Daily Commentary

Commodities Under Pressure

by Joe Battaglia
Posted: October 3, 2008

Gold continues to sell off this morning on further liquidation by funds and technical selling.  Gold is trading down $12, while silver is up $.20.  Silver is the only precious metal in positive territory as platinum is down $19 and palladium down $5.  Again, the action in gold relates directly to the dollar.  The dollar is up 42 basis points at 80.85.  Oil is also under some pressure again today, down $1.37 at $92.60 a barrel.  Equities are recovering, starting the day with 100-point gain and stretching that out to 133 points on the upside in the first half hour of trading. 

 

The euro is particularly weak, falling to $1.374, down nearly $.09 since last Friday and is at the lowest level in a little more than a year.  The euro is weak because while problems in the U.S. are severe, there are even worse problems in Europe.  I suspect the contagion will also spread throughout Asia and other parts of the globe.  The Bank of England is expected to announce an interest rate cut next week.  It may be a cut of 25 to 50 basis points.  On a relative basis that would make the dollar stronger than the pound.  Adding to the woes in Europe, the European Central Bank Governor, John Hurley said the situation in Irish banks was acute and risks to their stability was unacceptably high.  That was what led to the enormous guarantees by the Irish government.

 

The U.S. the economy moved further toward recession last month as companies shed workers at the fastest pace in more than five years.  That is a poor sign for household spending.  Non-farm payrolls, which are calculated by a survey of establishments, fell 159,000 in September the sharpest decline since March of 2003.  The pull back was broad based, including manufacturing, construction, and many service industries.   The unemployment rate remained unchanged at a five year high of 6.1%.  Ian Sheperdson, Chief U.S. Economist at High Frequency Economics said: "The U.S. economy is shrinking, and there will be many more awful reports like this."  This adds further to the expectation that the Fed will lower interest rates by the end of this month.

 

I think once the Fed cuts the interest rates, gold will have a more encouraging outlook.  For now, having broken below $850, it may test $800 again.  Looking at the longer-term picture out over the next several months and years, it would appear that the bailout bill should be extraordinarily inflationary and should not be good for the U.S. dollar.  However, since it is a floating currency and it competes against the euro and other currencies, part of the outlook will depend on actions taken by the Europeans and Asians and others.  One report I heard this morning on Bloomberg indicated that this has been the worst commodity drop in 50 years.  In other words, it isn't just precious metals; it is commodities across the board.  If we look at the fundamentals, the world isn't getting smaller and there aren't fewer people.  The need for commodities should continue to grow. 

 

Moreover, the fiat currency regimes that are in place today are likely to be extinguished in a move towards a new precious metal standard.  There are simply too many trial balloons being floated in the financial journals around the world for this not to be true.  Everyone recognizes the actions being taken by the largest Western Countries are destructive of currency values.  Therefore, in the longer-term precious metals should produce excellent gains for today's investors.  On a technical basis gold simply continues to hold within its trading range and demonstrating that these consolidations are at a high level.  This offers an opportunity to be acquiring precious metals at bargain prices.  Remember, many believe it's not what the price of gold is that's important, but how many ounces you own.  In the long run, gold will protect and preserve purchasing power and will remain the most valuable currency, while paper currencies are likely to become valueless. 

 

Call Goldline today at 1-800-827-4653 and ask them to assist you in acquiring some gold and silver at these favorable price levels.  Investors should consider utilizing Goldline's unique Price Guarantee Program that provides a two-week window of opportunity to re-price your transaction to get more gold and silver for your money in the event of a further correction. 

 

Goldline is also giving away an excellent free information package, which contains two brand new articles discussing the problems in money market funds and how they may present a risk to your funds, along with an explanation of the crisis that is unfolding before our eyes.  They also have several other articles that you will find helpful and informative.  Call Goldline at 1-800-827-4653 to receive your free information package.

 

Investors should contact Goldline 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 American Eagles, Krugerrands, Canadian Maple Leafs, Silver Bags or Silver Bars.  However, the Price Guarantee Program is not available with these assets.

 

If you would like to take advantage of the Price Guarantee Program, which provides you with a two-week window of opportunity in which to re-price your order in the event of a correction, you must select assets with some collectible value such as Swiss 20 Francs, Double Eagles and Silver Dollars.  When you acquire $6,000 of private gold, you will receive a free gold coin.  Investors may wish to consider a tube of these coins to obtain two free coins.  Call Goldline at 1-800-827-4653 for further information.

 

To receive the free information package including the four articles on the dollar, the economy and gold call Goldline at 1-800-827-4653.  Goldline also provides several other helpful articles.  There are a number of other independent third party source articles that you will find extremely helpful and informative.  You will also receive the Client Account Agreement, a company brochure and a Coin Facts Risk Disclosure Booklet, read these carefully before you make an investment.  Call Goldline now to receive your free information package at 1-800-827-4653.

 

 

 

^{You should carefully read the client Account Agreement and the Risk Disclosure information. These explain important things you need to know before you invest in precious metals, such as: past performance does not guarantee future results. Transaction costs are generally 5% to 10% 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, preferably five- to ten-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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