SRM-- I said Friday it was just a panel recco on the gold sale. Will the Swiss voter agree to it? Depends on what spin they give it, but I doubt it. It just points to the psycology of the gold market, looking for any excuse to be talked down. Talk about Lemmings! It's all too cute.
Also, everyone on this thread must read the Oct 27 Barrons, page 17,
article called "Pessimistic Paradigm."
Also, this is interesting>>Gold prices face further tests after sliding to their lowest level in 12
years late last Friday as selling swept the New York markets, traders said.
A five-percent plunge in prices took spot gold to $308.25/$308.75 per ounce after London closed at
$315.90/$316.40.
The cash price recovered slightly to open in London on Monday at $310.40/$311.00. It had fixed on
Friday at $316.65.
''We saw some short covering when the European markets opened, which helped pull the price up,''
one dealer in Hong Kong said on Monday.
News that the Swiss government was being advised that it could sell 1,400 tonnes of gold from its
reserves if it decoupled the franc from gold backing set market nerves jangling early on Friday.
Market weakness went into slump as soon as New York opened, even though no gold selling could
happen until after a referendum in 1999.
The news coming on top of the financial crisis in South East Asia, and volatilitity in world stock
markets undermined remaining gold market confidence.
''You have to say it was a disappointing week,'' one dealer said.
Another market professional took a different albeit no more optimistic view, ''(New York) can see
things much more clearly from afar than we can from here,'' he said as the resonance of crashing
prices continued on Friday afternoon.
According to technical analysts, the charts do not look positive.
The year's previous low of $313.85 collapsed on Friday. ''It could fall rapidly to $300, which is a
psychologically significant level,'' said technical analyst Cliff Green at price forecaster Trend
Analysis.
After that it had to be focused on the February 1985 lows between $275 and $285, he added.
The best gold could hope for short term, according to Green, was that the downturn became
overdone, leading to a period of severe volatility.
''It is beginning to look overstretched, so we may see some volatility and corrections,'' he said.
''It is probably too tired, so there could be a corrective bounce, but $320 will be difficult to
overcome,'' Green said.
''The only positive thing is if it continually fails to break lower, that might suggest some stability and
that it is basing out,'' he added.
Switzerland is the last developed country to insist on a gold backing for its currency. On November 1
the extent of the backing will be reduced from 40 percent to 25 percent.
Debate and deliberation have been going on in Switzerland since March, when the proposal was first
announced to revalue gold reserves closer to market value, reduce the franc's backing and sell part
of the surplus to generate a humanitarian fund for victims of tragedy such as the Holocaust.
At current market prices, selling 1,400 tonnes of gold would raise more than $14 billion and leave the
Swiss National Bank with 1,190 tonnes of gold in reserves.
Finance Ministry director Ulrich Gygi, co-leader of the expert group, told a news conference,
''According to all the experts, there should be no significant, erratic influence on gold prices from a
cautious and phased sale.''
That brought howls from market professionals. ''How can you possibly sell that amount of gold with
sensitivity?'' said one irate bullion source.
Current prices have been under pressure for over a year, since the International Monetary Fund
(IMF) announced it would sell five million ounces (155 tonnes) of its reserves to fill a gap in its fund
for supporting the world's poorest countries.
The central banks and institutions such as the IMF and the Bank for International Settlements
between them hold about 35,000 tonnes of gold, or about 15 years of annual mine output.
Since then sales by the Dutch and Australian banks, one smaller sale by Russia and talk of sales or
revaluation from Germany Switzerland and the U.S. have all helped to flatten gold's attractiveness as
an investment.
''First you had the Australians, now the Swiss, who knows who will be next. The price of gold is
basically capped for a long, long time,'' a trader said.
A brief correction was possible as physical buyers were induced to buy by low prices, dealers said.
''The outlook is very bad,'' said James Lo, a trader for Hing Fung Goldsmiths and Refinery.
Despite attractively low prices, most Asians were not buying gold after a summer-long decline in the
region's stock markets.
In the longer term, however, lower prices should give a boost to buying in Hong Kong, Taiwan and
China and is a bonanza for Indian buyers looking to pick up material ahead of the Diwali festival on
Thursday, they said.
WJ |
