Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Bounces as European Stocks Rally; Asia-Pacific Ends the Week 10% Down

Commodities / Gold & Silver Aug 17, 2007 - 09:15 AM GMT

By: Adrian_Ash


SPOT GOLD PRICES rose at the London opening on Friday, recovering the overnight bounce above $653 before slipping to $651.56 per ounce by lunchtime – a little more than 1% above Thursday's low.

European stock markets also rose despite a torrid session in Asia , bouncing 0.7% on average as London 's FTSE regained 1.4% and France 's Cac 40 put on 0.9% from Thursday's close.

Germany 's Dax was flat, while US Treasury bonds held steady as the US Dollar slipped 0.6% to $1.3440 per Euro, its first sizeable pullback in more than a week.

"Capital flight is hurting gold," says Phil Smith for Reuters India of Thursday's $20 sell-off in Gold Bullion Prices, "with the price dropping sharply through two major supports at the 200-day moving average and the long-term trendline on the weekly chart.

"Some interim support is pegged at the June low," he adds, pointing to the level of $638.90 per ounce in the Gold Market.

Overnight, Asian equities were sold hard yet again. The Nikkei 225 index in Tokyo finished more than 5.3% lower; the Bombay stock market dropped 4.4%; South Korea 's Kospi index – the world's busiest stock market for traders using borrowed money – dropped another 2.2%.

All told, today's losses took the drop in the MSCI Asia-Pacific equity index drop to more than 10% for the week as a whole.

In the gold market, Tokyo's most-actively traded gold futures contract dropped 'limit down' for a loss of ¥120 per gram – some 4.7% – as the Japanese Yen continued to rise against all other assets. Hitting a 14-month high versus the Dollar at the European open, the Yen briefly spiked to ¥220 per Pound and ¥150 per Euro – a gain of nearly 10% since Wednesday last week.

Tocom gold futures for delivery in June '08 ended the week equivalent to $652.42 per ounce. Comex gold futures for Dec. '07 then gained nearly $5 in early London trade to $662.90 per ounce. The Price of Gold Versus Euros broke above €486 per ounce before ticking down €1.50 by lunchtime in Frankfurt to stand 0.8% above yesterday's low.

"You're facing a serious and under-appreciated global liquidity crisis," reckons Zachary Oxman, a senior trader at Wisdom Financial in the US . "Right now, parties are all running for the door to get any and all the cash that they possibly can on their books to cover calls and redemptions."

US crude oil futures failed to bounce early Friday after dropping $2.33 per barrel to $70.10, down more than 11% from the record high hit on the first day of August.

Thursday also saw silver lose 8% of its Dollar price, while copper dropped 7% and palladium lost 6% according to a MarketWatch report.

"The current volatility in gold is very disturbing. This is forcing investors to sell gold, platinum and other commodities heavily," said Shuji Sugata, a manager at Mitsubishi Futures and Securities in Tokyo to Reuters earlier. Standard Bank in Johannesburg adds that "risk aversion is evidenced by continued demand for US government bonds, driving the 10-year yield down to 4.64%, ten basis points lower than at the start of the week.

"[But] there are no major data releases out in the US today," the technical note continues, "which might be good news, as it might allow markets to settle. However, the ECB's Webber and Fed's Poole are both due to speak today, and they will hopefully calm fears of a major meltdown in economic growth."

French president Nicolas Sarkozy waded into the "meltdown" debate meantime, writing an open letter to Angela Merkel – German chancellor and acting president of the G8 group of industrialized nations – in which he says: "I believe it is essential that as heads of state we should draw the consequences and lessons of the events that are affecting the markets."

Cutting interest rates to revive global asset prices may not be politically feasible, however. "Upward pressure appears evident in the core US consumer price index," says Marc Chandler, chief currency strategist for Brown Brothers Harriman in New York , "and that must be troubling."

Core CPI excludes volatile food and fuel prices, but it has still been rising at 2.5% annualized for the past three months. "Over the next four months, both the headline and the core rate will rise due to base effects," adds Gabriel Stein, an economist at Lombard Street Research in London .

"Continued domestic and inflationary pressures should stay the Fed's hand for now," Stein believes. But whether the Fed chooses to cut rates or stick, higher inflation would still result in a lower real rate of interest – and when US real rates last turned negative, between 2003 and 2005, the Dollar price of gold rose by one third.

During the negative real rates of 1975-80, matched by a bear market in stocks and bonds, the Dollar gold price quadrupled.

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 2007

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

© 2005-2022 - 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