-- Posted Monday, 3 March 2008 | Digg This Article
| Source: GoldSeek.com
The Morning Gold Report by Peter A. Grant
March 03, a.m. (USAGOLD) -- Gold surged to new record highs as the dollar continues its slide and global stocks take a beating. Gold has moved within $15 of the much discussed $1,000 threshold, after recovering from earlier profit taking.
Gold has been supported lately by a falling dollar, which makes the yellow metal increasingly attractive as an alternative investment. As foreign currencies gain ground against the dollar, gold becomes less expensive and therefore more appealing for holders of these currencies.
Risk aversion is driving up the value of low yielding safe haven currencies, particularly the Japanese yen and the Swiss franc. These gains are coming at the expense of the dollar. The greenback dropped to a new three year low against the yen at 102.61 in overseas trading, lending credence to expectations that the 101.67/23 lows from Dec-04 and Nov-99 will be challenged in short order.
USD-CHF set a fifth consecutive new all-time low today. The 1.0355 measuring objective has been exceeded, shifting focus to 1.0211 next, but parity is looking increasingly attractive.
EUR-USD remains well bid, just below the record high at 1.5239. With the ECB sill expected to hold steady on interest rates, upside potential in the combined currency is toward 1.5500. Such a move, combined with attainment of the aforementioned objectives in the other dollar rates, would likely be sufficient to push gold above the $1,000 level.
Global stocks have taken it on the chin in the wake of Friday's sharp sell-off on Wall Street. Weaker than expected Chicago PMI data on Friday, along with poor earnings news for several US companies, triggered the initial sell-off. Increasing pessimism about the world's largest economy prompted follow-through selling in overseas markets and Wall Street is poised to open lower again today.
The Fed is widely expected to cut interest rates again this month in a move to prevent a recession. However, recent cuts have had limited impact on tight credit markets. A hefty 50bp cut has been fully priced in by the market and odds are increasing for a jumbo 75bp cut. These expectations have been weighing on the dollar lately and bolstering interest in gold. Meanwhile, an easier monetary policy contributes to already rapidly rising prices, which also bodes well for gold.
Growing concerns about the US economy, and the potential for curtailed energy demand, have prompted a limited correction in oil. However, front month NYMEX futures remain above $100/b. OPEC meets later this week and is widely expected to keep output targets steady. Despite the recent setback in oil prices, historically high energy prices have been keeping upward pressure on prices and increasing the appeal of gold as a hedge.
Israel was pulling troops out of the Gaza strip today following an appeal by the US to end several days of intense fighting. Secretary of State Condoleezza Rice will visit the region on Tuesday and Wednesday this week, with the hope of restarting peace talks that were suspended last week by Palestinian Authority President Mahmoud Abbas. A sustained breakdown of the US backed peace process would be seen as a significant destabilizing event in the Middle East. Geopolitical uncertainties favor safe haven buying of gold.
Gold Market Movers:
US manufacturing ISM for Feb out at 10:00ET. Expected to fall to 49.0, versus 50.7 in Jan.
US construction spending for Jan at 10:00ET. Market is looking for -0.7%, versus -1.1% in Dec.
Canada Q4 GDP slowed to 0.8%, much worse than market expectations. Dec GDP -0.7%.
IMF chief spokesman: Committed to not disrupting gold markets. Any sales would be within the framework of CBGA.
Gold beats financial assets as investors seek haven
Gold shines as commodities strengthen
Stock index futures suggest a lower open on Wall Street.
Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
Pete Grant is the Senior Metals Analyst and an Account Executive with USAGOLD - Centennial Precious Metals. He has spent the majority of his career as a global markets analyst. He began trading IMM currency futures at the Chicago Mercantile Exchange in the mid-1980's. In 1988 Mr. Grant joined MMS International as a foreign exchange market analyst. MMS was acquired by Standard & Poor's a short time later. Pete spent twelve years with S&P - MMS, where he became the Senior Managing FX Strategist. As a manager of the award-winning Currency Market Insight product, he was responsible for the daily real-time forecasting of the world's major and emerging currency pairs, along with the precious metals, to a global institutional audience. Pete was consistently recognized for providing invaluable services to his clients in the areas of custom trading strategies and risk assessment. The financial press frequently reported his personal market insights, risk evaluations and forecasts. Prior to joining USAGOLD, Mr. Grant served as VP of Operations and Chief Metals Trader for a Denver based investment management firm.
-- Posted Monday, 3 March 2008 | Digg This Article | Source: GoldSeek.com
