Daily Commentary

Volatility in Markets Continues

by Joe Battaglia
Posted: October 7, 2008

Gold is up $12 in early trading and silver is up $.21.  Both are well off their earlier highs.  At the high December gold was up, about $15 more than where it is trading at the moment.  Silver, which was at $11.50 on the December contract, was $.40 an ounce higher.  Profit taking has set into the markets fairly early, as nervousness is the order of the day.  The Dow continues lower, down 46 points but still is about 10 points above the low.  The U.S. dollar has lost 105 basis points and is trading at 80.63.  The volatility in the currency markets is phenomenal.  When you think that there are literally tens, if not hundreds of trillions of dollars that change hands every single day, a movement of a penny on the dollar is a very large move.  Oil is also firmer today, up $3.36 at $91.17 a barrel.

 

The latest news is complex and some of it comes from out of the European and other markets.  Iceland for example has gone to Russia for a $4 billion loan, which seems as though will be made out of their sovereign wealth fund.  Iceland had to take over its largest bank overnight.  The country is on the brink of bankruptcy.  In Australia they lowered interest rates 1% as their economy and their banking system is in trouble.  In Europe, Great Britain is putting up $79 billion in further bank bailouts and the European Union has agreed to provide bank deposit insurance for most bank deposits across the continent. 

 

Here in the U.S., the Fed decided to pay interest on required capital deposits by banks.  This was in affect a stealth interest rate cut of ¾%.  On top of that, they announced today they are forming a Structured Investment Vehicle similar to the SIV's that were utilized by banks themselves and which got them in trouble.  This new SIV is going to buy commercial paper in an effort to free up the siezed commercial paper market.  Moreover, there is a considerable amount of talk that there will be a coordinated interest rate cut. 

 

In the precious metal sector the trouble in the financial markets around the globe are causing safe haven demand for gold to remain at high levels.  Each new bailout proposal requires yet another.  The problems are so severe and the actions taken by the Federal Reserve are now tantamount to dropping hundred dollar bills from helicopters.  Banks that seem to be requiring capital are former household names that no one thought would ever get into trouble. 

 

Consequently, where can one put their trust?  Certainly not in the currencies, which are extremely volatile and likely to continue to lose buying power.  Investors are coming to realize the most important feature of gold is that it is the best form of money.  As former Fed Chairman Greenspan said, in extreme situations no one wants to accept fiat paper money.  However, everyone will accept gold money.  Investment funds are so sure gold is going over $1,000 they are paying a premium for $1,000 options.

 

The ETF's are now reporting the inflows of gold into those funds is rising at an incredible rate.  Money into the physical gold ETC's rose by $93 million or 106,000 ounces in the last six days.  Holdings total 5.3 million ounces equal to $4.5 billion.  Analyst John Meyer told Dow Jones Wire Service: "Gold prices should rise further as market turmoil leaves few solid investment strategies for funds to rely on."  Citigroup reiterated its positive view on gold prices going forward.  They said despite new investment demand, gold is currently being held back by poor sentiment toward industrial metals, a firm dollar, plus disinflationary data points on durable goods, manufacturing and labor.  Their direct quote was: "We see gold as badly mispriced, and see positive prospects based on a mix of macro and supply demand drivers.  The forces that have propelled gold for the past five years are firmly in place, and policy prescriptions for the credit crisis seem powerfully and uniformly reflationary."  They peg gold to average $950 an ounce next year and $1,000 the year after.  However, they said: "Should macro environment prove worse than expected, gold could trade at "multiples" of these levels."

 

UBS today said they expect gold to be $925 within the month and $975 within three months.  They also said if the credit crunch continues to worsen and safe haven flow into gold accelerates, those forecasts could be conservative.  It seems that the major banks that best understand the crisis in the market are now looking for gold to make a more dramatic move to the upside.  That presents an excellent opportunity for investors to acquire gold at these bargain basement prices.  A number of these bank analysts are talking about the tightness of physical supply and shortages that give rise to the conclusion that gold is extremely undervalued at today's levels.

 

Investors should contact Goldline at 1-800-827-4653 to get started or to add to holdings today.  Ask them about the Price Guarantee Program, which is only offered by Goldline.  That program provides a two-week window of opportunity for investors to re-price their order in the event of a correction.  It is a valuable tool.  Also, ask Goldline how you can acquire free gold coins in conjunction with an investment.  Call Goldline at 1-800-827-4653 for more information.

 

Goldline will also provide you with a free investor kit that includes several brand new articles from independent third party sources.  The article package was updated yesterday and investors will find it to be very informative and helpful, particularly insofar as the current financial crisis is concerned.  To receive the free information package call Goldline now at 1-800-827-4653.

 

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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