Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
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

Market Oracle FREE Newsletter

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

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

Commodities

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 MoneyControl.com 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
BullionVault.com

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 www.BullionVault.com , 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 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

6 Critical Money Making Rules