Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Gold Bounces From 5% Plunge

Commodities / Gold & Silver 2009 Nov 27, 2009 - 06:55 AM GMT

By: Adrian_Ash


Best Financial Markets Analysis ArticleTHE PRICE OF PHYSICAL gold sank in late Asian dealing on Friday, losing 4.7% from Thursday morning's new all-time highs but quickly recovering one-third of that loss as London trading began.

"We would buy this dip," wrote Walter de Wet at Standard Bank as gold rose back through $1150.

Today's AM Gold Fix in London – used as a clearing and reference price worldwide – was then set at $1164.50, a five-session low.

"We still see support in the physical market," de Wet explains. "We also believe the renewed focus on credit risk, combined with ample liquidity, should keep investment demand for gold high."

Looking ahead, however, "We remain mindful of what can happen in February/March...a very weak period for seasonal demand. From what we saw at the start of 2009, physical selling could be intense."

Gold's drop – its fastest move since mid-March – mapped sharp falls in Asian stock markets that extended yesterday's broad financial sell-off after the Dubai government requested a "debt freeze" for one of its state-owned real-estate investment firms.

Tokyo's Nikkei lost 3.2% on Friday. Seoul was down 4.7%, Hong Kong 4.8%, and Shanghai 2.4%.

The US Dollar jumped more than 2% on the forex market, meantime, bouncing hard from 15-month lows to the Euro and a fresh 14-year low to the Yen.

Typically moving in opposition to Tokyo stock prices, the "safe haven" Japanese currency gained some 2.5% against the higher-yielding Euro, Aussie and Canadian Dollars, and British Pound.

"There was good offer above $1195 which kept a lid on gold," said one Hong Kong dealer's note this morning.

"Liquidity was pretty poor...probably due to New York holiday and traders switching [from Dec. to Jan.] future month."

This week's expiry of December gold options at the Comex in New York saw a position worth 93 tonnes – equal to 13 days of global mining production – fail to achieve its price-target of $1200 an ounce.

Latest data from US regulator the Commodity Futures Trading Commission said that last week speculative futures and options traders were "net long" of some 970 tonnes – almost twice the 5-year average.

"Our intervention in Dubai World was carefully planned and reflects its specific financial position," said Sheikh Ahmed bin Saeed al-Maktoum, head of the city's Supreme Fiscal Committee, in a statement aimed at reassuring creditors of the United Arab Emirates' other state-backed companies last night.

"The Dollar's rally was to be expected" on Thursday's debt freeze request at Dubai World, writes Steven Barrow at Standard Bank this morning. A sharp widening of bid/offer spreads on corporate and government bonds worldwide was also no surprise, he says.

"But if credit spreads continue to widen, we'd question the ability of the Euro to make [further] gains...In June 2009, global banks had international loans of just over US$32 trillion outstanding. Almost half of this is owed to Eurozone banks. [So] when non-domestic credit problems arise, they are more likely to affect Eurozone banks than those in the US."

Averaging almost +0.50 over the last 10 years, the daily correlation between gold and the Euro vs. US Dollars shows a strong statistical significance, with the single currency and bullion typically moving together against the greenback.

The correlation coefficient would stand at +1.0 if the Euro and gold moved in lockstep. If they always moved in perfect opposition, it would read -1.0.

On a rolling one-month basis, the correlation between gold and Euros tends to decline when the single currency falls against the Dollar, turning negative during gold's strong bull runs of late 2005 and early 2009.

"There is no doubt that the [currency] market has moved too far in one direction," said Hirohisa Fujii, Japanese finance minister, to reporters in Tokyo today.

"Moves right now [in USD/JPY] are extreme, and it would be possible to take appropriate measures," he added – taken to mean central-bank intervention to support the Dollar by selling Yen on the foreign exchanges.

"I would respond flexibly to a joint [G7] statement on currencies."

Gold priced in Japanese Yen sank more than 6% this morning from Thursday's early 26-year highs, but swiftly bounced back above ¥3200 per gram, regaining well over a third of its drop.

The gold price in both Euros and Sterling dumped 3.7% before turning higher, only briefly dipping below €768 and £700 an ounce respectively.

By Adrian Ash

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly 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