Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19
Crude Oil Price Fails At Critical Fibonacci Level - 15th May 19
Strong Stock Market Rally Expected - 15th May 19
US China Trade Impasse Threatens US Lithium, Rare Earth Imports - 15th May 19
Gold Mind Reader's Guide to the Global Markets Galaxy: 'Surreal' - 15th May 19
Trade Wars and Other Black Swan Threats to Your Investments - 15th May 19
Our Long-Anticipated Gold Momentum Rally Begins - 15th May 19
Defense Spending Is Recession Proof - Defense Dividend Stocks - 15th May 19
US China Trade Issues Will Drive Market Trends – PART II - 14th May 19
The Exter Inverted Pyramid of Global Liquidity Credit risk, Liquidity and Gold - 14th May 19
Can You Afford To Ignore These Two Flawless Gold Slide Indicators? - 14th May 19
As cryptocurrency wallets become more popular, will cryptocurrencies replace traditional payments? - 14th May 19
How US Debt Will Reach $40 Trillion by 2025 - 14th May 19
Dangers Beyond a Trade War with China - 14th May 19
eBook - Greatest Tool for Trading? - 14th May 19
Classic Pitfalls for Inexperienced Traders - 14th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Credit Crisis Hits Gold As Margin Calls Hit Investment Funds

Commodities / Gold & Silver Mar 19, 2008 - 09:56 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD and gold futures prices sank as the US open drew near on Wednesday, falling almost 3% to bounce off a seven-session low as oil prices and soft commodities continued to tick lower and European stocks climbed back from an earlier 1.2% drop.

In Australia a major real-estate investment fund today faced a A$30 million margin call (US$27.9m), reports the Herald Sun, while the highly-geared Wesfarmers fund denied rumors it could only re-finance an outstanding US$3.7 billion private-equity debt at 4% above prevailing cash rates.


Here in London , shares in the HBOS – the UK 's largest mortgage lender – fell by 18% at one point, forcing the bank to state that it remains fully able to "access wholesale funding whenever appropriate."

Government bond prices meantime rose sharply from last night's drop, and the US Dollar capped the Euro below $1.5750.

Late Tuesday the Dollar surged 1.2% in response to the Federal Reserve's "mere" 0.75% cut to US interest rates.

"A lot of people were hoping for a full percentage point, so [they] are probably disappointed with 75-basis points," reckons Robert MacIntosh, head economist at Eaton Vance Management in Boston .

"I don't think they should be. Inflation is an issue."

Confounding bond-market hopes of a 100 or even 125-basis point cut, the Fed's Open Market Committee saw two of its ten members vote against Tuesday's reduction.

Charles Plosser, head of the Philadelphia Fed, joined Dallas Fed president Richard Fisher in saying he "preferred less aggressive action." The United States ' key interest rate now stands fully 1% below the latest official reading of US consumer-price inflation.

( How come Gold Goes Up When Real Interest Rates Fall ? Download this free 18-page Gold Report now... )

Asian stock markets today picked up where the Dow left off last night, adding 2.8% to Tokyo shares and 3.3% to mainland Chinese stocks traded in Hong Kong.

But the Fed's rally faded by the time it reached Europe , where the FTSE100 in London managed to reverse an early 1% drop by lunchtime.

"The Gold Market has already shed much of the gains that had been built up on expectations of a big rate cut," said Harish Galipelli at Karvy Comtrade in Mumbai to the Economic Times of India earlier today.

"Some more downward movement can be expected."

Indian gold futures contracts for April delivery dropped below 13,000 Rupees per 10 grams. Here in London , the AM Fix picked up from Tuesday's post-Fed plunge to come in at $995.25 per ounce, a four-day low for US gold buyers.
 
Measured in British Pounds at £497.37 per ounce, the AM Fix marked a three-session low for UK investors. Against the European single currency, it came in at a five-day low of €632.14.

Today in London the British Pound dropped back below $2.00 to the US currency – down more than 1.5% from Tuesday's high – on news that two members of the Bank of England's policy committee wanted to cut UK interest rates when the BoE met at the start of this month.

"Indicators of inflation had risen," the BoE's minutes show. But former Home Office secretary Sir John Gieve – whose department failed to maintain "proper financial records" according to an official report – voted to reduce the price of Sterling on March 6th, as did US academic David Blanchflower.

"Gold has always been considered a defensive asset class and a hedge against inflation," notes the Economic Times of India in Mumbai this morning.

"Besides, gold can be liquefied and easily converted into hard currency."

The newspaper's readers agree, adding on its website today that – in their opinion – "this time is good as any to Buy Gold in view of the global slowdown and subprime crisis. With equity markets worldwide tanking in addition to the ever looming threat of inflation, gold offers the best hedge under the present circumstances."

"In India we have been taught since ages [past] that Gold is one of the best forms of savings and a hedge against inflation," says another reader of the Economic Times . "To sum up, investment in gold will never go wrong."

Measured against the Indian Rupee over the last three decades, physical Gold Bullion held for five years has lost value only three times – first during 1985, and then at the end of 1999 and again during 2001.

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

© 2005-2019 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

6 Critical Money Making Rules