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Gold Drops as Japan's Nuclear Panic Hits Global Stock Markets

Commodities / Gold and Silver 2011 Mar 15, 2011 - 08:04 AM GMT

By: Adrian_Ash


THE PRICE OF GOLD fell 3% against a rising US Dollar on Tuesday morning, bouncing from a 4-week low of $1384 per ounce as world stock-market and commodity prices sank on news of radiation leaks from Japan's earthquake-hit nuclear plants.

Tokyo's Nikkei index closed Tuesday down at a 22-month closing low, slumping nearly 11% for the day as officials advised people within 30 miles of the Fukushima Daiichi facility to stay indoors.

Austria was reported to be moving its embassy south-west from Tokyo – which is some 150 miles from the stricken nuclear site – where supermarkets have been stripped bare of food, flashlights and daily necessities.

New York's stock markets opened the day nearly 3% down as Germany's Dax index traded nearly 5% lower and London's FTSE-100 lost 2.6%, dropping to new 2011 lows.

The gold price in Euros, Sterling and Japanese Yen lost 2.0% overnight, falling towards 4-week lows.

"Be it due to margin calls [on other assets] or risk averseness," says one Asian dealer, "the financial markets suffered a meltdown [that] spilled into the metals."

With Japanese car production still shut by the disaster, auto-catalyst metals platinum and palladium fell 2.3% and 3.9% by today's AM Fix in London, hitting fresh 2011 lows after what one Hong Kong trader called "panicky sales" by private investors in the Tokyo market.

Wholesale silver bullion prices fell through last Friday's trough of $34 per ounce to hit a two-week low, down more than 5% from the start of today's Asian trade.

"We saw not only selling of equities, but also panic-selling of gold, silver, platinum and palladium in Japan today," writes James Zhang at Standard Bank.

Brent crude meantime oil lost $4.75 per barrel to $109, leading a 2% drop in the broad commodity markets.

Amid the Japanese earthquake and nuclear shocks, gold investment "has not been acting as much as a safe haven as other safe-havens," notes Matthew Turner at Mitsubishi, "but it's also not been acting as much as a commodity as other commodities."
"It's not unusual for gold to tumble during initial episodes of a severe broad asset sell-off," adds Dr.Edel Tully at UBS, also quoted by Reuters.

Further ahead, "Friday’s disaster in Japan will be negative for economic growth," says Zhang at Standard Bank, and "a slump in growth in the world’s third-largest economy may have a substantial impact on the outlook for global monetary policy.

"It may move monetary tightening into the future. If so, it would be bullish for especially gold."

Major-economy government debt prices jumped as stock and commodity markets sank, driving 10-year US Treasury yields down more than 0.12% to a three-month low of 3.23%.

BNP Paribas analysts note today that Japan is China's top trading partner, accounting for 13% of imports, with hi-tech, plant and machinery dominating.

By Adrian Ash

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

(c) BullionVault 2011

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