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
China Hang Seng Stocks Index Collapses and Commodities - 24th May 19
Costco Corp. (COST): Finding Opportunity in Five Minutes or Less - 24th May 19
How Free Bets Have Impacted the Online Casino Industry - 24th May 19
This Ultimate Formula Will Help You Avoid Dividend Cutting Stocks - 24th May 19
Benefits of a Lottery Online Account - 24th May 19
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
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

Market Oracle FREE Newsletter

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

Gold, Stocks and Commodities Slump

Commodities / Gold & Silver Oct 22, 2008 - 09:45 AM GMT

By: Adrian_Ash

Commodities THE PRICE OF GOLD BULLION continued to slide early Wednesday, dropping more than 3.5% to a fresh 5-week low of $749 per ounce as world stock prices sank and the US Dollar leapt yet again on the currency markets.


"Although liquidity fears are easing" in the banking sector, notes Walter de Wet at South Africa's Standard Bank, "uncertainty and fears about global growth prospects remain prevalent.

"Fed fund futures now are pricing in a 64% chance of a 50 basis-point cut by the Federal Reserve next week. [But] gold is still on the back foot, with more Dollar strength in the pipeline."

The Euro today accelerated its plunge vs. the Dollar during Asian trade, losing almost 2¢ in just 15 minutes to reach its worst level since Dec. 2006 at $1.2740.

US Treasury bonds caught the "safe haven" bid once again, pushing the yield offered to new buyers of 3-month notes down to 1.06%.

The British Pound meantime plunged to a fresh five-year low vs. the Dollar of $1.6250 – down more than 7% from Monday's start – after Bank of England chief Mervyn King said the UK is now entering recession and forecasting a "long march back to boredom and stability" in banking and monetary policy.

The Gold Price in Sterling held above £460 an ounce, while short-term gilt yields sank as UK bond prices jumped in response. The annual return offered by 6-month gilts sank to 2.83% – barely half the current rate of consumer-price inflation – despite the tidal wave of fresh Treasury debt now required to fund the government's £250 billion ($400bn) rescue of the private banking sector.

Leading the tax-funded fight against recession worldwide, UK prime minister Gordon Brown has also promised a Huge Government Sending Program . But "Britain's public debt is [already] £1,866 billion," says Tory MP Brooks Newmark, writing in The Guardian today.

"Equivalent to 125.5% of GDP [it's] nearly three times larger than the government's published figure" thanks to the off-balance-sheet liabilities owed on infrastructure built through private finance initiatives (PFI).

Here in London this morning, the FTSE100 dropped 150 points, plunging back towards the 4,000 mark – a level first crossed on the way up in 1996.

The Paris stock market lost 4% Wednesday morning. The Nikkei index of Japanese stocks closed 631 points lower at 8,674 – more than 23% down from the start of October – as the flight-to-cash forced a fresh jump in the Yen's foreign exchange rates.

Japanese investors held almost $6 trillion in overseas assets by the end of 2007. The Yen has since jumped by more than one-third against " Carry Trade " favorites – including the British Pound, Australian Dollar and New Zealand Kiwi – as that money fled back to Japan.

"Gold looks destined to challenge $1,000 once more," writes Declan Fallon of the Covestor tracking service for TheStreet.com today, "but under a strengthening Dollar it may succumb.

"Whether this happens or not, remaining commodity prices will provide opportunities to bottom-fish. Industrial metals in particular will benefit in a recovering economy.

"We are six years into a 20- to 35-year secular commodity bull market. It's time to take advantage."

Commodity prices continued to slump early Wednesday, with US crude oil falling back below $70 per barrel and copper futures traded in London losing 4.8%.

"The high nickel prices of the past two or three years are gone," claimed Carey Smith, an analyst at the Alto Capital brokerage, at a conference in Perth, Australia today. The base metal – a key element in stainless steel and electroplating – has dropped 80% of its price since mid-2007.

"The selling is not due to fundamentals," says Smith. "It's hedge funds and other hot money rushing to get out of the market."

The same trend towards No Credit, No Leverage continues to suck speculative cash out of gold as well. But if the global bail out of private banks – now promising some $3 trillion of government money worldwide – does stem the decline in asset prices, "the turn in prices back toward higher levels, especially for base metals and energy commodities, could be very fast," says New York research and analysis group CPM in its latest Market Commentary .

"There is so much money piled up in cash and Treasuries, with its owners waiting to re-allocate these funds...when the turn comes it could be a rapid appreciation off of the floor for many commodities prices.

"If one waits for the first 5% or 10% of the recovery before in-vesting, one may well miss the first 30% of the upward revision in prices – when it comes."

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