Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
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
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Holding Pattern - Economy-Wide Crunch" Now Looming in Europe

Commodities / Gold & Silver Nov 30, 2007 - 08:46 AM GMT

By: Adrian_Ash

Commodities

THE SPOT GOLD MARKET slipped from a small overnight bounce early in London on Friday, recording an AM Fix that was 5% below Monday's start as world equity markets rose on the promise of fresh interest-rate cuts from the US Fed.

Looking at the latest data on Gold Market futures – where the front-month contract is now trading $50 below its near-record top of Nov. 8th – "the net long Comex position declined by 12.4% in the two weeks" to Nov. 20th, note the team at Mitsui.


"This liquidation was propped up by a 50% increase in the Japanese general public's position on the Tocom exchange," they add, but the total number of contracts held open on US gold futures yesterday dropped by another 3%, "highlighting the closing of positions" according to ScotiaMocatta

The Gold Price , however, "continues to seem comfortable in its recent range of $773.10 to $845.84," the metal brokers believe. Only "a break to either side will foreshadow the next move.

"In the near-term, technicals have once again turned more bearish, but considering the numerous false signals we have been given recently we are cautious. Support comes in at historical congestion of $781.65; resistance comes in at the 21-day moving average at $807.40, followed by intraday congestion at $808.02."

In Tokyo today the Nikkei stock index closed 166 points to the good, finishing the week nearly 5% higher after Ben Bernanke – chairman of the US Federal Reserve – said in a speech last night that he "will have to remain exceptionally alert and flexible."

Taking Bernanke's comments as code for "cheap money ahead", Asian stock markets ended today at a two-week high on average. Crude oil held flat, meantime, trading around $91 per barrel as the Canadian pipeline damaged by fire yesterday morning was scheduled to come online "within days".

London 's FTSE100 index rose 0.7% by late morning, and the Dax in Frankfurt traded more than 2.6% above Monday's opening level.

"Weaker oil prices are one of the reasons for the Gold Market 's decline," reckons Alexander Zumpfe of Heraeus, the global refining group, in Hanau , Germany .

"I expect gold to go down to $790 an ounce."

For the first time since June, gold investors are likely to end today without recording a gain for the month. US government bonds, on the other hand, are nearing their best monthly finish since 1995.

A basket of Treasuries would have returned 3.2% this month, according to Merrill Lynch data. Spot Gold Prices are currently holding just shy of break-even.

Eurozone government bonds have also shot higher this month, putting in their best performance since early 2004 as Europe's interbank lending market has "gone mad" according to Il Sole 24 Ore , the Italian financial newspaper.

The surge in European bond prices has now pushed the yield offered to new buyers of Germany 's two-year bunds down 31 basis points to 3.74%. So far during the global credit crisis, however, the European Central Bank has continued to hold its key interest rate at 4.0%.

"If they don't do anything [i.e. cut sharply and soon] this could go beyond just a normal recession," warns Thomas Mayer, Deutsche Bank's European economist.

"This credit crisis could turn into a very uncomfortable situation with a real economy-wide crunch that we cannot stop," Mayer believes, pointing to Thursday's record spike in open-market lending rates between Europe 's banks.

The cost of borrowing one-month funds yesterday shot 0.6% higher to 4.87%. Short-term Euribor rates are used to price floating-rate mortgages in Spain , Italy , Ireland , and other parts of the Eurozone, notes The Telegraph in London today.

Further signs of the mounting stress in global finance come from the Caisse group of funds in Quebec , Canada , where the "commercial paper crisis" may force it to write down C$500 million (US$497m).

"This might seem high, but the large international banks have provisions [to write off] 30-50% of their exposures," Henri-Paul Rousseau, president and CEO, is quoted by Global Pensions magazine.

In London yesterday, ailing mortgage lender Alliance & Leicester accepted a £4 billion cash injection (US$8.24bn) from Credit Suisse. A&L has already taken a pretax loss of £55 million ($113m) on its collateralized- and structured-debt investments, and it will "mark down" a further £101 million ($208m).

And meantime in Asia, sales of corporate and government bonds denominated in Dollars, Yen and Euros sank by 91% this month from Nov. last year, the steepest drop since Feb. 2002 according to Bloomberg data.

"When paper money comes into some sort of disrepute, which it appears to be doing at this point, gold becomes the hard monetary asset," says John Embry, chief investment strategist at Sprott Asset Management in a new interview with The Gold Report .

"Once it breaks free of all its tethers, like moving in direct relation to weakness in the US Dollar [then] I think the Gold Market will probably achieve prices that will shock most people."

By Adrian Ash
BullionVault.com

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 www.BullionVault.com , 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 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