Gold Comments from U.S. Global Investors Gold Market
For the week, spot gold closed at $783.40 per ounce down $65.20 or 7.67 percent. Gold equities, as measured by the XAU Gold & Silver Index fell 14.63 percent for the week. The U.S. Trade-Weighted Dollar Index showed some weakness finally losing 0.70 percent.
Strength
The stockpiling of physical gold by investors around the world remains very robust.
Buyers who are able to find precious metal coins have been reported to be paying more than $20 per ounce of silver and $1,000 per ounce of gold.
The Zurich-based ZKB Gold ETF has risen to record levels for seven consecutive weeks on strong demand for bullion. The Swiss bank that manages the ETF said its vault is “full right up to the top” with gold.
Weakness
Gold fell below $800 per ounce this week on what may have been another forced liquidation.
Banks are no longer willing to fund hedge funds that are posting losses. Many hedge fund managers are under severe pressure to liquidate positions as banks demand more collateral to shore up their borrowing.
The most recent U.S Consumer Price Index showed a slight loss in momentum with a 4.9 percent in the last 12 months compared to 5.4 percent in August.
Opportunity
JP Morgan raised its price target for 2008 to $904 per ounce versus a previous forecast of $884 and its target for 2009 to $875 versus its previous target of $854 per ounce. Analysts expect investors to continue to purchase gold.
In collaboration with the World Gold Council, India will begin selling 24-carat gold coins through 100 post offices in four states. They will be sold in half gram, 1 gram, 5 gram and 8 gram denominations. In addition, the recent slide in prices should attract jewelry buyers back into the market.
One analyst noted that likely less than one percent of the public in the western world owns gold or silver. This is worlds away from the mass mania and participation associated with other market bubbles.
Threat
Standard & Poor's dropped the credit outlook for Glencore, the world’s biggest commodity trader, citing declining base metal prices. In a little over a month, credit default swaps for Glencore have jumped from 137 to 784 for 1-year commercial paper. This is similar to the widening of the Ted Spread as a sign of stress for mainstream markets.
Last week, a commentator was asked whether he was worried about the performance of the market next month. He calmly replied "no," because at the current rate of descent the market would be at zero in just nineteen days.
Point being we know the market is not going to zero and the forced liquidations by over leveraged players to rational buyers should be a great buying opportunity.
John Embry on Gold: Rescue will send Gold to surreal price level....
This is a good, but long Investor Daily article so I am posting the link below:
http://www.sprott.co...gest/digest.pdf
Best MDW
