Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
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

Market Oracle FREE Newsletter

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

Gold Slides as Dollar Bounces on Bernanke's New "Strong Dollar" Policy

Commodities / Gold & Silver Jun 10, 2008 - 08:20 AM GMT

By: Adrian_Ash

Commodities THE PRICE OF PHYSICAL BULLION slid further in Asia and London on Tuesday, losing half of the Gold Market 's bounce from last Thursday's three-week low after Ben Bernanke – chairman of the US Federal Reserve – repeated his claim of wanting to fight inflation.

Base metal and food prices sank, while crude oil dropped another 0.5% to trade more than $5 below Friday's All-Time Record Oil Price .


Global stock markets also fell hard, losing more than 1% in Europe as Chinese shares closed the session 7.7% lower.

Money also poured out of government bonds worldwide, driving open-market interest rates sharply higher.

The only gainer? The US Dollar rose 0.7% vs. the Yen and 0.9% vs. the British Pound. It also pushed the European single currency more than 0.8% lower inside 10 hours, knocking it below $1.5500 in what's become the most volatile week for the US currency since the Bear Stearns rescue – and all-time Gold top at $1,032 per ounce – of mid-March.

"With the Dollar depreciating from $1.5350 on Friday to $1.5840 yesterday," notes Walter de Wet for Standard Bank in Johannesburg this morning, "precious metal prices remain at the mercy of the extreme volatility [now] driven by market expectations of the interest-rate spread between the Fed and ECB target rates.

"The futures market is now pricing in a considerably higher probability of a rate hike by the Fed in August. Chairman Bernanke is due to speak again today, and the Dollar should remain sensitive to his comments."

Late on Monday, Ben Bernanke put the cart before the horse when he told a Fed conference in Boston that "rapidly rising prices for globally traded commodities have been the major source of the relatively high rates of inflation we have experienced in recent years."

Mistaking the Fed's Own Monetary Inflation for its effect on prices, the chairman then stated that the central bank "will strongly resist an erosion of longer-term inflation expectations."

Yet current Fed interest rates are just half the rate of April's consumer price inflation, and "the Fed appears handcuffed in its fight against inflation," notes the latest Gold Market analysis from Mitsui, the precious metals dealer.

"Friday's dismal unemployment data confirmed how entrenched the US economy is in negative economic circumstances."

That said, the latest data on exchange-traded gold positions – showing the week to June 3rd – "illustrate investors' clear preference to exit out of long Gold positions," Mitsui goes on.

Globally, "investors shed 7% of their global gold holdings. But Asian investors opted to stay neutral, and it was [ US ] Comex players who demonstrated a bearish attitude to the yellow metal."

Amongst the exchange-traded gold funds, "it was the turn of the Australian ETF contract to encounter head winds. On 2nd June, this platform fell by 10.1 tonnes...half of the previous exposure and the largest flood of one day liquidation in its five-year history."

Meantime in the financial sector – which led the plunge in Asian stocks overnight – Citigroup reports that the global banking industry could be tapped for $6,000 billion it offered in corporate loans before the credit crunch bit this time last year.

That's twice the potential drain on bank balance-sheets than the amount outstanding five years ago.

Corporations are already buckling under today's higher funding costs, said Moody's Investor Services on Monday. The ratings agency reported that 2% of speculative-grade corporate bonds defaulted last month, up from 1.7% in April and 1.5% this time last year.

So far in 2008, some 31 issuers have defaulted – already equaling the 2007 full-year total. Moody's expects the default rate on higher-yield corporate debt to reach 5% by the end of this year and rise to 6.3% by June '09.

Investors still holding shares in Swiss giant UBS should also prepare for further losses ahead, warns Peter Thorne of the Helvea brokerage in London , following the fresh write-downs, cash raising and $2.8 billion losses admitted by Lehman Bros. yesterday.

Monday's bad news was "clearly indicative of further write-downs for UBS," he believes, "as is the deterioration in AAA-rated securities and the UK mortgage market."

Today the Royal Institution of Chartered Surveyors (RICS) said transaction volumes in UK residential real estate have slumped to their worst level in three decades. A net balance of 93% of surveyors reported lower house prices in May from April.

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