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Gold Strong on Bernanke's Warning of Bank Failures

Commodities / Gold & Silver Feb 29, 2008 - 09:29 AM GMT

By: Mark_OByrne

Commodities Gold was up $7.10 to $965.80 per ounce in trading in New York yesterday and silver surged another 44 cents to $19.64 per ounce (more on silver below). In Asian and early European trading, gold and silver rose to new respective record and 27 year high levels but have fallen from record highs of $975.75 and $19.92.

Gold strengthened in British pounds and in euros to new record highs. The London AM Fix at 1030 GMT this morning was at $969.00, £488.88 and €637.58.


http://www.gold.org/value/stats/statistics/images/dailyshort_4.gif

Gold continued its recent rally on record oil prices, the dollar hitting record lows  and growing fears of a U.S. recession yesterday. The GDP and initial jobless claim figures continued the recent trend of very poor economic data and may also have contributed to gold's strength yesterday.

Gold rose in the aftermath of Bernanke's worrying comments that there probably will be some bank failures. Understandably,  financial stocks in the U.S. weakened on the news. Bernanke acknowledged that stagflation was a possibility yesterday but said that "I don't anticipate stagflation. I don't think we are anywhere near the situation that prevailed in the 1970s." Never believe anything until it's been officially denied.

Worryingly markets are now pricing in a 75 basis point cut at the next FOMC meeting on 18 March. Today's sees the release of personal income and spending for January as well as the Chicago PMI and final Michigan sentiment surveys for February.

29-Feb-08 Last 1 Month YTD 1 Year 5 Year
Gold $   969.00 4.90% 16.28% 43.79% 177.25%
Silver     19.63 17.34% 32.91% 37.86% 327.71%
Oil   102.18 10.72% 3.03% 66.25% 179.18%
FTSE     5,952 1.34% -7.49% -3.55% 63.20%
Nikkei   13,603 0.92% -11.13% -22.72% 62.65%
S&P 500     1,368 0.39% -6.85% -2.78% 62.59%
ISEQ     6,482 -3.55% -6.53% -31.11% 71.02%
EUR/USD   1.5201 2.92% 4.22% 14.93% 40.69%
© 2008 GoldandSilverInvestments.com


Our belief that the latest International Monetary gold proposal story was more spin than reality is seen in the fact that the IMF said on Thursday that no timetable has been set for the sale of a limited portion -- about 12.9 million ounces (403.3 tonnes) -- of the IMF's gold stocks of 103.4 million ounces. The news was not widely reported unlike the previous ‘news'. In a background paper, the IMF said if the gold was sold on the market, as opposed to off-market transactions, the sales would be phased over time to avoid market disruptions, as recommended by an independent panel.
Factsheet - Gold in the IMF : http://www.imf.org/external/np /exr/facts/gold.htm

Support and Resistance
Strong support in gold is now seen at $890 to $900. Short term support is now at $950 and below that at $930 and $915. The $1000 price level remains a short term price target and $1,200 is now a realistic possibility in the coming weeks.

Silver
Silver is trading at $19.64/70 at 1200GMT.
At the start of the year we predicted that silver would reach $20:
“ We remain bullish on silver and continue to believe it will outperform gold due to the extremely strong supply demand fundamentals. We believe silver will surpass $20 per ounce in 2008 and could reach as high as $25 per ounce.”

Despite surging prices the silver open interest fell another 5,128 contracts to 168,212 yesterday once again showing that this is not a speculative bubble rather a possible commercial signal failure where the huge and unprecedented concentrated short positions in silver are being forced to cover their shorts and buy back silver in significant volumes. We could see the commercial shorts forced to panic cover en masse creating a massive surge in the silver (and gold) price. This eventuality is looking increasingly likely, especially in the light of the very significant macroeconomic and systemic risks facing the U.S. and many western economies.

Silver has now surpassed the predicted high of most silver analysts in the world who have failed to realize the massive growing supply demand imbalance in silver and how the humongous and unprecedented short position in silver would lead to prices being propelled to levels that may shock even silver's more bullish enthusiasts. This happens in most bull markets but will be a sight to behold in silver in the coming years.

Only 3 analysts out of 21 predicted gold would surpass $19.50 this year. This continues a trend whereby most analysts have underestimated the fundamentals driving these bull markets in gold and silver and continue to do so. http://www.lbma.org.uk/publicat ions/forecast%202008/forecast20 08_silver.htm

Of all the precious metals and commodities we remain the most bullish on silver, next gold and then platinum and palladium.

PGMs

Platinum is trading at $2153/2163 (1200GMT).
Palladium surged and is trading at $560/566 per ounce (1200GMT). 

Both platinum and palladium are flat and appear to be taking a breather and consolidating prior to further likely price increases in the coming weeks.

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
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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

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