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USAGOLD Daily Press Release

The following report is prepared daily for the benefit of our clientele and the media. Please attribute quotes to Pete Grant at USAGOLD.com

The Morning Gold Report by Peter A. Grant
Gold Slumps on Modestly Firmer Dollar
May 13, a.m. (USAGOLD) -- Gold has fallen back into the range as the dollar firmed on the better than expected ex-auto retail sales gain. However, the greenback remains confined to the recent range and the longer-term trend is still perceived to be negative. With oil generally well bid and platinum looking strong, the downside for the yellow metal is thought to be limited.

While gold remains confined to the lower end of the recent range, platinum has staged a strong recovery. More than 61.8% of the decline from 2290.00 (04-Mar high) to 1804.00 (20-Mar low) has already been retraced, returning considerable credence to the underlying bull trend.

While moderate chart resistance at 2116.00/50 capped the upside on Monday, resulting in a minor pullback today, the overall technical picture for the white metal appears quite encouraging.

Given the tighter supply/demand dynamics, we have been watching platinum for an early indication that the corrective lows for the precious metals are in place. Yesterday's breach of the 2104.35 Fibonacci level further reinforces our belief that the lows are indeed in.

The platinum market has been in deficit for eight of the last nine years. Platinum rose 34% last year with a demand shortfall of 265,000 ounces. With the deficit for 2008 widely anticipated to come in significantly higher, prices are presently 35% higher so far this year, but were up 50% at the market's peak back in Mar.

Estimates of this year's supply deficit have ranged from 400,000 ounces to 700,000 ounces. However, industry forecasts have been biasing toward the low end of that range recently as the US economy sputters.

Nonetheless, strong physical demand on recent dips, both for jewelry and catalysts strongly suggest that the downside is well protected at this point.

The power crisis in South Africa inspired strong buying by automakers early in the year as they sought to secure supplies in anticipation of sharply higher prices. The automakers have been back in the market more recently, taking advantage of the recent correction to add to inventories for their Q2 needs.

Last week's launch of new platinum exchange traded notes (ETN), which offer both long and short trading strategies, have also contributed to the white metal's recovery.

ETNs are different from ETFs in that they do not require that physicals - platinum in this case - be purchased to back shares. Instead, ETNs are senior secured debt obligations and represent a promise by the issuer to deliver the performance of an index.

Platinum producers were vehemently opposed to a US ETF, fearing that increased market volatility would force industrial users to look for cheaper and less volatile alternatives.

As long as the market is still expecting a supply shortfall and as long as the trend remains positive, these new instruments should be supportive. While the ETN is not backed by physicals, market makers are still going to have to hedge their short exposure. That is likely to take place in the futures market, offering further support to the white metal.

The significantly improved technical picture for platinum, along with the still favorable fundamentals, bodes well for gold. A short-term move in the yellow metal back above $900 would be an encouraging signal. A break of the 916.82 level would return additional credence to the underlying uptrend.

Oil remains well above $120/brl, the dollar is still looking anemic, the US economy is wounded, home values conitnue to fall, the stock market is looking vulnerable, and considerable systemic risks to the banking system are still evident. Physical gold is still the best vehicle to hedge against such risks and protect your wealth.

Gold Market Movers:

Bernanke says markets healing but still not well

US retail sales for Apr -0.2%, slightly worse than expected, but ex-auto +0.5%.

US import prices for Apr surged 1.8%. Export prices +0.3%.

UK retail sales -1.5% y/y.

UK RICS house price index falls to a new record low of -95.1, versus -79.4 in Mar.

UK CPI for Apr above expectations at 3.0% y/y.

Credit Agricole set to raise $9.2 billion in share sale

SocGen 1st quarter down 23%

China's retail sales set record pace

SAfrica's March gold output falls 10.9 pct yr/yr

China to shut mines, oil wells, plants, after quake

Stock index futures suggest a higher open on Wall Street.

Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

About the author...

Pete Grant is the Senior Metals Analyst and an Account Executive with USAGOLD - Centennial Precious Metals. Read more...

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Pete Grant
Phone: 303-393-0322 ext 111
Toll Free: 800-869-5115 ext 111
Email: pgrant@usagold.com

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