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
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
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

Market Oracle FREE Newsletter

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

Gold Holds Ahead of US Interest Rate Decision

Commodities / Gold & Silver Jun 23, 2008 - 09:06 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES gave back an early 0.6% rally in London on Monday, trading just shy of last week's close at $902 per ounce as crude oil bounced and European equities held flat.

The world's biggest investment banks, meantime, issued a series of notes accusing each other of ever greater write-downs for the April-June quarter.


"I think it's cautious trading in Gold ," said a Singapore analyst to Reuters this morning. "I think everyone is focusing on this week's Fed meeting."

"With no US economic data due to be released today," agrees Standard Bank in Johannesburg, "precious metal investment sentiment could remain subdued as investors take cue from currency market developments ahead of the Fed rate decision on Wednesday."

Tuesday will see the release of two separate US house price reports, with new home sales data to follow on Wednesday, just before the Federal Reserve announces its latest decision on Dollar interest rates.

The Gold Price has risen 38% since the Fed began slashing US interest rates in Aug. '07.

Gold topped out at $1,032 per ounce just as the central bank stepped in to rescue Bear Stearns in mid-March. The price then fell back as Fed officials hinted they might stop cutting rates – or even raise them – in a series of " Strong Dollar " speeches.

But with Wall Street economists forecasting a 16% drop in US house prices in the year to May, a new report launched today by the Joint Center for Housing Studies at Harvard University says residential real estate remains hugely over-valued.

Returning to the level of affordability seen before the subprime bubble began at the start of this decade "would take some combination of large price declines, interest rate reductions, rent deflation and unprecedented real income growth."

" US housing prices are collapsing," says Matthew Johnson, chief economist for ICAP – the world's largest broking group – in Sydney , Australia . "So I don't think the Fed can lift rates."

"We don't see a rate hike in the United States ," agrees Masataka Horii, co-manager of the $52bn Kokusai Global Sovereign Open in Tokyo , the world's second largest bond fund.

"But the bond market has priced one in, temporarily helping the Dollar."

Early Monday the Dollar briefly pushed the Euro back below $1.55 – down from an all-time high of $1.60 two months ago – after the Ifo Institute's survey of German business sentiment fell faster than expected to a 36-month low.

The European Central Bank (ECB) is still widely expected to raise its interest rates in July, however, after a member of its governing council today called inflation in the 16-nation Eurozone "alarming".

Today the chief executives of three large European corporations – electronics giant Siemens, sporting goods manufacturer Adidas, and Austrian-based energy retailer OMV – warned in the Financial Times that higher interest rates would only slow growth further.

" Gold and silver broke out of their long-term congestion patterns last week," says today's note from Mitsui, the precious metals dealer, "but neither managed to rally through June's previous highs.

"Gold is capped at $908.50 and silver at $17.70. The Euro has moved lower overnight and once again stalled Gold 's progress, but there is good support from the oil price, which is higher again."

On Sunday the oil minister of Saudi Arabia – the world's largest crude producer – pledged an extra 200,000 barrels of daily output. But Ali al-Naimi's announcement was then trumped this morning by news of fresh violence against oil facilities in Nigeria .

The world's eighth largest oil producer, Nigeria has now seen its daily output slide to a 25-year low as a result of militant attacks.

Last week the UK energy giant Shell declared was forced to suspend operations at its 225,000 barrels-per-day offshore field at Bonga , Nigeria , following a series of attacks.

Crude oil prices today rose 0.8% to $136.50 per barrel. Base metals also rose, but soft commodities – led by wheat – fell back on forecasts of warm, dry weather to follow the recent floods in America 's mid-west.

Meantime in the financial markets, analysts at Bank of America today warned of further write-downs at competitors Merrill Lynch ($3.5 billion) and UBS ($7bn).

Bank of America itself may be forced to follow the lead of US peers Citigroup and Wachovia and cut the dividend it pays to stockholders, says a note at MotleyFool – now running at 8.6% of the current share price.

UBS in turn warned today of a further $8.7 billion in asset write-downs at Citigroup, adding to the $42bn already announced by the Western world's largest bank since April.

Swiss giant UBS has itself written down $37.4bn of its assets since the global banking crisis began last summer – and in a separate note from its domestic competitor Credit Suisse today, an analyst warned that an on-going investigation into possible tax evasion by its wealth management division could "in a worst case scenario" result in UBS losing its banking license.

That would "have adverse effects on the global private banking franchise," says the Credit Suisse analyst.

With this squabbling failing to mask the ongoing destruction of wealth hitting customers of the world's biggest financial firms, "for the first time in my career, I [have seen] concern about the location of one's assets," says Robert Balentine, head of investment management at Wilmington Trust in the US, in an interview with Reuters.

"We've seen tangible evidence of very wealthy clients shifting assets out of brokerage firms in great numbers."

"If UBS can't manage its own capital," as a financial consultant in Verona , Italy adds, "then what the hell are they going to do with mine?"

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