-- Posted Friday, 30 November 2007 | Digg This Article | Source: GoldSeek.com
Gold Gold was down $5.00 to $795.20 per ounce in New York yesterday and silver was down 10 cents to $14.23 per ounce. Gold has again traded sideways to slightly up in Asia and European trading and is at $796.50 per ounce at 1200 GMT. Gold remains near record highs in euros, British pounds and other currencies and is trading at £385 GBP (down from £391) and €540 EUR (down from €547).
Given the size of the USD's move against the GBP and EUR in recent years it is very likely that the next stage in the gold bull market will see gold rally more strongly in EUR and especially GBP as the UK economy suffers from many of the huge imbalances and record debt levels that the US economy does.
With the Federal Reserve likely to cut interest rates again soon in the light of the deteriorating US economy, the dollar is unlikely to rally significantly and any further cut in interest rates will bolster gold. The 's' word, or stagflation, is beginning to be acknowledged as a real threat (even by more sanguine commentators who have dismissed the threat of stagflation in recent months). Gold is stagflation's investment bedfellow and will very likely outperform other asset classes in the coming years.
Market action and the recent rally in stock markets is leading to misguided market commentary and misguided optimism. Nothing has fundamentally changed and indeed the credit crisis and housing crisis is deepening in western markets and looks like leading to serious stagflationary recessions in many economies. The notion that Ben Bernanke will somehow head off the worst affects of the credit crisis by simply decreasing interest rates again is erroneous. Cheap money , trillions of dollars worth of exotic derivative instruments and record debt levels got us into this mess and given the nature of the huge imbalances, further cheap money will not magically remedy the situation.
Investing is about controlling the emotions of greed and fear and over optimism and over pessimism. The 'third way' or realism is always the most sensible and prudent and thus it would be wise to be risk averse as we head into what will be a tumultuous 2008.
Silver Silver is trading at $14.22/24 at 1200 GMT.
PGMs Platinum was trading at $1440/1444 (1200 GMT). Spot palladium was trading at $344/350 an ounce (1200 GMT).
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