-- Posted Friday, 11 January 2008 | Digg This Article | Source: GoldSeek.com
Gold Gold reached new record highs yesterday and closed up $11.60 at $890.90 in New York (from the previous day's close in NY). Silver was up 43 cents to $16.15 per ounce. Gold has traded sideways in Asian and early European trading and the London AM Fix surged to $893.75 (up from $874.25). Gold surged to new records in other major currencies. At the London AM Fix gold was trading at £457.56 (up from £445.23 yesterday) and €604.74 (up from €595.50 yesterday).
Gold rallied on Fed Chairman Bernanke's negative comments on the U.S. economy and saying that the central bank was ready to take substantial action to boost the economy. This looks like confirmation of a 0.50% cut at the January FOMC meeting. This would take U.S. rates down to 3.75% despite significant inflationary pressures and this is obviously very bullish for gold. Interestingly, while Merrill Lynch and Goldman Sachs have said the U.S. is in recession, Bernanke said that they are not currently anticipating a recession.
While oil prices have sold off somewhat in recent days, the dollar has again weakened and these two 'pull factors' for gold may be cancelling each other out. Thus safe haven and long term diversification demand may be the fundamental factors driving the price to new record highs. The $15 billion write down by Merrill Lynch as a result of dodgy mortgage investments shows that the property and credit crisis has yet to abate. U.S. trade data features today and the U.S. trade deficit probably widened in November for a third consecutive month as Americans spent a record amount on imported oil. Any deterioration in the trade deficit from near record highs will obviously be bullish for gold.
U.S.'s Triple-A Credit Rating 'Under Threat' The FT reports that the U.S. is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody's, the credit rating agency, said yesterday. The warning over the future of the triple-A rating - granted to U.S. government debt since it was first assessed in 1917 - reflects growing concerns over the country's ability to retain its financial and economic supremacy.
This would have huge ramifications for the global monetary and economic system and is another extremely bullish factor for gold.
Support and Resistance While gold's fundamentals remain very sound in the medium to long term, in the short term we may be overbought and thus we could experience a healthy short term correction. Support is at previous resistance at around $840 to $850, below that at the 50-day moving average at around $815.97. Traders and investors would be wise to continue to 'make the trend their friend'. Especially in the current macroeconomic and geopolitical climate.
Markets have anticipated $900 and now analysts are looking forward to the $1,000. There may well be a short term correction however $1,000 now seems more likely in the first half of 2008 than in the second half.
Silver Silver has surged and rallied to $16.07/16.09 at 1130 GMT.
PGMs Platinum was trading at $1560/1566 as per above (1130 GMT). Palladium was trading at $375/380 an ounce (1130 GMT).
Oil Oil is down in European trading and NYMEX light sweet crude oil (FEB08) was trading at $93.51 a barrel.
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