Gold closed higher on Wednesday due to short covering as it consolidated some of Monday’s decline. The low-range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If August extends this month’s decline, the reaction low crossing at 882.00 is the next downside target. Closes above the 20-day moving average crossing at 951.10 would signal that a short-term low has been posted. First resistance is today’s high crossing at 944.40. Second resistance is the 20-day moving average crossing at 951.10. First support is Tuesday’s low crossing at 913.20. Second support is the reaction low crossing at 882.00.

(Bloomberg) — Gold rose for a second day on speculation that the Federal Reserve will spur inflation by continuing to buy Treasury securities in a bid to revive the economy. Silver also advanced.

Analysts expect the Federal Reserve to keep a $300 billion program of buying Treasuries as a way to loosen credit by adding to the money supply. Fed policy makers are meeting today. Some investors buy gold as a hedge against inflation. The U.S. consumer price index has declined 2.7 percent since September, Labor Department data show.

“There’s a lot of anticipation to see whether the Fed is going to continue printing money,” Sagiv Peretz, a Finotec Trading U.K. senior dealer, said by telephone from London. “If they will do that, it might support gold because of expectations of inflation further down the road.”

Gold futures for August delivery rose $10.10, or 1.1 percent, to $934.40 an ounce on the New York Mercantile Exchange’s Comex division. The most-active contract advanced 0.4 percent yesterday.

Bullion for immediate delivery gained $8.52, or 0.9 percent, to $934.35 an ounce at 6:50 p.m. in London.

“What is it about the U.S. dollar that has ‘prevented’ the materialization of fresh all-time highs in bullion?” Jon Nadler, an analyst at Kitco Metals Inc. in Montreal, said in an e-mail. “The rather banal explanation is the fact that the world is lacking for better alternatives.”

The Fed probably will keep its interest-rate target for overnight loans between banks close to zero, according to a Bloomberg News survey of economists. The Fed cut the target lending rate to 0.25 percent to zero percent in December.

Dollar as Rudder

The dollar “will provide direction in coming sessions,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note. “With the Fed expected to suggest it will keep rates very low for some time, we expect investors may again turn to stronger-performing assets such as commodities.”

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,131.24 metric tons as of yesterday, the company’s Web site showed.

The metal rose to $933.50 an ounce in the afternoon “fixing” in London, the price used by some mining companies to sell their output, from $928.75 this morning.

Silver for July delivery climbed 6.6 cents, or 0.5 percent, to $13.942 an ounce in New York. Silver for immediate delivery gained 5.25 cents, or 0.4 percent, to $13.9025 an ounce at 6:51 p.m. in London.

(Reuters) – Gold rose above $930 per ounce on Wednesday, gathering strength as the dollar prolonged its downward slide against major currencies on expectations that the U.S. Federal Reserve will not rush to raise interest rates.

The metal extended its gains in London after hitting a six-week low of $912.90 on Monday, with the dollar retreating further against major rivals — making bullion and other commodities priced in the U.S. currency more appealing to non-U.S. investors.

Spot gold rose to $929.60 an ounce by 1019 GMT (6:19 a.m. EDT), up almost half a percent from $925.15 quoted late in New York on Tuesday. It earlier hit a high of $930.35.

The Fed is expected to emphasize that the U.S. economy remains in a vulnerable position, despite some reassuring signs, when it publishes its post-meeting statement later on Wednesday.

Analysts said that short-covering would probably boost bullion, while gathering uncertainty about the pace of global economic recovery was also supportive to its role as a hedge against such jitters.

“The weaker dollar is helping today,…and people are becoming more nervous about the state of the financial landscape,” said Robin Bhar, an analyst at Calyon.

“There was a feeling that the Fed would have to tighten (rates) a lot sooner, but investors are perhaps reassessing their view of the timing of rate increases. And that, of course, would help gold,” he added.

(Bloomberg) — Gold rose for a second day in London as a weaker dollar increased demand for the precious metal as an alternative investment.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.4 percent to a 12-day low on speculation the Federal Reserve will today signal it intends to refrain from raising interest rates this year. The index yesterday dropped the most in two weeks. Gold typically moves inversely to the U.S. currency.

“Dollar-watching has helped lift the metal” and “will provide direction in coming sessions,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note. “With the Fed expected to suggest it will keep rates very low for some time, we expect investors may again turn to stronger-performing assets such as commodities.”

Bullion for immediate delivery added $3.30, or 0.4 percent, to $929.13 an ounce at 11:10 a.m. local time. August gold futures rose 0.6 percent to $929.40 an ounce on the New York Mercantile Exchange’s Comex division.

The metal rose to $928.75 in the morning “fixing” in London, used by some mining companies to sell production, from $920.75 at yesterday’s afternoon fixing.

The Fed will probably keep its interest-rate target for overnight loans between banks close to zero and maintain its $300 billion program of Treasury purchases, according to a Bloomberg News survey of economists.

