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Gold Supported by Negative Real US Interest Rates

Commodities / Gold & Silver Jun 06, 2008 - 08:54 AM GMT

By: Mark_OByrne

Commodities Gold closed at $872.20 in New York yesterday and was down $8.30 but silver closed at $17.07 and was up 23 cents. Both have rallied in Asia and in early European trading.

The dollar is flat after yesterday's weakness but oil is up again (another nearly 2%) after yesterday's surge and this is leading to gold buying.


Gold continues to consolidate between $850 and $950 and there appears to be very strong support at the 200 day moving average at $852 especially given the prevailing macroeconomic climate and the ever important supply demand fundamentals (as outlined yesterday).

With Trichet pointing to higher interest rates in the Eurozone in the coming months in order to combat deepening inflation pressures, the dollar is likely to come under further pressure which bodes well for gold. Especially with inflation in the U.S. having increased to at least 4% and yet interest rates remaining near record lows at a hugely expansionary 2%. As we have stated for months, cheap money created the problem and no amount of cheap money will rectify the situation indeed it could make things considerably worse in the form of runaway inflation and stagflation.

It is difficult to fathom how anyone can construe negative real interest rates in the U.S, surging money supplies in the U.S. and internationally and printing presses in full effect globally as in any way gold bearish and shows massive myopia and or bias.

Gold's fundamentals remain as sound as ever and it will continue to outperform the majority of asset classes for the foreseeable future.

Today's Data and Influences
The eurozone economic calendar is light today, with German industrial production data the main feature.

Thus, all eyes today will be on the US non-farm payrolls numbers. The consensus forecast is for a fall on the month of 58,000, though this week's ADP employment numbers and yesterday's weekly jobless claims figures were both better than had been anticipated.



http://quotes.ino.com/chart/?s =FOREX_XAUUSDO&v=d12&w=1&t=l&a =200

Silver
Silver is trading at $17.21/17.25 per ounce (1200 GMT).

PGMs
Platinum is trading at $2046/2050 per ounce (1200 GMT).
Palladium is trading at $432/437 per ounce (1200 GMT). 

By Mark O'Byrne, Executive Director

Gold Investments
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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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