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
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Gold Rallies, Dollar-Correlation Eyed as Irish and Greek Bonds Hit by Deficit Fears

Commodities / Gold and Silver 2010 Oct 28, 2010 - 08:37 AM GMT

By: Adrian_Ash

Commodities

INTERNATIONAL WHOLESALE prices for gold bullion rallied almost 1% from yesterday's four-session low in London on Thursday, reaching $1333.50 per ounce as European stock markets rose – along with the Euro – despite a fresh plunge in "peripheral" Eurozone bond prices.

Crude oil ticked back above $82 per barrel. Silver prices held steady around $23.75 per ounce after an "extremely volatile" session on Wednesday in the words of one London trader.


"Last week's low of $1316 [in gold bullion] appears pivotal considering the three-month [rising] trend line comes in today at $1319," says Scotia Mocatta strategist Russell Browne.

"Gold managed [on Wednesday] to hold trend-line support at $1319," agrees a London dealer, and "with gold falling below $1330," says Walter de Wet at Standard Bank, "physical demand for gold has picked up markedly since the start of the week."

In particular, believes de Wet, gold buyers in India – the world's No.1 gold consumer – will keep buying gold on price dips until the Hindu festival of Diwali one-week tomorrow. Whereas in the West, "the market still focuses" on the US quantitative easing expected at the Fed's meeting next Wednesday.

"We believe the gold market is pricing $500bn of QEII already. A gold price roughly 4% lower than current levels would be consistent with no QE. So, until 3 Nov., we see $1280 as a floor for gold and any price dips in gold should be bought."

"Next Wednesday's [Fed] announcement will carry our qualified endorsement [even though] check writing in the trillions is not a bondholder's friend" writes Bill Gross, head of bond-fund giant Pimco – and long-time advocate of quantitative easing – in his latest Market Outlook.

"It will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers – and, yes, equity managers – to adjust to a new environment."

Forecasting talk of not a second but a third round of QE in the United States within 3 months, "Emerging economies need a fresh spray of capital controls and higher interest rates," says former Morgan Stanley analyst Andy Xie, now a board member of Rosetta Stone Advisors, "because hot money inflows are about to go from boiling to molten.

"Russia gave foreign bondholders a deep haircut a decade ago. Now they are bending backwards to buy Russian bonds."

Noting that the Euro's strength vs. the Dollar has not translated into "excessive" strength against other currencies, "If the US were seen by markets as actively trying to debase its currency...the [European Central Bank] might well choose to offer investors who flee from the reserve currency a new home," reckons current Morgan Stanley analyst Joachim Fels.

"True, the price to pay for becoming a reserve currency is a significant loss in external competitiveness and a current account deficit reflecting the capital inflows. Yet, the benefits of offering investors a form of Ersatzgold would include higher asset prices and permanently lower interest rates, which would help especially highly indebted governments."

The ECB was seen buying Irish government bonds today according to Bloomberg report, after the yield on Dublin's debt jumped to new record highs compared to German Bunds, offering new buyers more than 7% over comparable debt.

Ireland's 2010 budget deficit is now forecast at almost one-third of the country's annual economic output.

Both Portuguese and Greek government bonds also fell hard in price, driving 10-year yields on Athens' debt above 10.5% after it revised its 2009 budget deficit figure up from 13.5% to 15.3% of last year's GDP.

Fears of a snap election are adding to concerns that Greece's targeted deficit of 8.1% may be impossible in 2010, says Reuters.

"Gold prices are currently being driven by the weakness/strength of the Dollar," says the latest Commodities Weekly from French bank Natixis, "unlike the early part of the year when gold prices were being driven predominantly by European [credit-default insurance] rates.

"Were we to see a shift in focus away from the Dollar after next month's Fed meeting...we could [also] see a move away from the highly negative correlation between gold prices and the Dollar."

"If the market senses any chance at all that the 'nuclear' option [of pan-Eurozone bond issues or quantitative easing] could be taken as a result of shifting political sentiment, the Euro is likely to endure a re-run of the weakness that we saw through the first half of 2010," says Standard Bank's currency strategist

By Adrian Ash

BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

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 www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

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.


© 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