these gold sales in the current price of gold which may partly explain why silver is outperforming gold and may well continue to do so. These sales have been mooted on various occasions in the last 8 years and nothing has materialized and gold has risen by nearly 250%.

Were the IMF actually to start selling gold then we may actually see gold surge in value in a typical sell the rumour and buy the news market movement. Central banks have been selling a part of their gold bullion reserves (very shortsightedly) under the Washington Agreement in recent years and yet gold has surged in price.

There is a growing chorus of market analysts who seriously doubt the possibility and efficacy of gold sales by the International Monetary Fund and the IMF looks unlikely to depress gold prices and support the dollar which may be the ultimate motivation of any sale. Mario Innecco, a broker at MF Global in London, told Bloomberg some 2 weeks ago “Every time the IMF has sold gold it has actually triggered more buying interest. It will just make it easier for the big sovereign buyers" – the big central banks outside the G7 who want to build up their gold reserves – "to snap up cheap gold from the IMF."

Market analyst, Rick Ackerman observes that the gold contemplated for sale by the IMF, is a tiny fraction of the gold needed by nations, especially in Asia and the Middle East, seeking to hedge their huge dollar surpluses. Ackerman predicts that the dollar-surplus holders will gladly hoover up any amount of gold the IMF wants to throw on the market and that it will turn out to be "the day the hard-money advocates called the bankers' bluff."

Attempting to sell the IMF gold is another short sighted illusory panacea which will create more problems for western financial institutions in the long term. Indeed it may ultimately lead to a further increase in the wealth and power of Asian and other emerging economies and diminution in that of western economies and particularly the U.S.

We believe gold and silver remain in the middle stages of a multi year bull market as none of the fundamental factors driving prices higher have dissipated, indeed many are strengthening and becoming even more important – particularly the real possibility of stagflation.

Support and Resistance
Strong support in gold is now seen at $890 to $900. Short term support is now at $925 and below that at $915. The $1000 price level remains a short term price target but further short term consolidation may be needed prior to reaching that big round number.

Silver
Silver is trading at $18.11/16 at 1200GMT. Silver remains undervalued and $25 looks likely in 2008. Silver's nominal high of $50 per ounce is likely to be reached in the next 3 to 7 years. Nearly all other commodities have reached their nominal record highs and some have reached their inflation adjusted record highs. Silver remains the laggard and this will likely change soon as silver plays catch up.

PGMs
Platinum is trading at $2112/2122 (1200GMT).
Many assume that the surge in platinum in recent weeks must be a speculative blow off and will result in a sharp selloff soon. This is highly unlikely as this has not been a speculatively driven market.

The FT reports that CFTC data showed a reduction in the speculative net long position for a sixth consecutive week in spite of prices rising to record levels amid concerns about the South African power crisis causing a supply shortfall this year. John Reade of UBS said the data was a clear indication that speculators were not the driving force behind rising platinum prices. “Over the counter buying from funds and investors, together with some producers scrambling to cover contractual requirements have been behind the move in platinum (prices) this year,” said Mr. Reade.

Mr. Reade said that “supply deficits of more than 700,000 ounces a year will result over the next three years. The only way the market can be brought back to near balance is for higher prices to displace jewellery demand and encourage scrap (supplies) and profit taking from investors.”

The shortfall in platinum production appears to be creating a structural change in the platinum market that will result in materially higher prices and $3,000 per ounce is being spoken of as a realistic medium term target.

Palladium surged to over $513/519 per ounce (1200GMT).

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
Tower 42, Level 7
25 Old Broad Street
London
EC2N 1HN
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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 www.financialregulator.ie 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.

Mark O'Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - 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