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Increasing Gold Demand from Sovereign Wealth Funds and Central Banks

Commodities / Gold & Silver Jul 25, 2008 - 06:53 AM GMT

By: Mark_OByrne

Commodities Gold finished trading in New York yesterday at $922.20, down 50 cents and silver was down 16 cents to $17.22. Gold has rallied in Asia and in early European trading.

While oil is up slightly and the dollar is down slightly, gold is likely to be up on bargain hunting and safe haven buying. The 100 day moving average at $916 appears to be good support and the summer low is likely to be around these levels although a brief dip below $900 is possible.


Risk aversion is in evidence again as stock markets have fallen globally on reports fuelling fears that Britain, the euro zone, Japan and the US are sliding toward recession. US financial stocks suffered their worst one-day decline since 2000, as investors' recent optimism was dented by renewed fears over the health of Washington Mutual and weak US housing data.

German business sentiment this month suffered its biggest decline since the 2001 terrorist attacks in New York and Washington, while existing US home sales were at the lowest in a decade and UK retail sales growth slowed in June to the weakest annual rate since early 2006 .

Swiss National Bank Gold Sales Minimal due to Likely Increasing Demand from Sovereign Wealth Funds and Many Central Banks
Reuters reports that the Swiss National Bank placed 68 tonnes of gold in the market in the first half of the year as part of a programme to sell a total of 250 tonnes by the end of September 2009. The central bank said this meant roughly another 37 tonnes of gold were yet to be sold as part of the programme. In June 2007, the SNB said it would sell 250 tonnes of gold by September 2009, in line with the agreement among European central banks to limit gold sales to 500 tonnes a year.

The SNB news is old news and already priced into the market and given the extent of international demand both from investors but increasingly also from sovereign wealth funds and central banks, the news will have no impact on prices. The FT reported last week that sovereign wealth funds are cutting their exposure to the dollar due to increasing concerns regarding the U.S. financial system and economy. Central banks internationally are doing likewise and western central banks have sharply decreased their gold sales and central banks in Asia, South America and the Middle East are becoming net buyers of gold again.

Today's Data and Influences
U.K. GDP figures this morning showed the UK economy slowing sharply. The UK economy grew 0.2% in the second quarter of the year, as the credit crunch took its toll on housing and consumer spending. The figure is the lowest quarter-on-quarter growth for three years.

U.S. Core Durable Goods Orders at 1.30pm, and U.S. New Home Sales at 3pm. Both are expected to be weak.

This morning's M3 money supply data from the eurozone should highlight that growth in monetary aggregates remains elevated and cause of concern for the ECB. M3 is the broadest measure of money supply growth and far more important than M2 which is sometimes used as ‘evidence' of the likelihood of deflation rather than stagflation or hyperinflation.

Gold and Silver
Gold is trading at $930.20/930.80 per ounce (1130 GMT).
Silver is trading at $17.53/17.57 per ounce (1130  GMT).

PGMs

Platinum is trading at $1730/1740 per ounce (1130  GMT).
Palladium is trading at $389/395 per ounce (1130  GMT).

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 and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
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.

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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.

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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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