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Gold Over £900/oz As British Pound Falls Sharply - Soaring Inflation Sees UK Retail Sales Plunge Most On Record

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Submitted by Gold Core

Gold Over £900/oz As British Pound Falls Sharply - Soaring Inflation Sees UK Retail Sales Plunge Most On Record

Gold is marginally lower in all currencies today except sterling after UK retail sales plunged the most on record in March due to deepening inflation. Consumer’s finances in the UK and internationally are being negatively impacted by food and energy inflation showing the UK’s vulnerability to a double dip recession and stagflation. Gold rose 0.5% in sterling over the £900/oz mark again.

Silver has recovered somewhat from yesterdays sell off and is nearly 1% up against major currencies and 1.5% higher against the pound. Yesterday’s selling was likely primarily due to speculators taking profits and locking in recent gains.

Japan's Nikkei fell and equities in Asia and Europe have come under pressure on the gradual realization and admission that the impact of the March 11 earthquake may be far more severe than assumed and as Japan put its nuclear crisis on par with Chernobyl.

A nuclear catastrophe does not bode well for an already fragile global economic recovery.    
 

Gold and particularly silver are vulnerable to a short term sell off. The fundamentals remain very sound but correction and consolidation may be necessary in both markets. Most participants are again expecting sharp pullbacks and some brave souls continue to assert gold and silver are “bubbles” about to burst. They are likely to again be disappointed as markets have a habit of doing the opposite of what the herd expects.

In gold, should a correction materializes previous resistance just above $1,400/oz and the 100 day moving average at $1,375/oz (see chart above) are likely to provide strong support. Resistance is at the recent nominal high at $1,475/oz.

The record nominal sterling high of £915/oz looks set to be challenged as sterling comes under pressure due to soaring inflation and record low interest rates.
 
Households in the UK are seeing their spending power eroded at the fastest rate in more than 60 years as food and energy costs soar and the faltering recovery restrains wage increases. Concerns about the tentative economic recovery as well as the government’s VAT increase and the deepest spending cuts since World War II are undermining consumer confidence.

NEWS

(Telegraph) -- Gold to Break $2,000/oz Barrier

The price of gold will reach $2,100 an ounce within three years.

The price of gold will reach $2,100 an ounce within three years and could rise to almost $5,000 by the end of the decade, according to a new report.

Rising demand for gold in China and India will drive the precious metal's continued bull run, analysts at Standard Chartered, the Asia-focused bank, predicted. They said low interest rates in America and a time lag before mines started supplying more gold would see the rally extend to at least 2014.

"Our base-case forecast is that prices rally to peak at an average of $2,107/oz in 2014, although our modelling suggests a possible ‘super-bull’ scenario of gold prices rallying up to $4,869/oz by 2020, should current relationships between Asian demand and gold persist," the analysts wrote.

The bank said there was a "powerful relationship" between income per head in Asian emerging markets and the gold price.

The report added: "We expect some headwinds for gold to come from higher US [interest] rates, but we find that the impact of higher rates is rather muted and we do not expect this to derail gold’s rally for now," they added.

"More important, we believe, will be the impact of higher mine production. We expect a steady acceleration in mine-supply growth in the years ahead, which should overwhelm demand growth beyond 2014. Nevertheless, we expect an extended period of high gold prices."

In a previous report, the analysts had predicted that average income per head in China and India would reach 30pc of the US level by 2030. "Under this scenario, and assuming that the relationship between rising income levels and gold holds, gold prices could reach $4,869 by 2020," the report said.

"On this basis, the bull run for gold could still be in its infancy. This is based on the assumption that the current relationship between gold and incomes persists through to 2020, which is considered possible, but unlikely."

The report concluded: "The bull run in gold is likely to continue for some time, but prices should peak around 2014 as supply finally catches up with demand and US real rates turn positive."

(Bloomberg) -- Gold May Advance to $1,560, Commerzbank Says: Technical Analysis

Gold may rise to $1,560 an ounce by the end of the year, indicating a 7 percent gain, according to
technical analysis by Commerzbank AG.

The $1,560 level is based on point and figure analysis, Commerzbank analyst Axel Rudolph said in a report on April 8.The attached chart shows gold may first climb to about $1,515, the 161.8 percent extension of the February 2010 to June 2010 gain, projected from the July low, one of the levels singled out in so-called Fibonacci analysis.

 “Other point and figure targets are at $1,515 and $1,530, so the $1,515 zone seems important, together with the psychological $1,500 level,” Rudolph said by e-mail yesterday. A price of $1,500 may be achieved before three months, he wrote.

Gold climbed to a record $1,478.18 yesterday after gaining for 10 consecutive years on demand for a protection of wealth and an alternative to currencies. The metal for immediate delivery traded at $1,457.79 an ounce by 7:42 a.m. in London.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices tend to drop or climb by certain percentages after reaching a high or low. A point and figure chart gauges trends in prices without showing time or volume.

