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
Friday Stock Market CRASH Following Israel Attack on Iranian Nuclear Facilities - 19th Apr 24
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
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

New High for Gold on Euro Break Above $1.50

Commodities / Gold & Silver Feb 27, 2008 - 08:48 AM GMT

By: Adrian_Ash

Commodities THE PRICE OF PHSYICAL gold bullion leapt to new record highs above $964.50 per ounce early in London on Wednesday, gaining more than 3.9% from Tuesday's low as European stock markets slipped back and the US Dollar slid towards new all-time lows on the currency markets.

Breaching $1.50 for the first time ever today, the European single currency has now gained 12.7% versus the Dollar since the US Federal Reserve began slashing its interest rates in Aug. 2007.


The price of Gold has outpaced the Euro, however, gaining 47% vs. the Dollar and 31% vs. the single currency itself during the last six months.

Now Fed chairman Ben Bernanke will today give his semi-annual testimony to the Joint Economic Committee in Washington, and since he last went to Congress, Bernanke's policy team has cut the key US lending rate by a further 150 basis points, down to a three-year low of 3.0%.

But US home prices have continued to sink regardless, falling at their fastest pace on record during 2007 while the S&P 500 index of US equities has lost 6.4% of its value.

Wholesale prices for US businesses, on the other hand, increased at a 27-year record pace in Jan., and “normally one would expect high inflation data to give a currency a boost,” as John Hardy notes for Saxo Bank in London today.

“But the focus here is on the Fed's lack of inflation-fighting credibility,” he adds – and the Fed remains fixated on trying to revive asset prices, if only in nominal terms, abandoning all pretence of managing the Dollar as a stable store of value for US households and business.

Even after the worst producer-price inflation numbers since the fall of 1981 were released on Tuesday, Fed vice-chairman Donald Kohn said that the looming US recession remains a “greater threat” than rising prices. So with New Home Sales figures due later on Wednesday – and with Personal Consumption Inflation due out Friday – “it's crunch time for the Dollar,” reckons Yuji Saito, head of foreign-exchange in Tokyo for Societe Generale, the ailing French banking giant.

Analysts at Bank of America believe the Dollar will now fall to new record lows on its trade-weighted index “within weeks”, while Chicago interest-rate futures put a mere 4% chance on another 25-basis point cut from the Fed when it next meets on March 18th.

The other 96% of futures betting all backs a full 50-point cut.

In contrast “Germany's business sentiment was unexpectedly strong,” notes Ryohei Muramatsu at Commerzbank of yesterday's surprise Ifo report, so “the ECB is likely to keep borrowing costs unchanged.”

But that may not be enough to slow the rising rate of inflation in the 14-nation Eurozone, where the region's broad M3 measure of money supply grew by 11.5% in the year to Jan. the ECB said today.

Loans to financial intermediaries such as stock-brokers rose by 25.5% year-on-year.

Today's new highs in world Gold Prices still came only in US Dollar terms, however, as the European single currency reached $1.5087 and the British Pound touched a new high for 2008 so far at $1.9970.

Buoyed by news that German import-price inflation shot to 5.2% annualized in Jan. – the fastest rate of import-price inflation since Aug.2006, and a sharp jump from Dec.'s 3.5% increase – the single currency capped the Gold Price in Euros below €637 per ounce, more than 1% off its top of last week.

The Euro also reached a seven-week high against the Japanese Yen, which stayed flat against the Dollar, while Tokyo's Nikkei stock index added 1.5%.

Australia's ASX ended at a three-week high. The Hang Seng in Hong Kong gained 3.2% for the day.

On their last day as the most-active contract at the Tocom in Tokyo, Gold Market futures traded for Dec. delivery rose 2.3% today. The Feb. 2009 contract will now become the benchmark after closing the session equal to $971.03 per ounce.

For British investors wanting to Buy Gold today the price moved back above £482 per ounce, but it still held more than 1% below the record top of last week as the Pound jumped on confirmation of 2.9% annualized GDP growth in the last three months of 2007.

The FTSE in London fell 0.7% despite that news, whilst the faded hope of lower Eurozone interest rates helped the German Dax give back one-third of Tuesday's 1.5% gain.

In Zurich, shares in UBS – the world's largest wealth management group – lost 0.7% ahead of today's extraordinary general meeting (EGM), where stockholders will vote on a $12.7 billion injection from state-owned wealth funds based in Singapore and the Middle East.

Elsewhere in the commodity markets, the falling Dollar helped take crude oil above $102 per barrel – a new all-time high – and all base metals traded at the London Metal Exchange pushed higher.

In soft commodities – where the current run of high prices is evoking “the Maltusian spectre of global food shortages” according to the Financial Times today – wheat and corn futures slipped, while sugar, cocoa and coffee gained around 1.5% on average.

Global stockpiles of major oilseeds such as soybeans have reached a four-year low amounting to less than two months of consumption, reckons Thomas Mielke, head of the OilWorld consultancy in Hamburg, Gemany.

Today China reported 28.1% growth in its cotton imports last month from Jan. ‘07.

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 2008

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