Gold Near $800 (August 25, 2008)
Gold near US$800 remains vulnerable in the near term to a stronger dollar but is underpinned by rising physical demand in key global markets, deteriorating macroeconomic and financial environments, accelerating inflation, and tight supply/demand fundamentals.
A pop in the U.S. dollar, prompted by signs of deteriorating economic activity in Europe, has once again undercut gold, just as the metal looked like it might hold and build support around $830 an ounce.
Having failed to establish a foothold over $830 an ounce, gold is greatly oversold but still looks technically vulnerable. A further decline to the $790 to $800 range — or even briefly lower — is certainly possible, especially if the dollar continues to rise against the euro. But, I believe any decline below $800, however deep, will be short-lived as price-responsive physical demand increases in tandem.
