-- Posted Thursday, 13 November 2008 | Digg This Article | Source: GoldSeek.com

The Morning Gold Report by Peter A. Grant

Nov 13 a.m. (USAGOLD) -- Gold remains soft within the recent range, weighed by ongoing weakness in oil and a firmer dollar. Evidence of a severe economic contraction continues to mount both domestically and globally.

Initial jobless claims for the week ended 08-Nov surged 32k to a seven-year high of 516k. This was much worse than the market was expecting and perpetuates the disturbing trend in US employment that has emerged this year.

German Q3 GDP data came in much weaker than expected at -0.5%, confirming the Europe's largest economy is in a recession. The euro came under additional selling pressure as a result, bolstering the dollar, despite our own economic woes on this side of the pond.

The OECD went so far as to say the developed world is in a recession that will extend into next year. They predicted that the US economy would contract by 0.9% in 2009. Economic growth in Japan is expected to contract by 0.1% next year and the Eurozone by 0.4%.

The firmer dollar served to suppress gold within its range. Hedge fund redemptions are also apparently having a negative impact on the yellow metal -- and other assets -- as investors scramble to get redemption requests in before 15-Nov. That is the deadline for many funds if one is hoping for a redemption this year. However, a number of funds have apparently already suspended redemptions in the hope of preserving liquidity.

Oil is fractionally higher this morning, but the overall tone remains quite negative amid rising expectations of demand kill as economic conditions continue to worsen. Oil prices have moved within striking distance of $50 bbl after the IEA slashed its 2009 forecast for global oil demand.

The gold/oil ratio has recently climbed above 13, showing that the yellow metal is doing a better job of holding value as commodity prices in general continue to fall. The ratio was near 6 back in July and it is likely it will continue to rise toward 15 over the near-term as more investors turn to physical gold as a safe-haven in these troubled economic times.

A rebound above yesterday's high at 739.80 would ease short-term pressure on the downside, returning focus to Tuesday's high at 768.05. Above the latter, the recent range high at 776.80 comes into play. On the downside, the 706.50/700.00 zone is seen as formidable barrier ahead of the range low at 681.65.

Gold Market Movers:

U.S. jobless claims reach seven-year high of 516,000

German economy enters worst recession in 12 years

OEDC says developed world in recession

Hedge fund redemptions total $100B in October

Oil sinks to 21-month low on global demand estimate

8 reasons to own gold

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 Thursday, 13 November 2008 | Digg This Article

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