A quick rebound again from $850 for gold
Posted on 09 August 2008 with no comments from readersNot normally one for sticking my kneck out on numbers this is a fairly easy call. At the Hedge Funds World conference in Dubai this spring one top manager told me he was always a buyer at $850 and a seller under $1,000.
Was it a coincidence that gold hit this low on the day that Russia invaded Georgia? Or was this a function of closing margin positions? We will never know exactly but this is a market fluctuation and gold hoarders should just sit tight, very tight, and wait for better times ahead very soon.
Indeed, Russia attacking US backed Georgia is a serious geopolitical event, not least because of the US backed oil pipeline passes through Georgia – put there ironically to avoid problems from Russia. This could well be enough to send the oil price higher – is this why Gazprom is so convinced oil will reach $250 next year? Remember Gazprom is the world’s biggest energy company and its former chairman is now the President of Russia.
Meanwhile, the rest of the world economy, ex-US continues to slowdown. That takes the heat off the dollar and is not good for precious metals priced in dollars. But can it really help the US economy that its key export markets are beginning to fall apart?
General Motors only stayed on the road this year because a 20 per cent fall in US sales was countered by bouyant exports held up by the cheap dollar. What happens to GM – and the rest of US exports – if this stops? Then we have a double dip recession and lower interest rates, and a still lower dollar, and far higher gold price.
So use this buying opportunity for gold and gold shares if you have been thinking about precious metals. Unfortunately some people are chickening out – I have not sold a thing, and will be buying.
no Comments posted by readers:
Afghanistan 1979, Georgia 2008 – this explains why Gazprom puts oil at $250 next year…gold is an absolute steal at this level.
I agree that gold is fundamentally undervalued at $850. However, I sense that with the Central Banks intervention in rallying the US$, riding the Golden Bull will prove testing in the short term.
We may see further lows towards $800 thereby shaking out the weak longs.
Although I have been buying on the way down, I think I’ll sit out for a week or two until the dust settles!
It also vastly increases the odds of a US strike on Iran.
Although I would take odds on Venezuela.
Unlike Iran, who big enough is gonna defend Venezuela?
Dropping oil prices will end inflation in America. For the House of Saud, that means the end of inflation is nigh for the Riyal (which is pegged to the dollar).
Although I expect President Bush to veto any attempt at ending speculation on his ICE, I also expect foreign powers to also manipulate it down to protect their economies from destruction.
Remember, the ICE was created for corruption, so it has no real protective measures. It is a two-way street.
Also, I have a strong sense that conservative Muslim aristocracy is more concerned with stability than with neo-con pyramid schemes. Also, they are probably looking forward to a new American government that is far less corrupt, and possibly more competent.
1)Foreign Central Banks are intervening to support the $
2)There are vast naked shorts via COMEX on gold and silver, roughly equal to 80% +/- of global annual prodn.
3)The fall in oil has 2 causes, – deflationary demand destruction, – and bankruptcy of a major long player.
4)Yes, sinking oil helps reduce inflation globally
5)BUT the tsunami of deflation must not be allowed to win.
SO
The apparent strength of the $, which will be helped when the BofE, and the ECB eventually cut rates, will allow Bernanke to reduce interest rates once again, and engage in more inflationary, ummm, – activities.
In the meantime, PMs suffer.
Just my 2 cents
Thursday, August 7, 2008
Massive US Naval Armada Heads For Iran
Operation Brimstone ended only one week ago. This was the joint US/UK/French naval war games in the Atlantic Ocean preparing for a naval blockade of Iran and the likely resulting war in the Persian Gulf area. The massive war games included a US Navy supercarrier battle group, an US Navy expeditionary carrier battle group, a Royal Navy carrier battle group, a French nuclear hunter-killer submarine plus a large number of US Navy cruisers, destroyers and frigates playing the “enemy force”.
The lead American ship in these war games, the USS Theodore Roosevelt (CVN71) and its Carrier Strike Group Two (CCSG-2) are now headed towards Iran along with the USS Ronald Reagon (CVN76) and its Carrier Strike Group Seven (CCSG-7) coming from Japan.
They are joining two existing USN battle groups in the Gulf area: the USS Abraham Lincoln (CVN72) with its Carrier Strike Group Nine (CCSG-9); and the USS Peleliu (LHA-5) with its expeditionary strike group.
UK inflation hits 4.4% – food prices are up 12.3% – buying gold at these levels is just plain commonsense.
We are in for a rough ride in the global economy – don’t trust your savings entirely to conventional finance…this is is when you will get burned.