Firm's Gold Comments

June 29, 2009

Gold Market Weekly Report

Last week, spot gold closed at $939.60 per ounce up $5.55 or 0.59 percent. Gold equities, as measured by the XAU Gold & Silver Index (11) rose by 1.52 percent for the week. The U.S. Trade-Weighted Dollar Index (12) fell by 0.54 percent.

Salient Research Points:

• Gold’s investment appeal resurfaced as the dollar came under renewed pressure after China’s central bank reiterated a call to lessen the dollar's role as the world's currency. The European Central Bank’s liquidity injection of 442 billion euros pushed money market rates and Libor to record lows. This marked the first week in four that gold prices recorded a gain.

• Contrary to market expectations, many analysts believe the Federal Reserve is unlikely to begin rate normalization in 2009 because of a negative output gap and tight levels of credit. RGE analysts said that in order to tame rising Treasury yields, the Federal Open Market Committee may later expand quantitative easing.

The chart at right shows what looks to be an ascending triangle forming in the GLD (streetTRACKS Gold Trust Shares). It has successfully held the lower line at the 92.00 region and, with continued dollar weakness, will likely retest the top trendline near 96-97 area. A clear break there will obviously send the metal to new highs likely snapping the previous peaks at 98.99 and 100.44 with ease. Using a pattern price projection, the 112-115 region should be attainable.

posted by Peter Greene