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Gold Range Trades Pending Bull Market Resumption

Commodities / Gold & Silver Sep 04, 2008 - 10:35 AM GMT

By: Mark_OByrne


Gold was flat in New York yesterday despite the increasingly bullish macro environment. Gold closed at $803.40 down $1.20 and silver closed at $12.92 down 12 cents.

Gold rose in early trading in London but has subsequently given up some of the gains as the dollar has rallied again (1.4456 to the EUR).

Oil is stronger and remains at the upper end of its recent range ($110.18 a barrel - Light Sweet Crude Oil Future - Combined - OCT08) and this should be supportive of gold.

Gold has been in a range and consolidating between $775 and $845 for more than 3 weeks. A daily and weekly close above $845-$850 will be needed in order to rectify some of the serious technical damage done in recent weeks and to confirm the gold bull market remains in full effect.

Gold Fell Some 50% in Middle of 1970's Bull Market Prior to Rising 800%
Gold would have to fall by some 50% to massive long term support at $550 in order to signal the end of the bull market. In 1974, gold had risen from $35 in 1971 to some $200 (December 1974) prior to sharp falls to nearly $100 (August 1976).

Given the extent of international demand it is extremely unlikely that gold could fall a similar amount today. Indeed, it is estimated that the average production cost for gold mining companies to produce one ounce of gold has now surged to over $750 per ounce. Which will lead to a floor being put under the gold price at these levels.

Many heralded the falls in the mid 1970’s as the end of the bull market when in fact it was just a long correction. Subsequently gold rallied from some $100 (August 1976) to over $800 in January 1980. While an eight fold increase in gold from today’s prices seems outlandish it is not beyond the realms of possibility and the inflation adjusted high of $2,400/oz looks increasingly likely in the coming months.

Gold Monthly Close 1971-2008

Today's Data and Influence
Markets await today’s interest rate decisions by the European Central Bank and the Bank of England. The two central banks are expected to leave rates unchanged for the moment however expectations that they will cut in the longer term have hurt both currencies.

Given the speed and scale of the UK economic slowdown, investors are convinced a rate cut is just a matter of time. For the first time since the early 1990s, Britain’s economy failed to grow in the second quarter of the year and many believe the country has already tipped into recession.

Today’s US Jobless data just after the NY open and ISM non-manufacturing (services) scheduled to be released at 1500 GMT will also be closely watched for indications as to the extent of the slowdown in the U.S.

Gold and Silver
Gold is trading at $807.60/808.10 per ounce (1215 GMT).
Silver is trading at $12.93/12.99 per ounce (1215 GMT).

Platinum is trading at $1399/1413 per ounce (1215 GMT).
Palladium is trading at $288/294 per ounce (1215 GMT).

By Mark O'Byrne, Executive Director

Gold Investments
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Dublin 2
Ph +353 1 6325010
Fax  +353 1 6619664
Gold and Silver Investments Limited
No. 1 Cornhill
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708

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 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.

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