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
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Dips as Germany and ECB Dragged Towards Shock and Awe

Commodities / Gold and Silver 2011 Aug 05, 2011 - 09:59 AM GMT

By: Ben_Traynor

Commodities

Best Financial Markets Analysis ArticleU.S. DOLLAR gold bullion prices fell to $1655 an ounce Friday lunchtime London time – 1.6% off the latest all-time high set the previous day – following the release of better-than-expected US employment data.

Stock markets bounced after nonfarm payrolls data showed the US economy added 117,000 jobs last month. The US unemployment meantime rate fell slightly to 9.1%.


Stocks and commodities remain down for the week, however, following more heavy selling Thursday after noon and Friday morning, as central bank intervention failed to quell investor fears over sovereign debt problems.

Silver prices meantime drifted down to around $39 per ounce by lunchtime – following a sharp sell-off on Thursday which saw silver lose nearly 6% in the space of an hour.

Gold bullion prices set fresh records at Thursday afternoon's London Fix in all three currencies – the Dollar, Pound and Euro.

Going into the weekend, gold bullion prices were up around 1.7% for the week by Friday lunchtime, while the price of silver bullion was down 2.2%.

"Despite[gold appearing] overbought [by]technical indicators, the threats of a US [credit rating] downgrade and default by one or more EU nation suggests that gains will continue, with $1700 the next upside target," said Swiss gold bullion refiner MKS on Thursday.

"A persistently negative economic outlook," added one gold bullion dealer here in London this morning, "could accelerate the so-called flight to quality that has been pushing gold higher." 

The European Central Bank re-entered the bond markets on Thursday for the first time since March – despite opposition from Germany's Bundesbank. The ECB's bond purchases were limited to Portuguese and Irish government bonds, according to traders.

"The ECB is being dragged unwillingly back to the table, having tried originally to palm off responsibility for restructuring the Eurozone to governments," says Peter Dixon, economist at Commerzbank in London.

"If the ECB is serious about playing its part in holding the Eurozone together, then it's going to have to spend a considerable sum."

"Ultimately," says Royal Bank of Scotland economist Jacques Cailloux, "a 'shock and awe' response [from the ECB] will take place, but only after further market deterioration."

Eurozone leaders did grant bond-buying powers to the European Financial Stability Facility – the €440 billion Eurozone bailout mechanism set up last year – on July 21 as part of the Greek rescue deal. 

However, the EFSF will not receive its new powers until the relevant legislation is drafted and passed by national parliaments. This is not expected to happen until mid-September at the earliest.

Eurozone leaders must "accelerate the approval procedures...so as to make the EFSF enhancements operational very soon," European Commission president José Manuel Barroso said in a letter to European governments on Thursday, adding that the crisis is "no longer...just in the Euro-area periphery".

France and Germany announced Thursday evening that French president Nicolas Sarkozy and German chancellor Angela Merkel will hold a conference call today with Spain's prime minister José Zapatero to agree a co-ordinated crisis response. 

The yield on both Spanish and Italian 10-Year governments bonds remained above 6% Friday morning – compared to 2.32% on German bunds. The yield on 10-year French bonds, meantime, was 3.19%.

Spain and Italy may have to drop out of financing earlier bailouts of Greece, Ireland and Portugal if their borrowing costs continue to rise – while some fear France could follow – reports this Saturday's edition of the Economist.

"Germany's position," warns Barclays Capital economist Julian Callow "appears to be that since it comprises 27% of Euro area GDP, it is not large enough to single-handedly rescue the Euro."

German industrial production fell 1.1% during June, according to figures published Friday.

Silver and gold bullion prices are "well supported by concerns over strength of the global recovery and renewed focus on fiscal problems in Europe," says Marc Ground, commodities strategist at Standard Bank.

Over in New York, the Bank of New York Mellon announced Thursday that it will start charging some institutional clients for holding their money – in effect imposing negative nominal interest rates on some deposits.

BNY Mellon says it has received "sudden, significant increases" in cash deposits, which it blames on market uncertainty.

"Past history shows us that once the storm passes these deposits quickly return to markets. The transient nature of these deposits prevents us from investing [them] to cover the costs from regulatory and deposit insurance."

The charge – equivalent to 0.13% per year – will affect clients whose deposits average over $50 million in one month, and where this amount is not "consistent with prior averages".

By Ben Traynor
BullionVault.com

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

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(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