Gold And Silver Reach New Record Nominal Highs – Little Coverage, Bearish And Superficial Analysis

Submitted by Tyler Durden
04/15/2011 07:35 -0400
From GoldCore
79 comments

Gold and Silver Reach New Record Nominal Highs – Little Coverage, Bearish and Superficial Analysis

Gold and silver have reached new all time and 31 year record highs in trading in London this morning.

Silver is particularly strong and the euro particularly week on sovereign debt contagion concerns.

Inflation and sovereign debt fears are leading to continued safe haven demand. It is import as ever to note that the record highs are nominal highs and inflation adjusted gold and silver remain a long way from their respective highs of $2,400/oz and $140/oz in 1980. These inflation adjusted highs remain viable long term price targets.



Cross Currency Rates at 1200

Precious metal prices at record highs are symptomatic of the degree of macroeconomic and geopolitical risk in the world today. These risks do not look like dissipating anytime soon which will likely lead to higher precious metal prices.

$1,500/oz and $50/oz remain short term targets. Resistance levels have been breached and thus these psychological price points will likely now be tested. Trading and timing markets remains high risk but astute hedge funds and other traders will continue to “make the trend their friend’.



Gold in USD and Gold in EUR – 5 Year (Daily)

The risk of contagion in the Eurozone and internationally remains real. Already seriously indebted taxpayers in many western countries are set to struggle with the massive liabilities incurred from bailing out western banks.

This is leading to the possibility of even more quantitative easing, a massive increase in money supply and currency debasement on a scale not seen since our modern monetary system came into existence when Nixon announced that the US would no longer convert US dollars to gold and the world entered the era of fiat paper currencies not backed by precious metals.

The record highs were greeted with little coverage and no fanfare. What little coverage there is, remains almost exclusively in the non specialist financial press (such as the FT, WSJ, Reuters and Bloomberg). Very occasional treatment in the non specilialist financial press remains superficial and negative (see news).

The negative treatment of gold and silver is in marked contrast to the treatment of more high risk individual equities and equities in general. Bearish sentiment abounds and we have seen a lot of profit taking this week. These are tell signs and contrarian signals that gold and silver are far from the bubbles that some have been claiming for some time.



Risk appetite remains high. Predicting future price movement of securities, a trading mentality and speculation remains rife. This comes at the expense of a real evaluation of risk and educating the public about the importance of real diversification and holding quality assets passively in a low risk and low cost way.

NEWS

(Dow Jones)-- PRECIOUS METALS: Gold, Silver Hit New Records; Others Tad Down

Spot gold and silver hit fresh records in Asian trade Friday, but platinum and palladium were marginally lower as further inflationary pressures emerged in China and concerns over the health of the euro zone lingered.

At 0655 GMT, spot gold was down 50 cents from its late New York level at $1,475.30 a troy ounce, having touched an all-time record of $1,479.44 around midnight GMT, while silver gained 15 cents to $42.33, 10 cents below a record $42.43 hit around 2200 GMT.

Regional markets were mostly lower, a data from China showed that both GDP growth in the first quarter and March consumer price inflation came in above expectations.

Inflation is seen as a key risk for China's booming economy, and the People's Bank of China has sharply tightened monetary policy in recent months to avert the risk of out-of-control price rises.

"Someone please cool this economy down now," Standard Chartered said in a note. "We maintain our call of only one more policy rate hike in the second quarter, but we highlight the risk that there could be two more hikes.

Precious metals are frequently a beneficiary of inflation fears, although they have had a mixed performance as an inflation hedge since most currencies gave up their historic links to gold or silver.

Chinese demand for gold in particular has boomed in recent years. J.P. Morgan's China equities and commodities managing director, Jing Ulrich, said Friday that Beijing's attempts to moderate the country's housing boom could be driving the "mass affluent" toward gold.

"Chinese demand for gold jewelry increased 13.5% [on year] in 2010, while demand for bars & coins rose 70.5%," she said in a note. "Most market participants expect that China's gold demand could grow at a still-stronger pace in 2011."

Silver's booming price has seen it move well beyond traditional ratios with gold. An ounce of gold has usually been worth at least 60 oz of silver in recent years, but an ounce of gold currently buys only around 34.7 oz of silver.

A trader for a European broker in Hong Kong said that silver could continue to outrun the yellow metal, since it was exposed to both industrial and booming investment demand.

"I think silver can continue to go a lot higher and continue to outpace gold. There's no downside limit to the gold-silver ratio. I think it could go a lot lower," he said.

(Bloomberg) -- Gold Trading Climbed 5% in March, Silver Gained 3.2%, LBMA Says

Gold trading rose 5 percent to an average of 19 million ounces a day in March, the London Bullion Market Association said today in an e-mailed statement. Silver trading increased 3.2 percent to an average of 145.7 million ounces a day, the LBMA said.

(Bloomberg) -- China’s March Gold Output Surges 35% to 57.6 Tons; Silver Gains

China’s March gold output gained 35 percent from the same time last year to 57.6 metric tons, according to a statement from the statistics bureau today. Silver output increased 34 percent to 1,052.6 tons, it said.

(Bloomberg) -- Coeur D’Alene Says Bolivia Silver Mine in Production ‘as Usual’

Coeur D’Alene Mines Corp. said silver production at its San Bartolome mine in Bolivia is under way “as usualâ€