-- Posted Monday, 11 August 2008 | Digg This Article | Source: GoldSeek.com

By: Peter A. Grant

Intraday Update
Aug 08 p.m. (USAGOLD) -- Gold has extended sharply lower after penetrating the range low at 845.50 (02-May). Further downside potential must be considered at this point, but it is also important for our clients to remember why they buy gold in the first place.

The vast majority of our client-base buys physical gold as insurance against adverse movements in the more traditional asset classes, where the vast majority of their wealth is held. Equities for example have benefited from commodity price relief in recent weeks along with the rebound in the dollar, although probably not as much as many may have expected.

That is a strong indication that the current drop in gold prices should be utilized to either make an initial purchase, or add to existing holdings. We like to remind our clients that paper selling in gold provides physical buying opportunities.

The Indians have certainly taken this to heart. In the past eight months that gold has been trading above $800 an ounce, substantial physical demand has built up. Jewelry interest last week from the world's largest physical buyer of gold was considerable ahead of 850/845. We anticipate that buying interest below this level will be even more robust.

With no significant central bank sales in the offing that we're aware of and mine production continuing to decline, it raises the question: Where is the physical supply going to come from to satisfy the anticipated increase in physical demand?

That question highlights the other side of the volatility issue -- gold could rebound just as quickly as it came down.

Morning Update:

Gold Consolidates as the Dollar Remains Firm
By: Peter Grant, USA Gold

-- Posted Monday, 11 August 2008 | Digg This Article | Source: GoldSeek.com

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