-- Posted Wednesday, 9 January 2008 | Digg This Article
| | Source: GoldSeek.com
Although we do not have sufficient space here to cover the full picture of why, [this will be seen in the full issue of our special 2008 issue of the newsletter next week] we can give you one aspect of why. This feature will be one of “moves to extremes” in a variety of markets as “dramatically difficult days” will hit some markets and “couldn’t be better days” hit others.
As gold is now commonly being spoken of going to $1,000, as it goes above $850/ounce and as part of our forecasts for 2008, it is appropriate to continue to give you the next step in the evolution of gold that began at the end of the last century, after having been virtually discarded for the last twenty years of the last century.
With the crack in confidence in the global monetary system becoming clearly visible in 2007, as the sub-prime crisis evolved into an interbank credit crisis towards the end of the 2007, the stage was set for more confidence degeneration in 2008. When globally respected bank’s become fearful of established bank’s ability to repay short-term loans, despite the reality that Central Banks are lenders of last resort, something fundamental has broken down. Even when Central banks opened the flood-gates of credit supply to banks, not once but several times the problem did not go away. Add to that that the initial precipitant of that crisis has yet to reach full impact and an economic recession seems to be on the way [unless the floodgates of new money can stem the dive down to there] then you know crisis management has moved from 
short-term to medium-term. These problems are systemic not open to a quick fix nor even an obvious long-term solution so have to get worse.
A look at the impact of the tsunami of new money tells you that inflation is being fostered worldwide, as the target of such money isn’t being hit, but held in the hands of those institutions that don’t have a dire need for it, sending good markets even higher. To get investments right in 2008 we have to ignore the usual “overview” approach, as this is now completely inadequate. Now we have to separate ailing markets from healthy ones, within all economies. And we are seeing bond markets roaring next to steeply declining other fixed interest markets, manufacturing sectors suffering as emerging nation countries manufacturing flourishing.
Complicate this with the steady, unstoppable flow of wealth to the healthy East from the West and to massive sovereign wealth funds looking for markets to invest in and you are seeing a global move from poor markets to vibrant ones in emerging nations and commodities, including gold and silver.
In these markets, the massive increases in liquidity that we are seeing as a result of the credit crunches across the world [except in the East] is and will lead to a steady injection of inflation that will, we believe become self generating. The very nature of the liquidity demand is similar to that seen after the First World War in Europe [Germany, France, etc]. The key feature of this was that the demand for more liquidity could not be satisfied as prices rose in healthy markets where demand remained strong and many businesses crashed because the injections of liquidity just could not lift them out of danger so their important asset prices [relative to their survival] could not rise and went lower in the face of rampant inflation.
The underlying reason why this is likely now is that Central Banks, even to the last one, will inflate rather than see the dark hole of a recession, then depression, suck down the monetary system and following hard on its heels, the government of the day. Whatever the success rate of the many global banks in combating the problems that arise, you can be sure that each one will target either inflation as the main danger facing them [if they have a healthy national economy] or drop interest rates and suffer inflation to protect what growth they have. This alone will engender a global set of extreme market conditions, both good and bad.
As we are seeing now the gold price will continue to be a prime beneficiary of investment as investors realize that gold cannot suffer from these problems as it remains unprintable.
Gold Market Update
During the traditionally subdued period over the holiday period, gold caught many by surprise with its swift rally to record levels. With an intra-day gold price high of $875, gold came within dollars of a nominal all time record price level!
2008 started off where 2007 ended. Gold maintained its strong support around $800 an ounce as we closed out the year finding good investment buying interest. With one of the worst weekly starts to the global markets, with oil touching $100 a barrel and the US Dollar treading water, gold’s momentum accelerated into the close last Friday. Mainstream media is also taking notice, starting to give more attention to gold’s strength, providing it more exposure to potential investors.
Gold will start this week feeding off last week’s strong momentum, $875 is the first resistance to overcome, and a breach of this level brings $900 into focus quickly. We expect consolidations to be short-lived and provide good entry opportunities. Our posture remains that gold is on target to move over $1,000, possibly as soon as over the next months!
Mining equities last week appeared to exert more resilience to general market sell-offs. Indications are that leveraged investors have been shaken off the bull’s back and mining equities remain in excellent position to extend gains. The HUI is within striking distance of the 500 mark in the coming weeks, pullbacks are also viewed as excellent entry opportunities. 460-462 is the first upside target, a break will open the door to 500. Strong support in the upper 430’s then again around 420 followed by the 400 level. Technicals are in overbought territory, but positive momentum remains the dominant force and gains can come quickly. Weekly momentum indicators have reversed and support additional gains in the coming weeks.
Upcoming Issue:
Dear Gold Forecaster Subscribers,
As exciting as 2007 has been, we believe 2008 will be far more dramatic year than most expect. As we start off 2008, we are preparing a special 2008 forecaster issue covering these significant topics which we believe will benefit gold and silver far more than most expect!
Next week we will publish our special 2008 forecaster issue and resume our weekly schedule. Julian and I look forward to providing subscribers with another year of highly accurate forecasts, detailed market updates along with our other weekly features.
Wishing you all the best and a most golden 2008!
Julian Phillips & Peter Spina
- To Subscribe: http://www.GoldForecaster.com
Legal Notice / Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster - Global Watch / Silver Forecaster / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Silver Forecaster / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Silver Forecaster / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Silver Forecaster / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.
-- Posted Wednesday, 9 January 2008 | Digg This Article | Source: GoldSeek.com
