Thoughts on Markets

Friday, August 29, 2008

Escalation of Saber Rattling


Both silver and gold are trading in patterns similar to yesterday's. They are both a good bit lower than they were yesterday at the same time, but they are a bit higher than the day before. Today is the last trading day in August and we are facing the 3-Day weekend. That means that trading should be rather light today. With light trading, it is easy for those interested parties to have considerable impact upon prices if they so desire.

From what we have been seeing the last few days, it seems that the gold spot price of about $837 is being defended rather heavily. If true, it will be difficult for gold to exceed that price until the intervention is ceased. Note, too, from the Daily Pfennig it was reported that Pam and Mary Ann Aden (the Aden Sisters) said that their charts were showing that if the price of gold moves above and stays above $845, it will be in for a rise from there.

A UBS analyst issued a strong buy on gold. He cited that GLD (Gold Trust) assets had declined only 7.7% while gold declined 13%. This indicates strong interest in gold. Also, we are seeing unprecedented buying of gold by India.

The following reports of more unrest in the world should also cause more people to seek the security of the precious metals.

More saber rattling between Russia and the West. See the following from www.Telegraph.co.uk:

Russia may cut off oil flow to the West

By Ambrose Evans-Pritchard
Last Updated: 10:39am BST 29/08/2008

Fears are mounting that Russia may restrict oil deliveries to Western Europe over coming days, in response to the threat of EU sanctions and Nato naval actions in the Black Sea.

Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets.

Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert.

"They have been told to be ready to cut off supplies as soon as Monday," claimed a high-level business source, speaking to The Daily Telegraph. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda.

You can view the whole article here: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/29/cnrussia129.xml


Then there is this from www.timesonline.co.uk:

Cold War tension rises as Putin talks of Black Sea confrontation

A new Cold War between Russia and the West grew steadily closer yesterday after the Kremlin gave a warning about “direct confrontation” between American and Russian warships in the Black Sea.

You can view the whole article here: http://www.timesonline.co.uk/tol/news/world/europe/article4622422.ece

The second quarter Gross Domestic Product (GDP) was up to 3.3%. This is encouraging, but analyst reported that it was largely due to an increase in exports of about 3%. That is good news, but could be the highest of the year with the remaining two quarters showing much less.

The dollar has been higher for a time now, but has fallen back a bit. Noteworthy is the fact that gold is down against all major currencies at present.

Europe is showing some signs of slowing, albeit, not as much as America. Executive and Consumer sentiment there was down from 89.5 to 88.8 for July. Inflation was down to 3.8% from 4.1% and unemployment remains high at 7.3%.

Japanese consumer spending was up to -0.5% in July from -1.8% in June. That's looking up a bit, too.

Don't expect too much out of today's trading, because of the long weekend and the month's end. The London traders will be headed to the local taverns early today and ours will be going into "pre-quit" early, as well.

Gold is currently at 830.40 and silver 13.59. Both are on down ticks.

We should all look forward to corporate worship of the Sovereign God of all on Sunday (the Lord's Day). This is a vital part of our lives and essential to spiritual health. When Paul wrote to tell us to "Work out our own salvation with fear and trembling. For it is God which worketh in you both to will and to do of his good pleasure." (Phil. 2:12b,13) The church is a blessing to the people of God and is of great help in growing us in the likeness of Jesus Christ. This is particularly true as we participate in the sacraments and fellowship with other believers for encouragement and challenge for further growth.

Best to each, Doug

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