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
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


Gold: "Buy the Dips" Advised as Dollar Slides on Terrible US Economic Data

Commodities / Gold & Silver Feb 28, 2008 - 09:41 AM GMT

By: Adrian_Ash


THE PRICE OF physical gold bullion spiked to $962.50 per ounce just ahead of the US open on Thursday, standing 1.5% higher for the week so far as European stock markets dropped another 1%.

Crude oil rose above $102 per barrel, while Wall Street futures slumped on the weakest GDP data since 2001. Initial US jobless claims for the week-ending last Friday came in 6.5% ahead of forecast.

"I'm looking at $978 per ounce to be tested at least," said T.Gnanasekar of Commtrendz in Mumbai to earlier today.

"Basically, it's going to be volatility against profit booking and that would also find lot of bargain hunting in the Gold Market .

Short-term, "I believe that there is still some upside and one can consider Buying Gold on the dips," he added.

As the Gold Market broke out of its tight overnight range, US economic growth for the end of 2007 was reported at a miserable 0.6% annualized, below Wall Street's already modest 0.8% consensus forecast.

That fourth-quarter GDP growth compares with 4.9% annualized between July and Sept. – and it would have been sharply negative if the cost of living used in the Census Bureau's sums were nearer to CPI inflation.

The GDP deflator applied by the Census Bureau to its headline growth rate rose by 2.7% annualized in the fourth quarter according to today's report. The Consumer Price Index, in contrast, averaged 4.0% annualized growth between Oct. and Dec.

Since the Federal Reserve began slashing its key lending rate in August to try and stall a credit-led recession, the US Dollar has now lost more than one-tenth of its value on the currency markets and dropped 42% of its value against Gold .

The Dollar held steady today around a new all-time low of $1.5140 per Euro, but "if the Dollar weakens further, then definitely we will see an acceleration in [gold's] upside trend," reckons Frederic Panizzutti at MKS Finance.

"Gold should remain pretty well supported. We see a range between $950 and $1,000."

In the broader commodities market crude oil rose back above $102 per barrel today after a report of militant attacks in Nigeria , the world's fourth largest producer. Israel meantime continued air strikes on the Gaza Strip, raising the Palestinian death toll to 17 – including a six-month old baby according to Reuters – after a rocket fired from the territory killed an Israeli overnight.

"We are at the height of the battle," said the Israeli prime minister, Ehud Olmert, when he met US secretary of state Condoleezza Rice this morning.

The United States also called on Turkey today to halt its ground offensive against Kurdish PKK rebels in northern Iraq . The head of Turkey 's general staff replied that his troops may stay in Iraq for "one day or one year."

"New mining-production of gold has been anything but good for the mines of late," notes Wolfgang Wrzesniok-Rossbach in his latest Precious Metals Weekly for Heraeus, the German refining group. "In South Africa gold production fell 4.1% in December. Mali , with 57 tonnes annual production – not entirely insignificant – produced 9% in 2007."

One major reason, Wrzesniok-Rossbach notes, is "that the mines were coming closer to the end of their life."

"Gold is part of people wanting to buy into tangible, limited supply assets," as BullionVault told Bloomberg this morning. Faced with surging prices for food, oil and base metals, "gold [remains] a hedge against inflation [but only] for as long as interest rates are not keeping up with the cost of living.

With Ben Bernanke at the US Federal Reserve, however, "there's no fear of sharply higher interest rates any time soon."

Completing his two-day testimony to the US Congress today, the Fed chairman will know that Freddie Mac – the second-largest US mortgage lender – suffered losses of $2.5 billion in the last three months of 2007.

Chartered by Congress to help boost home-ownership rates in 1970, Freddie managed to lose $3.97 per share in the fourth quarter, some 30% worse than analyst forecasts. Home-loan lender Thornburg Mortgage now faces margin calls on $2.9 billion of securities it said today, while J.P.Morgan Chase saw it 2008 earnings downgraded by two brokerages this morning.

The Calpers pension fund (California Public Employees' Retirement System) announced that it may raise its exposure to commodity investments 16 times over by 2010 to some $7.2 billion.

The largest US pension fund, Calpers holds some $240 billion in assets. Last year it put 1.8% of its money into commodities for the first time.

"We plan on ramping up the program by hiring additional staff," says spokesman Clark McKinley. "We are excited about commodities, which have performed exceptionally well for us."

By Adrian Ash

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2008

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash 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