Higher Oil, Lower Dollar Helps Support Gold
by Joe Battaglia
Posted: April 21, 2008
Gold is up $5 in
early trading in reaction to a weaker dollar.
The dollar is down 37 basis points at 71.65. Silver is lower along with platinum and palladium. The white metals falling on fears of the
weakening economy. Gold was
substantially higher reaching $931.90 on the futures contract. Therefore, it is $10 off the high. Silver was as high as $17.98 before pulling
back. Oil had reached a high of $117.60
but it too fell back to $116.46, down $.23 and the equity market is down with
the Dow 75 points lower. It seems as
though gold held its gains and other commodities fell back as oil
faltered. Some analysts had been saying
oil may get as high as $122 a barrel.
However, for today it looks as though it will be softer even though OPEC
has decided not to increase production, Shell shut down its operations in
Nigeria due to violence, and a Japanese oil tanker was attacked.
The metals markets
remain nervous because of fund liquidation on Friday that caused the market to
pull back substantially. However, the
declining dollar helps to provide support for the gold market as does high oil
prices. Clearly, oil prices at these levels
will lead to a substantial increase in inflation pressures in the months
ahead.
Moreover, the Fed
is going to have to continue to take action to try to protect the financial
system. Bank of America reported
multi-billion dollar losses from its credit derivatives exposure. Clearly, these problems aren't getting
better and are likely to get much worse as consumers begin retrenching and
slowing down their spending and tracking the economy further. Moreover, the problems are spreading to
regional and local banks according to the Wall Street Journal.
The economy must go
through this period of correction before the excesses can be wrung out of the
financial system. There was a massive
bubble in equities followed by a massive bubble in housing and the problems
that result from this will take some time to work out. The bankers and Wall Street Financial
Institutions made this problem substantially worse than it might otherwise have
been due to the extraordinary leverage that they used. We now see a number of municipalities facing
bankruptcy and states cannot pay their obligations. The bond market may be on the brink of experiencing considerable
problems. All of these factors continue
to be supportive of the precious metals markets.
On Friday we had
warnings from members of the Federal Reserve that the economy could slip into
significant difficulties over the remainder of this year. In my view, these are all substantial
reasons for the gold market to resume its up trend. Once the funds begin to accumulate gold again, I believe you will
see these markets develop increasing strength to the upside.
Take advantage of
this period of correction and consolidation to acquire precious metal
assets. Silver looks like a steal at
these levels. Investors should call
Goldline today to get started. Ask them
to explain the features, benefits and cost structure of the various gold and
silver investments that are available to you.
Select those that best meet your own personal and individual investing
needs and objectives. Investors looking
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Bars. If you would like to take
advantage of Goldline's Price Guarantee Program, which has proven very helpful
and effective for most investors over the past several weeks, you will have to
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Call Goldline now to get started at 1-800-827-4653.
The free information package is
also available to everyone. It includes
the company brochure, which explains the benefits of owning gold and silver
along with several independent third party source articles that you will find
helpful. Silver investors will find one
article rather remarkable. In addition
you will see articles and quotes from major banks, brokerage firms and
financial publications. We will also
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before making an investment. Call
Goldline at 1-800-827-4653.
Investors should be mindful that past performance does not guarantee future results. Transaction costs are generally 5%
to 7% on bullion and 30% to 35% on coins. This is also referred to as the spread, or the difference between the buy price
and the sell price. The market must go up enough to overcome this spread before an actual profit is achieved. All markets go
up and down. Coins are a long-term, three- to five-year investment, suitable for 5% to 10% of the average portfolio. Please
see Goldline's Risk and Disclosure Statement for further details.
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