Wednesday, March 19, 2008

What Goes Up,...

Source: Kitco

"...Now, for the psychology of the event that will now be recorded as the most significant loss in gold since May of 2006, and, in fact, according to Bloomberg - the $59 decline the metal experienced today will be chalked up as its worst ever. Make no mistake, the Dow was not any better off today either, as a 300-point drop almost wiped out the post bailout/Fed euphoria from the other day. Stock traders have a new scapegoat this time: commodity-related issues. They dragged the index down brutally and have given rise to fears of further margin calls. Nothing much was spared today. Perhaps cash..."


"Bank Credit Analyst was quoted as being of the opinion that:, "gold now appears overbought and our commodity & energy strategy service warns that the rally is in a late stage. Thus, we are not making a bold new target at this point. Instead, we will look to take profits on our long/overweight positions in the coming weeks".

Also looking ahead, analysts at Royal Bank of Canada Capital Markets point to "the risk that without any follow-on physical demand for gold, particularly out of India, the Far East and the Middle East (which in aggregate account for ~70% of annual physical demand for gold), significant physical selling could occur, as was observed in mid-2006".

There, investors will no doubt recall, gold bullion spiked to $735 an ounce and then sold-off to $550 an ounce. The analysts believe that a similar correction could see the gold price retrace back to the mid-$800 an ounce level during the seasonall weaker demand northern hemisphere summer months."


"...Repair work would have to begin almost immediately here and thus far there does not appear to be much in the way of bullish news out there save for a small ($3 billion) hiccup over at Merrill. If there is some good news in all of this, it may be that Indian demand may finally break out of its freeze and start mopping up some metal finally. We cannot count on it, but it would surely be welcome."

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