SPDR Holdings

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,131.24 metric tons as of yesterday, the company’s Web site showed.

Silver for immediate delivery in London rose 1 percent to $13.99 an ounce. Platinum gained 1.1 percent to $1,174.45 an ounce, and palladium was 0.6 percent higher at $238.10 an ounce.

Implied platinum stockpiles in the Swiss clearing system gained 112,000 ounces in May to the highest since March 2007, John Reade, head metals strategist at UBS AG in London, estimated in a report. The increase was mainly from imports from South Africa, the U.S., Japan and Germany, suggesting that industrial demand remains “very” weak, he said.

“The fact that metal is returning to the clearing center suggests that contractual undertakings are too high,” Reade said, adding that UBS doesn’t know the absolute stockpile level. “Producers are sitting with excess metal, as industrial clients do not wish to take the metal.”

Automakers account for about 60 percent of platinum and palladium usage, according to researcher and trader Johnson Matthey Plc. Moody’s Investors Service estimates that global auto sales will fall 13 percent this year, with the U.S. leading with a 24 percent drop.

Last month “we heard talk of auto companies looking to increase purchases of platinum-group metals following aggressive de-stocking that took place since mid-2008, but so far this has not translated into any measurable tightening of the platinum market,” Reade said.

A few weeks ago the gold rush was back on.

Inflation fears were rising. Yields on treasury bonds were rising. Gold was making
another run at $1,000. Leading the headlines though and sparking the most
interest was hedge fund manager John Paulson and his big bets on gold and gold
stocks.

Since then, interest in gold has cooled quite a bit.

The latest Consumer Price Index reading quelled inflation fears and put
deflationary risks back in focus. The U.S. government’s measure of inflation
indicated prices fell 1.3% over the past year. It was the biggest decline since the
Truman Administration.

With deflation taking the lead, an ounce of gold has fallen more than $60 per
ounce. Silver’s run was quickly halted too. Even the mainstream press, which was
really getting behind gold for a while, is getting on board too. A New York Times
article from the weekend explains, “Why Inflation Isn’t the Danger.”

But here’s the thing, inflation is coming. Everything is in place. And right now, with fears of deflation being
Wall Street’s main focus, the window of opportunity is opening up again.

Some of the world’s best investors are taking advantage of the opportunity. Some of the world’s leading
commentators are not. Which side do you want to be on?

The “Smart” Money

Back in February we looked at how billions of dollars were flowing into gold companies’ coffers. Whether
the gold companies were looking for debt or equity financing, they could get as much of it as they wanted.
The “big money” wanted gold and they were willing to cut sizable checks for it. Since then, a lot of big
money managers have taken a liking to gold too. The list of prominent gold (or gold stock or gold ETF)
buyers has been steadily growing.

A few weeks ago, Northwestern Mutual Life Insurance announced it had accumulated $400 million worth of
gold. It was the first gold purchase in the company’s 152-year history. When asked why his firm was
buying gold, Northwestern Mutual’s CEO simply replied, “Gold just seems to make sense; it’s a store of
value.”

It’s not just the third largest life insurance company in the U.S. buying gold though. John Burbank’s
Passport Capital recently said it increased its gold exposure significantly too. According to a recent SEC
filing, the fund had increased its SPDR Gold Shares (GLD) holding by 6,717% in the first quarter of 2009.
SPDR Gold Shares (GLD) now account for 7.9% of Passport’s portfolio.

Basically, interest in gold as an investment is growing. And it’s slowly moving beyond the top-performing
hedge fund managers like John Paulson and David Einhorn.

In the markets, we can’t forget that for every buyer, there’s a seller. And right now, one of the doom and
gloomers who really made a name for himself during the most recent downturn says gold is overvalued.

Roubini: “Gold looks toppy.”

Last week Noriel Roubini threw his hat into the deflation/inflation ring. The man who has become one of
the rockstar commentators of this downturn (every boom or bust seems to create new investment
“rockstars” – that is until their next big call) recently revealed his feelings about real assets.

At the Reuters Investment Outlook symposium, Roubini warned:

“For the next two years, deflationary pressure is going to be dominant, and it is going to become a time
bomb down the line if and when we keep monetizing large deficits. It may be too soon to hedge with gold.“

“Unless we have high inflation, or…other risks like depression, gold looks toppy.“

Deflation? Too soon to hedge with gold? Toppy?

These aren’t “on this hand…on the other hand” types of words used by most economists. This is a firm
prediction inflation isn’t a concern at the moment and won’t be for some time.

So who’s right and what should you do?

Buying on the Dip

Well, here’s the thing. Both sides of the gold argument make sense. All past bubble-booms have ended in
deflation. However, the central banks and governments of the world are doing a lot to prevent it and still
have a lot of arrows left in the quiver to prevent a deflationary spiral.

