Gold and Silver React to a Weaker Dollar, Higher Oil
by Joe Battaglia
Posted: May 5, 2008
Gold and silver are
both higher this morning with gold posting a $12 gain at the open and silver up
$.30. Both are reacting to a weaker
dollar and higher oil prices. With the
$850 support level having held, many believe the period of correction and
consolidation may be drawing to a close.
It is too early to feel comfortable that this is the case. Nevertheless, inflation concerns are
certainly present in the markets and with inflation gold almost always goes
up. It means the dollar is weaker and
it will take more dollars to purchase all products including gold and silver.
The ECB Central
Bank president warned there are significant risks to inflation on a global
basis. Moreover, he expressed the ECB's
intention to be vigilant to these issues.
That statement caused the dollar to weaken as the Federal Reserve seems
to be prepared to do anything it can including allowing inflation to soar in an
effort to protect the banking system.
That is why the dollar is down 19 basis points at 73.31. Oil is up $2.30 at $118.63 a barrel on
continuing violence in Nigeria. The oil
market is very thin. There just isn't
enough supply available. When a problem
occurs in any one country, it affects the oil prices globally. As oil prices rise that too impacts the gold
market in a positive way.
When you look at
the dollar you must also take into consideration the fact that oil used to be
sold for dollars only. Today, we have a
significant and growing number of countries that no longer accept dollars for
their oil. Moreover, Kuwait has already
dropped the dollar peg, which linked its currency values to the dollar. Other OPEC countries are now considering
doing the exact same thing. As they
drop these dollar pegs it is likely they will stop utilizing the dollar as
their principal reserve currency and may begin selling oil for euros.
In the economic
news, the ISM non-manufacturing survey came in above the critical 50
level. That would suggest the economy
is back in a positive or growing mode.
Will there be a recession? Are
we already in a recession? If you look
at the data that comes from the government there may be some question on these
issues. However, when you speak to
people across the country there seems little doubt the country is in a
recession and that it is deepening.
Renewed liquidity
injection efforts by the ECB, the Fed and the Swiss National Bank are all
helping gold to move higher and pushing the dollar lower. If you look at what the central banks are
doing rather than what they are saying, you will see they are expanding money
supply at an awesome rate. As they do
that, it weakens all of their currencies against gold. And, it causes inflation to rise. With gold attempting to trade above the $865
level on the key futures contract, we may be in a situation now where we will
see a rally back towards $900. From a
technical point of view, the market is improving. I believe this will attract more fund demand and that suggests
higher gold prices ahead. Investors
should take advantage of the opportunity to acquire gold and silver at bargain
basement prices.
Call Goldline today
and 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 for low transaction costs
may wish to consider bullion assets such as Krugerrands, Canadian Maple Leafs,
American Eagles, Silver Bags and Silver Bars.
Investors who would like to take advantage of Goldline's Price Guarantee
Program, which is not available with the bullion assets, should consider assets
with some collectible value such as Swiss 20 Franc gold coins. When you acquire 29 Swiss 20 Francs you
receive the 30th for free.
In addition you have the benefit of the Price Guarantee Program, which
gives you a two-week window of opportunity during which you may re-price your
order lower in the event of a correction.
That is a very valuable tool that may assist you. Call Goldline today to learn how you may
take advantage of these opportunities at 1-800-827-4653.
In addition you should ask for the
free information package, which you will find very helpful. It contains the company brochure, which
explains how and why gold and silver can provide purchasing power protection
and protect your savings against the dreadful disease of a falling dollar, which
essentially is a tax on the middle class.
You will also find excellent articles taking about the benefits of
owning food rather than CD's and articles on oil prices rising to over $200 a
barrel and gold rising over $1,000 an ounce.
You will also receive a Coin Facts Risk Disclosure Booklet before making
an investment. Call Goldline now to
receive this free information 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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