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
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
S&P SEASONAL ANALYSIS - 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

Silver "Disconnected from Gold"

Commodities / Gold and Silver 2011 Feb 22, 2011 - 08:53 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD and physical silver whipped sharply in London trade on Tuesday, falling hard only to rally as New Zealand's second-biggest city Christchurch was struck by an earthquake and Libyan dictator Colonel Gaddafi's defiant appearance on state TV led to accusations of "genocide" and "the government killing its people" by his own diplomats in the Unitd States.


Silver dropped nearly $2 per ounce, erasing Monday's 5.4% gain, in Asian and London dealing, rallying again near 31-year highs as world stock markets and commodity prices also hit massive volatility.

Brent crude oil rose above $107 per barrel. US oil contracts were set to re-open New York trade with a near 8% jump after Presidents Day.

"Problems in the Middle East are leading to a rise in the silver price," says Suresh Hundia, president of the Bombay Bullion Association, speaking to the Hindustan Times.

But silver investing is suffering "irrational exuberance" reckons Mitsui analyst David Jollie in London, citing the phrase used by former Fed chairman Alan Greenspan to describe the early stages of the DotCom Bubble in the mid-1990s.

The silver price shows "some disconnect from the gold price," says Jollie, noting that the ratio of gold to silver prices has fallen to its lowest level since the 1980s at 42:1.

European stock markets meantime bounced from an initial 1.5% drop on Tuesday morning, as the Euro currency reversed an early 1.5¢ plunge to $1.3520.

That rally in the single currency knocked the gold price in Euros back to €32,800 per kilo – some 1.7% below the near 6-week highs hit overnight.

Gold priced in Sterling spiked to £870 an ounce – an all-time record for UK investors when first touched in May and then June 2010.

"Geopolitical tensions in the MENA region continue to fester," says Standard Bank in its daily gold and silver note, "keeping risk aversion elevated...and enhancing the appeal of safe-haven assets.

"In addition, the surge in oil prices is keeping fears of rising global inflation alive...Unlike Egypt, Libya is a significant oil producer. We maintain our view [first published on Feb. 3rd] that IEA and OECD countries should put their Strategic Petroleum Reserve (SPR) on a standby, ready to be released."

Up to 10,000 of the estimated 1 million Egyptian nationals living in Libya were reported on Tuesday to be fleeing towards the border, where the Egyptian army has set up two field hospitals.

Three Turkish ships and three Italian air-force planes were heading to the eastern Libyan city of Benghazi, according to the BBC, to evacuate their nationals.

Two Iranian warships meantime entered the Suez Canal today, heading for the Mediterranean Sea for training with Syrian forces in what Israel calls a "provocation".

"We expect the [precious] metals to pursue their bull run as safe haven buying in regards to the Middle East tensions should help maintain sentiment," reckons today's note from MKS Finance in Geneva.

Trading in Italian stocks was halted Tuesday after yesterday's 3.6% drop, with analysts noting that Libyan investors own 7.2% of UniCredit.

Former state-owned oil company Eni – active in Libya since 1959 – today faced threats from anti-Gaddafi group 'February 17' to cut the Greenstream pipeline which runs from North Africa to Italy,according to the Rome press.

"[Middle East unrest] has clearly been a game-changer in the last couple of weeks" for gold and silver prices, reckons Daniel Major at RBS Global Banking and Markets, quoted by The Oman Tribune.

"If [new demand to Buy Gold] is not through the exchange-traded funds or a clear change in the net long on Comex [gold derivatives], it is most likely to be through the physical market, coin and small bar buying.

"I potentially wouldn’t rule out larger purchases by high net worth individuals on the back of the unrest we're seeing."

Middle Eastern gold jewelry demand fell sharply at the end of 2010 from a year earlier, new data from market-development organization the World Gold Council showed last week.

Gold investment in coins and bars, in contrast, rose 39% across the region, cutting the full-year drop in total gold demand from 7% to just 3% at 238 tonnes all told.

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 2011

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.


© 2005-2022 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