(Bloomberg) -- UBS Sees ‘Difficult Three Months’ Ahead for Metals, Miners

UBS AG said the next three months will be “difficult” for metals and mining companies, because of global slowdown, Middle East unrest, changes to U.S. interest rate policy and Japan’s earthquake.

The bank downgraded industrial metals, and expects a 5 percent decline “across the complex” in the second quarter, while gold climbs 5 percent, analyst Julien Garran wrote in a report today.

(Bloomberg) -- Gartman Adding to Gold in Sterling Terms

Newsletter writer Dennis Gartman adding to Friday’s gold position; had bought gold in GBP terms, says must add with gold trading upward through GBP900/oz.

Notes yr spreads for WTI, Brent both backwardated; Brent/WTI spread had gone “dramatically” in Brent’s favor;

watching Qaddafi -- w/ Qaddafi “conciliatory,” Brent’s premium waning; Qaddafi “recalcitrance” may push spread back out, beyond $15/bbl.

NOTE: Friday Gartman said gold remained strong, with  increasing monetary base, falling USD “gold has to move higher.”

(Bloomberg) – Bartels: Chances are Rising for NY Oil to Jump to $147/bbl

Oil’s potential to reach $147/bblis rising as crude “has started to trend above the 61.8% (Fibonacci) retracement level” of $103-$104/bbl, says Bank of America Merrill Lynch market analyst Mary Ann Bartels.

Says holding above 61.8% retracement “increases the potential” for oil to return to July 2008 high $147/bbl.
Says gold’s “breakout above $1450 supports the case for a rally to $1525 and $1575”, long term says may reach $2000-$2300/oz.

Says silver futures’s next resistance level $44-$45; says spot silver likely to reach $50/oz.

Says Investors Intelligence % of newsletter writer bears at 15.7% last week could be bearish sign for equities; says readings below 20% bears has been a “warning sign,” though sentiment is a poor timing indicator.

(Green Bay Press-Gazette) -- Steve Forbes predicts return to gold standard

Steve Forbes apparently no longer is interested in the White House.

The question just begged to be asked — would Forbes consider a third run for the presidency?

Although it didn't receive much mention during his lecture April 4 at Lakeland College in Howards Grove, Forbes willingly entertained the question afterward.
"There's an old saying that the third time's the trick," the audience member said rather encouragingly.

Forbes laughed along with the audience, and then put the matter to rest.

"Thank you for your compliment, but my role now is agitator," Forbes said.

Forbes, 63, president and CEO of Forbes Inc. and editor of Forbes magazine, shared economic philosophies that echoed his previous presidential campaigns when he delivered Lakeland College's 10th annual Charlotte and Walter Kohler Distinguished Business Lecture.

Forbes' presidential bids of 1996 and 2000 centered on a flat tax plan; ushering in a new system of Social Security for younger Americans, and allowing parental choice in the school system.

"It's highly unusual what we're experiencing today," Forbes said of our nation's current economic woes. "The norm for this country is for people to move ahead. When that doesn't happen, you have to look at what's standing in the way."

Forbes likened the economy to a stalled automobile — too little fuel and the engine stalls; too much and it floods — and said that the Federal Reserve's current monetary policy plays a fundamental role in the situation.

"The Fed has been on a bender since the early part of the last decade, printing too much money," Forbes said. "They're doing it again. … Some people may benefit, short-term, but overall you don't get productive investment, (which) means more inflation at home, speculation in commodities, currencies."

Looking ahead

In one of several predictions he made during the lecture, Forbes said that within the "next five years, for the first time since the 1970s, the dollar will be re-linked to gold."

The gold standard, in which currencies are tied to a specified amount of gold, broke down during World War I. The Bretton Woods system was in use from 1946 until 1971, when President Richard Nixon announced that the United States would no longer redeem currency for gold.

"We're going to have to do this," Forbes said. "Gold provides a stable value, as much as you can, in this imperfect world."

 

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Tue, 04/12/2011 - 07:08 | 1160882 ZeroPower
ZeroPower's picture

Gold and particularly silver are vulnerable to a short term sell off. The fundamentals remain very sound but correction and consolidation may be necessary in both markets.

 

Yes. People playing in paper PMs here don't know how to take profits and then come here to bitch.

Sell >40, buy dips under 38, keep on trucking.

Tue, 04/12/2011 - 07:16 | 1160889 topcallingtroll
topcallingtroll's picture

I sold gdxj at 42 ish and vde.at 116 ish. Should have.sold at the height of the inflation hysteria. Now slight doubts are creeping in as the end of qe2 is near.

I have one box of silver eagles left. I will probably just keep that and not worry where it goes, but i am totally out if silver hits 50. I am in cash and cyh now waiting.for a.downdraft.

Cyh is just for a quick pop and then sell.

Tue, 04/12/2011 - 07:12 | 1160885 topcallingtroll
topcallingtroll's picture

I may be early calling a top in the inflation trade, but it just now appears that people understand there is no qe3 in the immediate future.

Ben cannot afford unpredictability. Qe2 will end on schedule and there will be no qe3 unless we have another deflation svare.

