Gold is up in Asian and early trading in London this morning. Gold was up $3.60 to $909.30 per ounce in trading in New York Friday and silver was up 32 cents to $17.71 per ounce. The London AM Gold Fix at 1030 GMT this morning was at $914.70, £460.27 and €582.17.
Gold has rallied in London after early weakness and looks very well supported with strong physical demand internationally at these levels.
Friday's poor jobs data and the continuing poor economic data out of the U.S. suggests the economy is worsening and this will put pressure on the dollar in the coming weeks (the euro looks well supported at 1.55). With more interest rate cuts on the cards from the Federal Reserve gold looks likely to consolidate at these levels prior to challenging recent highs in the coming months.
Oil's rally back above $107 will also lead to inflation hedging by investors as will the surge in soft commodity prices and particularly rice in recent days.
There is little in the way of market data today but tomorrow’s release of the minutes of the last FOMC meeting may be important in setting the tone for the week.
It seems increasingly likely that the Bank of England will reduce rates by another 0.25% given the deterioration in the credit crisis, falling property prices and a decelerating economy since the March policy meeting. A likely rate cut is keeping cable below the $2.00 level, while sterling’s lifetime lows versus the euro remain within easy reach and look like they will be reached in coming weeks.
Stagflation is clearly emerging as a real and present danger to western economies and to the UK economy and the BoE (like the Federal Reserve) is caught between a rock and a hard place. The property markets and economy again need the life elixir of cheaper money but the inflation genie is out of the bottle and should sterling fall even further inflation will increase even more which would require sharp rate increases (possibly to double digit levels) in order to control the grave threat that is real and serious inflation.
Support and Resistance
Support is at $885, $900 and $910. Resistance is at $950 and $970.
Silver is trading at $17.96/18.00 at 1200 GMT.
Platinum is trading at $2026/2036 (1200 GMT).
Palladium is trading at $453/459 per ounce (1200 GMT).