Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Gold Follows Stocks By Giving Back Early Gain

Commodities / Gold & Silver 2009 Oct 26, 2009 - 07:25 AM GMT

By: Adrian_Ash


THE PRICE OF GOLD gave back early gains in London on Monday, dipping below last week's all-time record finish versus the Dollar as European stock markets also gave back an early 1% rise.

Asian trading was light, with Hong Kong closed for a holiday.

Oil drifted lower to $80 per barrel, while the major currencies – and government bonds – were little changed.

This week the US Treasury will issue a record $123 billion in new debt.

"If gold is telling us anything today," writes Fidelity International analyst Tom Stevenson in London's Daily Telegraph, "it is that governments – principally America's and [the UK] – are about to make a mess of the exit from their economic stimulus programs.

"Either they are going to tighten too soon, plunging the world into a deflationary ice age, or, more likely, they are going to hang back too long until we are swept away by hyperinflation."

Pointing to the Bank of England, "When a central bank gets to own around 30% of the government bond market, it is very hard to suggest that political factors do not play a bigger role in policymaking," writes Steven Barrow, chief currency strategist at Standard Bank in London.

With "virtually no chance" of the current UK government being re-elected next May, Labour "is likely to use the upcoming pre-budget report to keep fiscal policy actively stimulating the economy," he warns. "[But] the opposition Conservatives are threatening to take away the Bank's ability to 'print money'."

The Bank of England has now bought £165 billion (($269bn) of UK government bonds, equal to the entire public deficit for fiscal-year 2009 to date.

"Hence the Bank is caught between a bit of a rock and a hard place," says Barrow. "It could come up smelling of roses, with a stronger Pound into the bargain. But the chances are that it won’t."

The British Pound today recovered half-a-cent from Friday's sharp sell off, pushing the gold price in Sterling back 0.7% to £645 an ounce.

A survey of 1,700 British investors undertaken last week by Barclays Stockbrokers – the UK's largest execution-only retail brokerage – shows 40% believe the gold price will rise from here.

Thirty per cent of respondents say gold will fall. One-fifth of Barclays clients think the price will hold steady, and 10% answered "Don't know".

Over in the leveraged derivatives market, meantime, latest data from US regulator the Commodity Futures Trading Commission showed speculators trimming their record bet on gold in the week to last Tuesday.

Cutting their "net long" position by 0.8%, hedge funds and other non-commercial players still held a futures and options position equal to 866 tonnes of metal.

Including commercial industry trades and retail investors, the correlation of gold prices to the total number of US Comex contracts rose to its highest level on record, giving what statisticians call an "r-squared" of 99%.

"There are important internal dynamics – such as weak Indian imports and even weaker central bank sales," says the latest BNP Paribas Fortis Metals Monthly from Virtual Metals in London. "But all the action right now is investor-led and based on larger financial flows.

"If the US Dollar regains esteem, gold could get savaged – but perhaps not yet."

During this decade's bull market so far, notes Virtual Metals, the most significant peaks were followed by a drop of 16%, 12%, 9%, 23% and 30% respectively.

"The time span for this to happen hitherto has been 44, 25, 44, 104, and 157 trading days after the peak," the consultancy adds, "giving us a time somewhere between mid-December 2009 and May 2010" if last week's new record gold prices aren't beaten soon.

"[Gold's] constancy over the centuries, through a huge range of economic and political circumstances, through calm and crisis, peace and war, and through immense changes in the gold industry itself, is remarkable," writes Jill Leyland, former chief economist for the World Gold Council – and editor of a new edition of Roy Jastram's 1977 book, The Golden Constant – in the latest Alchemist magazine for members of the London Bullion Market Association.

"Gold's appeal, apart from its relatively limited industrial use, lies in two elements," says Leyland – "the human need for security and the desire to own something of beauty...needs that do not change over time."

Since gold was officially de-monetized in the 1970s, however, "Investors [also] turn to gold when confidence in fiat money, and particularly in the US Dollar as the world's leading fiat money, falls," she adds.

By Adrian Ash

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 , 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 - 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