Best of the Week
Most Popular
1.BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - Nadeem_Walayat
7.Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - Michael_Noonan
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.Gold And Silver: Security, And BREXIT - Michael_Noonan
10.BrExit Vote - "The Trend is Set" -- And What You Should Pay Attention to Next - EWI
Free Silver
Last 7 days
Michael 'Little Finger' Gove Slays Boris 'Baratheon' Johnson in Game of Thrones for Next Tory PM - 30th June 16
Gold, Silver, Bonds and Stocks Path Towards Inflation - 30th June 16
Stock Market SPX Rally Nearing its End as DB Gets Slammed - 30th June 16
Brexit & The Precipice - 30th June 16
Gold and Silver Precious Metals Bull Market Update - 30th June 16
14 Signs the World Is on the Verge of Generational Chaos - 30th June 16
BrExit Stock Market Upwards Crash as FTSE Recovers 100% of Friday Plunge - 30th June 16
Stock Market Rally Runs Out of Steam - 29th June 16
Rapid Growth:The Financial Trends Of Online Gaming - 29th June 16
FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - 29th June 16
Stock Market Bounce May be Over - 28th June 16
Stock Market Meltdown Likely to Drive Gold Towards $1,500 - 28th June 16
Brexit Victory over the EU Globalists - 28th June 16
Brexit Psyop: Greenspan Falsely Blames the Brits for the Crash and Chaos to Follow - 28th June 16
Greenspan Calls Brexit a ‘Terrible Outcome’ as Euro Area Tested - 27th June 16
Stock Market SPX Below Mid-Cycle Support - 27th June 16
Best Holidays for Summer 2016 - 27th June 16
Another Stocks Bear Market? - 27th June 16
BBC EU Referendum Result Highlights - YouGov, Markets, Bookmakers, Pollsters ALL WRONG! - 26th June 16
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Market Volaility

US Treasury Bonds Fast Becoming Certificates of Confiscation

Interest-Rates / Inflation May 22, 2008 - 08:09 AM GMT

By: Adrian_Ash

Interest-Rates THE PRICE OF GOLD BULLION slipped $10 from a new five-week high in London early Thursday, pulling back to $925 per ounce as crude oil broke new record highs and the US Dollar fell yet again on the forex market.

" Gold has rallied over 8% in the last five days and is now trading over $80 higher than May's low," notes Mitsui, the precious metals dealer, in London today.


"Record oil prices and a resurgent Euro are playing a significant part in this precious metals rally. But there are also fresh concerns today about the credit crisis."

US credit spreads – a measure of investor anxiety over the risk of non-payment – turned higher on Wednesday after ailing Swiss banking giant UBS sold $15.5 billion worth of mortgage-backed assets to the Blackrock hedge fund at a 30% discount.

UBS also lent Blackrock the funds needed to complete the purchase, mimicking the "vendor financing" tactics employed by home builders and auto-dealers before the bubble in consumer credit burst in spring 2007.

Shares in Moody's – the credit ratings agency – fell a record 16% meantime after the Financial Times reported how a computer glitch in early 2007 led the company to award "triple A" ratings to high-risk debt derivatives.

Moody's is now reviewing the ratings on $4 billion in so-called constant proportion debt obligations (CPDOs) – likened by Bloomberg columnist Mark Gilbert to a " Nigerian banking scam ".

( What's the link between Gold & Credit Defaults ? Read more here... )

Today the price of government bonds – the main "safe haven" bought by large funds and financial institutions after the global banking crisis first broke – also fell as crude oil rose above $135 per barrel.

"For bond market players the focus is now on accelerating inflation," said one senior analyst in Tokyo to Bloomberg this morning.

Fixed-income investments destroy wealth when the cost of living rises. That's why US Treasuries became known as "certificates of confiscation" during the double-digit inflation of the late 1970s.

Ten-year US government bond yields rose to 3.86% on Thursday as prices fell. Karsten Linowsky, fixed-income strategist at Credit Suisse in Zurich , believes the 10-year yield is heading for 4.00% and above – meaning a capital loss of $3.50 on every $100 invested.

"The inflation outlook is weighing more on the market as it implies the Fed could hike interest rates," says Linowsky. But Wednesday's release of minutes from the Federal Reserve's latest policy meeting showed the central bank most likely frozen for the rest of 2008.

After slashing the cost of Dollars from 5.25% to 2.0% in just nine months, the US Fed no sees cost pressures staying "elevated" while unemployment rises "significantly".

The Fed also cut its 2008 growth forecast down from a ceiling of 2.0% as low as a mere 0.3%.

US interest rates at 2.0% are barely half the rate of consumer price inflation meanwhile. That negative return to cash savers is likely to boost commodity and Gold Prices as investors seek to defend their wealth.

"Renewed credit market strain could put further pressure on global bond and equity markets," adds Manqoba Madinane for Standard Bank in Johannesburg today.

"This could lift precious metal investment demand amid rising global inflation expectations.

"Continued Dollar weakness should also support precious metal investment appeal. Under these conditions, we see upside potential."

The US Dollar continued to slide vs. the Euro this morning, dropping to a new five-week low despite a sharp fall in European industrial orders reported for March.

The UK data agency in Cardiff added that business investment in the United Kingdom shrank by 1.4% during the first three months of this year. But the Pound also rose against the US currency, reaching its best level so far this month above $1.9800.

That pulled the Gold Price in Sterling down almost £10 per ounce from a five-week high of £474.50.

For French, German and Italian investor wanting to Buy Gold today, the price moved back to €587 per ounce after touching its highest level since April 18th.

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

© 2005-2016 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

Catching a Falling Financial Knife