Tue, 04/12/2011 - 07:20 | 1160903 AUD
AUD's picture

Yeah, and you could be wrong like you have been every time.

Tue, 04/12/2011 - 07:21 | 1160911 topcallingtroll
topcallingtroll's picture

Hehehe.

Not every time!

Lets see how it unfolds.

Tue, 04/12/2011 - 07:49 | 1160974 Global Hunter
Global Hunter's picture

Its just Headline Inflation folks, they can't afford to let the stock market indices drop, that headline they care about.  A QE3 I think will continue in some manner, but watch the go for a big headfake and call it something different.  

Tue, 04/12/2011 - 07:52 | 1160984 topcallingtroll
topcallingtroll's picture

Good point to remain vigilant and suspicious.

Tue, 04/12/2011 - 09:38 | 1161289 Bicycle Repairman
Bicycle Repairman's picture

"there will be no qe3 unless we have another deflation svare (sic)"

Since QE is the only thing holding up this economy, there will be another deflation "svare" and QE will promptly resume.

Tue, 04/12/2011 - 07:16 | 1160898 bania
bania's picture

Au/Ag with a case of "morning rod" today

Tue, 04/12/2011 - 07:19 | 1160900 oh_bama
oh_bama's picture

Those guys are too NEGATIVE!!

  • UK is doing GREAT!
  • CPI BEAT Expectations!
  • And short sterling went up 18 ticks in the back end!!

Hehe..

Tue, 04/12/2011 - 07:21 | 1160901 SloaneSquare
SloaneSquare's picture

Well most suspect the UK CPI number was leaked. I hear there's going to be an investigation and I hope a number of people are feeling the heat.

Tue, 04/12/2011 - 07:21 | 1160910 Josephine29
Josephine29's picture

The UK inflation numbers were better on a headline basis but there were factors within them that make them look as if they may be a one-off or temporary improvement. The reason for this is explained below.

It would appear that this months dip in the annual headline rate of inflation was caused mostly by the discounting of some prices by shops and supermarkets. Adding in the way that the CPI index is calculated meant that the headline rate was affected by 0.4% when its predecessor RPI fell by a much smaller 0.2. If we remember that on a month on month basis prices rose and that shops are unlikely to discount forever then I feel that we may finally learn the true definition of the word temporary!

http://www.mindfulmoney.co.uk/wp/author/shaun-richards/

 

So we may yet see inflation last for longer in the UK and may yet see it go higher...

Tue, 04/12/2011 - 07:30 | 1160929 topcallingtroll
topcallingtroll's picture

Maybe.

But i believe it is about time for deflation concerns to reappear.

Tue, 04/12/2011 - 07:35 | 1160938 overmedicatedun...
overmedicatedundersexed's picture

if only they were on the Euro, it would be all roses and honey in dear old england..

Tue, 04/12/2011 - 07:50 | 1160980 Global Hunter
Global Hunter's picture

sarcasm?

Tue, 04/12/2011 - 07:23 | 1160913 cheesewizz
cheesewizz's picture

Sorry, off topic, But...

"Running from Tsunami"

http://www.ebaumsworld.com/video/watch/81433416/

 

Tue, 04/12/2011 - 07:55 | 1160988 topcallingtroll
topcallingtroll's picture

We may get another btfd moment.

The deflation monster is rattling his.chains.

Better hope he doesnt break out, cuz he will open
a can of whup ass on all y'all hyperinflationistas.

Tue, 04/12/2011 - 08:03 | 1161001 thepigman
thepigman's picture

Global recession's back, bitchez.

Tue, 04/12/2011 - 08:08 | 1161028 thepigman
thepigman's picture

I was getting tired of every bulltard maroon

making coin on asset price inflation, anyway.

 

 

Tue, 04/12/2011 - 08:09 | 1161023 DoctoRx
DoctoRx's picture

Gold picking up Big Finance bulls.  This is necessary to allow pension funds, general institutional investors, and of course average retail investors to push prices to another level.  IMHO not a contrary indicator yet, so long as the case for gold remains strong and gentle Ben continues to worry about not enough price inflation.

Tue, 04/12/2011 - 09:50 | 1161305 Bicycle Repairman
Bicycle Repairman's picture

IMHO the plan is 5% to 10% inflation for a decade.  Negative real interest rates.  The market will be slightly up in nominal terms.  Cut in half in inflation adjusted terms.  Lowered standard of living as wage inflation will not keep up with price inflation (suck it up).  Efforts to vacuum up middle class and third world wealth to re-capitalize the bankers will continue.  From time to time there will be headfakes to keep the rabble in line.  Not to worry, the banks will be informed of the incidence and duration of the headfakes well in advance.  The vast majority of little guys trying to trade these headfakes will get their capital vacuumed up promptly.  When the frogs have been boiled sufficently, TPBT will declare that it is "Morning in America."

Tue, 04/12/2011 - 10:28 | 1161453 Bansters-in-my-...
Bansters-in-my- feces's picture

A loaf of bread will be $49.95 also.

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