Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Gold Dips Ahead of Fed Decision on Interest Rates and Quantitative Easing

Commodities / Gold & Silver 2009 Aug 12, 2009 - 07:17 AM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleTHE PRICE OF PHYSICAL GOLD bounced from new August lows Wednesday lunchtime in London, trading at $945 an ounce as the US Dollar pulled back from new two-week highs on the currency market.

Crude was little changed below $70 per barrel, while Asian stocks caught up with yesterday's sell-off in New York. European shares gave back an early 1% bounce as government bonds pushed higher again.


The yield offered by 10-year German Bunds fell to 3.45%.

"The market tone for Gold remains soft," says a technical analysis from Scotia Mocatta, the London Bullion bank, "and only a move above yesterday's intraday high [at $950 an ounce] would reverse the psychology of the price action.

"Still, [gold] resists the urge to collapse through the 50-day average, coming in at $941...Marginally past that point lies one-month uptrend support at $938.63."

Over in India – where the post-harvest festival season typically sees strong gold demand leading to Diwali in late Oct. – the dip in Rupee Gold Prices continues to spur re-stocking by wholesalers and jewelers, Reuters reports.

"I did around 250 kg yesterday evening," says one bank dealer in Mumbai, "and still there is demand."

"I have a lot of orders in the range of $930-935 an ounce," another tells the newswire.

Looking ahead to Wednesday's US policy announcement from the Federal Reserve, however, "The markets are a bit lacklustre now and traders are probably focused on the key interest rate decision later tonight for more direction," reckons Adrian Koh at Phillip Futures in Singapore.

"Gold is very much trading within a band of $920-$980."

On the data front today, the UK reported a 14-year high in unemployment, with 573,000 people – some 2% of the working population – losing their jobs since New Year.

The level of GDP has dropped some 6% from its peak, adds the Bank of England in today's Quarterly Inflation Report. Manufacturing output has dropped over 10% from a year ago.

"Given the depth of the recession," the Bank says, "to erode the margin of spare capacity that has been created will require an extended period of robust growth. [But] recovery could be slow and protracted."

Last week, the Bank of England surprised market analysts and traders by extending its Quantitative Easing program by 40% to £175 billion ($287bn), buying government gilts and corporate bonds in the open market in a bid to give banks and other lenders more cash and credit.

In response, however – and despite the base interest rate now standing at an historic low of 0.5% – lenders are making a record profit on new loans, says Michael Saunders at Citigroup, earning a full 2.0% extra on fixed-rate home loans than they're currently paying savers in interest.

Before the financial crisis broke in August 2007, that profit margin stood at just 0.1%, reports The Daily Telegraph. Over the last six months, meanwhile, the Bank of England "has monetized 60% of public spending" via its Quantitative Easing – a.k.a. money printing – notes Martin Hutchinson at Prudent Bear.

"That's a higher level than the 50% monetization of public spending undertaken by the Weimar Republic in 1919-23 and the result will be the same" – hyperinflation as confidence in the currency collapses.

Of the US government's deficit, "It is astonishing," says Keynesian economist Brad De Long. "Between last summer and the end of this year the US Treasury will expand its marketable debt liabilities by $2.5 trillion."

That's equal to more than one-fifth of all US equities, notes the Berkeley professor, and equal to 8% of all traded Dollar-denominated securities.

"And yet the market has swallowed it all without a burp," he says, citing Tuesday's successful auction of 3-year US Treasury debt, which drew bids for 2.89 times as much debt as was on offer.

With many foreign buyers, particularly the Chinese, "shifting to the shorter end of the curve from the longer end," counters Peter Bookvar at the Big Picture, "the tough part though comes [today] when the 10-year benchmark note auction takes place, with the 30-year following on Thursday."

A poor result could hurt the Dollar and send US Gold Prices higher, notes Walter de Wet at Standard Bank. "Over the past few days, a slide in Treasuries has resulted in Dollar weakness," he says, adding that the Federal Reserve is "unlikely to raise interest rates" at today's meeting today, "but might shed some light on its own Quantitative Easing.

Already $250 billion through its planned $300bn purchase of bonds with newly-created money, the Fed's QE program may "nearly [have] come to an end," says de Wet. But a surprise extension – such as the Bank of England announced last week – could give "strong support" to Gold, silver and platinum.
 
"When the BoE announced resuming its QE programme last week, gold jumped almost $10. If the Fed follows suit, we expect a bigger jump in the Gold Price."

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2009

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules