-- Posted Thursday, 1 May 2008 | Digg This Article | Source: GoldSeek.com
Gold
The Federal Reserve’s latest interest rate cut saw gold rally from early lows but still close down $12 to $862.70 per ounce in trading in New York yesterday and silver was down 7 cents to $16.50 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $863.50, £434.64 €556.74 (from $867.75 £440.77 and €557.72 ).
Today’s Data and Influences
There are a number of key US reports due again today but market action may be subdued by the May Day holiday in Europe and by players adopting a wait and see approach ahead of tomorrow’s non-farm payrolls report. Thus, gold will again likely take its lead from oil and the dollar which are down and up respectively so far today putting pressure on gold.
While surprised that gold had fallen as far as it has, we continue to believe that gold will be supported above previous resistance at the record nominal highs of $850 and below that at the 200 day moving average. There are very substantial physical imports from Asia and from India at these levels as reported by Reuters which should make the gold bears nervous.
Fed’s Interest Rate Decision
There was a lackluster response to the Federal Reserve’s expected latest interest rate cut (down 25 basis points from 2.25% to 2.00%) with U.S. stock markets falling from initial rallies, Asian markets mixed overnight (Nikkei down 0.6%) and the FTSE flat after the morning session. The Fed hinted that they may pause in their rate-cutting after their 325 basis point cumulative easing since September. The statement pointed out that there had been substantial easing already and two members of the FOMC dissented which may indicate that inflationary concerns are increasing. Thus the cheap money policy of recent years, which got us into this financial and economic crisis, continues and negative real interest rates continue.
Silver
Silver is trading at $16.68/16.74 per ounce at 1200 GMT.
Silver continues to sell off in conjunction with gold and on oil weakness and dollar strength. However, we are confident that this is another short term correction in a long term secular bull market. Silver remains up 22.4% in the last 12 months and has outperformed nearly all asset classes since the outbreak of the credit crisis. Silver has risen 44% from $11.50 in mid August 2007 to $16.60 today which is a sterling (silver) performance by any standards and has led to a typical bout of profit taking and healthy consolidation. Silver has again proven it’s safe haven credentials over the medium to long term and will continue to do so.
Of all the precious metals we remain most bullish on silver. The following Resource Investor outlines some of the reasons why, focusing on the all important supply and demand fundamentals: http://www.resourceinvestor.com/pebble.asp?relid=42353
PGMs
Platinum is trading at $1885/1905 per ounce (1200 GMT). Palladium is trading at $414/419 per ounce (1200 GMT).
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