Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


Gold Jumps after Central Banks Launch Liquidity Measures

Commodities / Gold and Silver 2011 Nov 30, 2011 - 08:19 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleU.S.DOLLAR gold bullion prices leapt 1.7% in 30 minutes Wednesday lunchtime in London – hitting $1744 an ounce – following an announcement of coordinated action from central banks worldwide aimed at increasing Dollar liquidity in the global financial system.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank will all lower the price on existing Dollar liquidity swap arrangements by 50 basis points (0.5 percentage points), effective Monday.

As well as strengthening Dollar liquidity provision, the central banks "judge it prudent" to make arrangements to offer enhanced liquidity provision in other currencies " so that liquidity support operations could be put into place quickly should the need arise", a Bank of England statement said.
On the currency markets the Dollar fell sharply following the central banks' announcement.

Despite its rally, the price of gold bullion this lunchtime remained only marginally above where it began the month.

Spot market silver bullion prices also surged – jumping 3.5% to $32.51 per ounce in the space of 36 minutes – while stocks and commodities also rallied.

By Wednesday lunchtime in London the FTSE was up over nearly 3% on the day – while Germany's DAX was up more than 4%. 

A few hours earlier, ratings agency Standard & Poor's cut its ratings on 15 of the world's largest banks late Tuesday – while at the same time raising its rating for two Chinese banks.

Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland and UBS all had their debt ratings cut by one notch each – reportedly as a result of changes in ratings methodology at S&P.

Despite this technical explanation, the downgrades "will likely raise concerns about their short term funding," says Andrew Fraser, investment director at Standard Life Investments, speaking before the central banks' announcement.

"They will be sidelined by money market funds who are the traditional buyers of that short-term paper."

S&P could also change its outlook on France's AAA rating from stable to negative "within a week, perhaps 10 days" reports French newspaper La Tribune, citing an anonymous diplomatic source.

European leaders meantime "are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," European economic and monetary affairs commissioner Olli Rehn said Wednesday.

The next European leaders' summit is due to take place on December 9.

Eurozone finance ministers meantime agreed Tuesday on measures aimed at boosting the Euro area's rescue fund, the European Financial Stability Facility.

One mechanism will be a "partial protection certificate" for government bond investors, worth 20-30% of the initial amount invested. These certificates, will be detachable and separately tradable, according to an official EFSF statement.

The other measure agreed involves creating "one or more Co-Investment Funds", to attract additional investment.

"Both options are designed to enlarge the capacity of the EFSF," said Klaus Regling, the rescue fund's chief executive.

"[However] it is really not possible to give one number for leveraging because it is a process...we will need money as we go along."

The EFSF's current effective lending capacity if €440 billion, backstopped by guarantees from Eurozone governments. Some of that €440 billion is already committed in loans, however, while the guarantees offered by countries like Italy and Spain have been compromised by those countries' recent fiscal difficulties.

There are widespread concerns that the EFSF is not large enough to rescue either of those two nations should they require a bailout.

"We will have to look at the IMF," Dutch finance minister Jan Kees de Jager told reporters after Tuesday's meeting.

"We have talked about leverage though private money, but it would be two or two and a half times an increase so not sufficient... I think countries in Europe and outside of Europe should be prepared to give more money to the IMF."

Tuesday's meeting also brought an agreement to release €8 billion of bailout funding to Greece.
A poll of economists by newswire Reuters meantime shows a majority expects the ECB to cut interest rates when it meets next week.

Switzerland has become the number one destination for Italian exports – primarily owing to a large jump in gold bullion shipments, Italian business daily Il Sole 24 Ore reports.

In Vietnam meantime a number of gold bullion refiners are reported to have shut down their processing operations following a central bank draft decree that some fear will hand a monopoly to a single refiner, Saigon Jewelry Co.

The State Bank of Vietnam has previously allocated gold bullion import quotas to refiners, one trader in Ho Chi Minh City says.

"Over the last few months [though] only the Saigon Jewelry Co was allocated quotas.

SBV governor Nguyen Van Binh last week announced that the central bank has "administratively acquired" SJC – the latest in a series of moves aimed at regulating Vietnam's gold market.

By Ben Traynor

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.

© 2005-2019 - 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