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Gold Falls on Increasing Risk Appetite

Commodities / Gold & Silver 2009 May 01, 2009 - 04:08 AM GMT

By: Mark_OByrne

Commodities Gold fell 1% yesterday as risk appetite returned with equity markets in Asia and Europe rising prior to a mixed performance on Wall Street.


US bonds continue to come under pressure and the yield on the benchmark 10-year Treasury bond rose to 3.124%, the highest it has been since late 2008. The bond may have broken down technically and this would in normal free market circumstances lead to higher long term interest rates. But the US government is printing money to buy their own bonds and this artificial manipulation of monetizing debt may lead to rates remaining near historic lows, at least in the short term.

The markets appetite for risk (particularly in equities) remains remarkable as the myriad of negative financial and economic fundamentals is daunting. The bulls as usual herald this resilience as proof that the worst is over. However, it is likely no such thing rather the markets are being irrationally exuberant in the short term prior to the very poor fundamentals reasserting themselves in the coming weeks.

The WHO yesterday raised its six-tier alert to 5 and said the world's first influenza pandemic since 1968 may soon be declared. A pandemic would further badly affect international economies with unemployment surging, tax revenues collapsing further and government spending and deficits set to surge massively.

It would be hard to write a script that could be more positive for gold than the current global macroeconomic one.

‘Sell equities in May and go away’ may never have been a more appropriate a strategy than this year.

Conversely, buying gold in May will likely be seen as very wise in the coming months as the long period of correction and consolidation may soon run its course prior to the resumption of the gold bull market.

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
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Email info@gold.ie
Web www.gold.ie
Gold and Silver Investments Limited
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EC3V 3ND
United Kingdom
Ph +44 (0) 207 0604653
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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.

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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.

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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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