Daily Commentary

Metals React to Stronger Dollar, Lower Oil

Gold and silver had their biggest drop in more than four weeks this morning, with gold falling $19 and silver down $.73.  Both are falling in reaction to a combination of a stronger dollar, up 39 basis points at 72.28 and a sharply lower oil market with oil down $2.19 at $129.94 a barrel.  The markets are extremely nervous and volatile this morning.  Moreover, the markets seem to be thin in terms of volume of trading.   In my view the corrections today are extraordinary and probably a significant overreaction to the aggressive drop in oil prices.  While last week it looked as though the corrective process had concluded, we now see a new test of support at the $900 level.  In all likelihood this support level will hold and as it does will generate increased support for the gold and silver markets.  I am always impressed by the fact that corrections in the context of bull markets tend to be large and dramatic.  Today is no exception.

According to technical analysts at Barclay's, gold has excellent support at $901 an ounce.  What we are seeing today is speculative selling pressure, which is forcing funds to liquidate positions.  One analyst said, "It's all about oil, and the dollar is beginning to rally."  It is interesting to note virtually all of the major banks and brokerage firms are forecasting much higher prices over the remainder of the year.  For example, today Merrill Lynch said they forecast gold at $1,000 by autumn (September 22^nd).  I believe they see this period of correction and consolidation as simply that, and presenting a good buying opportunity.  Gold has now tested these levels quite a few times and in each instance, once support is identified there is a substantial rally from that level.  Analyst Sterling Smith told the Dow Jones Wire Service, "I think we are seeing some minor fund liquidation and some minor spec selling."  He also said, "Some of gold's decline may also be the result of rolling out of June positions ahead of first notice day on Friday." 

Over the past eight years, gold has had a number of corrections very similar to what we are seeing today.  Each and every one of them has been a major buying opportunity.  Therefore, I would focus on the opportunity to acquire gold and silver at bargain basement prices.  Those of you who have acquired gold or silver within the last two weeks and took advantage of Goldline's Price Guarantee Program, should be celebrating the opportunity to get more gold or silver for your money.  If you took advantage of the Price Guarantee Program, you may wish to consider locking in today's prices particularly if your two-week window of opportunity is about to run out. 

Dresdner Klienwort said that weaker consumer confidence and new home sales numbers will be positive for the gold market as it may pressure the Fed to continue lowering rates.  Looking at the economic news, April new home sales rose in April, but failed to meet expectations.  Sales of single-family homes rose 3.3% last month.  March new home sales fell 11%.  The Case Schiller index of home prices, had the biggest drop in twenty years, as prices fell 14% year over year.  Moreover, May consumer confidence hit a sixteen year low.  The big question is whether the Fed will continue to lower interest rates and increase money supply in an effort to try to prevent the U.S. economy and the financial system from collapsing.  With home prices falling, it is common sense that foreclosures will increase.  This again puts significant pressure on the banking system.  It is impossible to do workouts or handle the derivatives crisis when the underlying assets that support the derivatives are falling aggressively.  In my view, all of these factors suggest that dollar strength cannot last long.  The dollar should weaken as the Fed and other central banks take action to try to relieve the distress in the financial system.  Given all of these factors, it would appear that the correction in the gold and silver markets is vastly overdone.  Therefore, they likely present opportunities for investors.

I recommend investors call Goldline today 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 Krugerrands, Canadian Maple Leafs, American Eagles, 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 29 Swiss 20 Francs, you will receive the 30^th coin for free.  Investors may wish to consider several tubes of these coins to obtain several free Swiss 20 Franc gold coins.  Call Goldline at 1-800-827-4653 for further information.

To receive the free information package including the special booklet from the FDIC that helps you to understand whether your bank accounts are safe and enables you to be sure that your bank has the proper insurance to protect your deposits, call Goldline.  We also provide several other helpful articles.  There are also a number of other independent third party source articles that you will find extremely helpful and informative.  You will also receive the company brochure and a Coin Facts Risk Disclosure Booklet, which you should read carefully before you make an investment. 

Goldline will send you a free CD of the special interview with analyst Frank Barbera if you ask for it.  This is a remarkable interview and I think everyone would benefit from listening to it.  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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