Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
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

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Slumps on Strong Dollar

Commodities / Gold & Silver May 29, 2008 - 11:35 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES gave back an overnight rally early in London on Thursday, flirting with a two-week low beneath $890 per ounce as crude oil fell 0.6%, the US Dollar rose, and world stock markets continued to gain.

"There is not much speculative participation" in the Gold Market right now, according to one London fund manager.


"I feel the sell off is not over," a Swiss trader added to Bloomberg.

As Gold fell back, European stock markets erased their losses for the week so far, pushing the FTSE100 here in London another 0.5% higher in morning trade.

The Nikkei share index in Tokyo closed the day with its best performance in eight weeks, jumping 3% as export stocks rose on a sharp fall in the Japanese Yen.

By midday in London , the US Dollar had broken above ¥105 and pushed the European single currency back to a 7-session low beneath $1.5550.

"A firmer Dollar and weaker oil are two negatives for Gold," reckons Mark Pervan, a commodities analyst at ANZ, speaking to The Age in Australia .

"If oil falls 3-4% this week, gold could fall 4-5%."

Trading below $890 per ounce, the Gold Price stood 3.8% below last Friday's close as the US open crew near today. The price of crude oil has dropped 3.7% per barrel.

Supporting long-term oil bulls, however, " Mexico [just] reported a 13% year-on-year decline in daily oil production," notes Manqoba Madinane for Standard Bank in Johannesburg , "whilst Indonesia announced that it planned to pull out of the Opec oil cartel as it has become a net importer of oil – indicating growing crude oil supply-side risks."

Higher energy costs, coupled with an unexpected surge in credit and money supplies, are set to push European inflation rates back to a 16-year high according to consensus forecasts of Friday's CPI data for April.

Today the European Central Bank (ECB) said annual growth in the broad M3 money supply hit 10.6% last month across the 15-nation Eurozone.

German government bond prices dropped hard on the news – pushing two-year yields up to a nine-month high – while UK government gilts also fell despite Nationwide, the country's largest mortgage lender, reporting the sharpest monthly drop in national house prices on record at 2.5%.

"If inflationary developments and, more important, inflation expectations continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, even in the face of an anemic economy," said Richard Fisher, president of the Dallas Federal Reserve Bank on Wednesday.

But Fisher remains one of only two Fed committee members to vote against this year's sharp cuts in the cost of Dollars. Only yesterday, Ben Bernanke – head of the Federal Reserve – praised former Fed member Frederic Mishkin for his "invaluable" contribution to recent policy as the Columbia professor returned to academia.

At the 16 policy meetings he attended as a Fed governor, Mishkin never once voted to raise US interest rates.

"The sharp recent rises in global commodities prices, particularly in the energy and agricultural sectors, is undoubtedly causing hardship for many Americans, and is indeed threatening the health of many millions in developing countries," said Dr. Benn Steil, a senior fellow at the Council on Foreign Relations, in testimony before a Senate Committee on Surging Oil and Food Prices last week.

"[But] whereas the prices of oil and wheat measured in US Dollars have soared over the course of this decade, they have, on the other hand, been remarkably stable when measured in terms of Gold – gold having been the foundation of the world's monetary system until 1971.

"It is therefore reasonable to conclude not that we are a experiencing a commodities bubble, but rather the end of what might usefully be termed a 'currency bubble'."

Looking at the supply-and-demand dynamics of the global bullion market, meantime, Gold Buying by the world's major gold mining companies could equate to some 10 million ounces this year, according to the latest analysis from SocGen's Hedge Book , researched by the GFMS consultancy.

After building up a short position worth 3,421 tonnes of production – as yet unmined – during the 20-year bear market ended in 2001, the world's gold mining companies began to "de-hedge" and buy back these sales when the Gold Price began rising at the start of this decade.

Once again "the rate of producer de-hedging surpassed expectations" during the first three months of this year, says the SocGen report. Meaning that gold miners took steep losses on cutting their short position as the Gold Price broke new all-time highs above $1,000 an ounce.

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