When it comes to history though, inflation always wins out under the current conditions. As we looked at in
a historical perspective of the inflation vs. deflation debate a few weeks ago, the last few times U.S.
government spending reached these levels (as a percentage of GDP), the consequences, which were
always the same, followed close behind.

In 1861, the Union printed more money, borrowed everything it could, and spent it all to fight back the
“rebels.” Inflation between 1861 and 1865 ended up at 117% for the period. That’s 16.7% on an
annualized basis.

In 1917, President Woodrow Wilson aggressively emptied the government coffers in World War I. Prices
increased 126% between 1917 and 1918. That’s a 50.3% annual rate.

In the 1940’s we went through it again. The U.S. involvement in World War II forced another surge in
government spending. This time the prices rose 108% between 1941 and 1945. That works out to a
15.7% annual rate of inflation.

It seems so obvious right?

Frankly, it is obvious to many.

In the end, we can’t forget how the markets work. Assets everyone wants get premium prices and
unwanted, out-of-favor assets go for next to nothing. And the safest and largest gains are found in buying
the unwanted assets and waiting for them to fall back into favor.

And right now, while deflation takes the lead in the inflation/deflation debate, it’s giving us a chance to
protect ourselves from the coming inflationary wave inexpensively.

If you’re looking to buy gold and undervalued gold stocks on dips, right now is definitely one of those dips.

Good investing,

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

Courtesy of Eric Lam of FP Trading Desk

Gold producer Iamgold Corp. recently increased the resource estimate at its new Westwood mine in Quebec, but Blackmont remains unconvinced about the value of the company moving forward.

“Given the still early stage and uncertain economics, we ascribe only a $25/oz value to this project and as such, the resource increase does not materially change our NAV,” Richard Gray, mining analyst with Blackmont, said in a note Tuesday.

The recent discovery of several new high-grade finds helped Iamgold bump up the resource estimate to 3.43 million ounces.

Mr. Gray is “intrigued” that the Toronto-based company’s existing Sadiola mine in Mali may get a new lease on life thanks to a possible deep sulphide project.

“Although we are unconvinced of the economic viability, the deeper potential at Sadiola is intriguing,” he said.

Citing elevated political, technical and financial risk for Iamgold’s development properties and declining production, Mr. Gray is maintaining his “Sell” rating and C$9.25 target price.

Meanwhile, Paolo Lostritto of Wellington West Capital Markets is more optimistic about the company’s prospects. He argues the Rosebel mine in Suriname will boost 2009 production and cash flow.

“However, cash flow and gold production will likely remain a challenge in 2010 until Essakane [in West Africa] start up in the second half of the year,” Mr. Lostritto said in the note.

Mr. Lostritto is also maintaining his “Market Perform” rating while upping the target price to C$14 from C$13.

August gold futures closed up $4.70 at $925.70 today. Prices closed nearer the session high after hitting a fresh five-week low early on today. Short covering and perceived bargain hunting were featured today as the U.S. dollar sold off sharply.

Courtesy of Commodity Online

Demand for silver investments is heating up in 2009. “The rise in silver prices has also been largely thanks to a fresh wave of investment demand, as funds and other investors buy into silver futures and physically backed exchange-traded funds (ETFs), ” Reports Commodity Online.

“The growth in investment demand for silver is such that it could account for between one quarter and one fifth of total consumption in 2009. As well as the sharp climb in silver ETF holdings, net long positions — or commitments to buy — in silver on the Comex futures exchange in New York rose last month to the highest since August 2008, suggesting keen speculative interest,” Reports Commodity Online.

Commodity Online continues to say “In addition to its appeal as a proxy for gold, silver is also taking a fresh leg higher from renewed optimism over the outlook for the global economy, which is helping the outlook for industrial metals.”

Something to keep in mind as speculators pour into the investment of silver is “With much of the fresh investment since the start of 2009 having flowed into ETFs, from where it can quickly be re-sold on to the market, and futures, some say prices are vulnerable to a sharp correction if funds decide to off-load their holdings,” Reports Commodity Online.

In our current 8-year bull market, June has seen the lowest return for gold and one of the best times to buy. Gold is one of the best forms of capital that can protect you in a financial Armageddon. That gold was up in 2008 is a reminder of its protective power. How much gold should you have? Continue to accumulate physical gold until you can honestly say you don’t care how many dollars Ben Bernanke prints,” reports BigGold editor Jeff Clark.

Gold closed sharply lower on Monday marking a downside breakout of last week’s narrow trading range. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If August extends this month’s decline, the reaction low crossing at 882.00 is the next downside target. Closes above the 20-day moving average crossing at 954.10 would signal that a short-term low has been posted. First resistance is the 10-day moving average crossing at 940.00. Second resistance is the 20-day moving average crossing at 954.10. First support is today’s low crossing at 918.30. Second support is the reaction low crossing at 882.00.