Gold Falls to "Most Oversold" This Decade as Lehman, WaMu Sink Yet Again

From Chris Mullen at GoldSeek.com...

Gold held near unchanged around $758 in Asia on Thursday before falling as low as $736.45 by the start in New York.

Gold then rebounded a little in the last few hours of trade, but it still closed with a loss of 2.25% for the session.

Silver rose about 0.5% to $10.913 and dropped to $10.246 in New York before it closed over 2% off that low with a loss of 3.46%.

The Gold Price in Euros fell to €533, platinum lost $43.50 to $1137, and copper gained another penny to about $3.13.

Crude oil fell towards $100 per barrel on further demand worries despite the imminent threat of Hurricane Ike, now due to hit the Texas coast over the next couple of days.

Speculation is that Ike will not be as damaging as previous hurricanes, but many installations have been evacuated as a precaution and some production will remain off line for at least a few days regardless.

Across in the Persian Gulf, meantime, Saudi Arabia has given "private signals" that it won't act on the production quota cut agreed by Opec in Vienna this week, according to the New York Times.

The US Dollar index traded mixed and near unchanged as traders continue to debate the health and direction of various world economies and also what actions the Fed and other central banks may take to help spur growth in their respective nations.

Treasuries rose as traders shifted expectations towards the possibility of Fed rate cuts in the future due to continuing financial problems. Chances for a cut next week have risen from about 4% to 17% in the futures market, while the chances of a rate cut by December have risen to be priced around 50%.

The Dow, Nasdaq, and S&P mostly fell in early trade on more financial worries as Lehman fell another 40% on news that CEO Dick Fuld is trying to sell off the entire company in order to keep any or all of it operational.

Washington Mutual was also a notable weak stock as it fell about 10% to near $2 a share, but all three stock indices rose in late trade and ended with over 1% gains on optimism that a deal to save or acquire Lehman will be announced soon.

Gold and silver equities fell about 5% in the first hour of trade before they rallied back higher to find slight gains by early afternoon, but they then fell back off into the close and ended with over 2% losses.

"I have just recorded the single most oversold condition for Gold since the great bull market began [at the start of this decade]," notes Peter Grandich of the eponymous Grandich Letter.

"Mining shares are also deeply oversold and juniors? Well, the fire sale has become a nuclear detonation."

"I will tell you one thing," adds Jim Sinclair, veteran metals trader and head of JSMineSet.com. "The most valuable currency is NOT the Dollar.

"Gold is the currency of last resort. When it becomes too damn complicated trying to find sound paper, the world gives up the futile search."

On the data front, US jobless claims for last week rose faster than expected, while the Trade Balance for August came in at a 16-month record of $62.2 billion.

Import Prices meantime fell 3.7% last month, but only slipped 0.3% excluding oil. The Treasury's budget deficit for August was reported ahead of expectations at $111.9 billion.

Friday at 13:30 GMT brings Producer Price Inflation for August, expected at -0.5%, plus Core PPI (excl. food and oil) – expected at +0.2%.

Retail Sales for August follow, expected up 0.3%, and Retail Sales excluding autos expected at 0.3%. At 15:00 GMT comes the Business Inventories report for July expected at 0.5% and Michigan Sentiment for September, expected at 64.0.

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