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
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
US China Trade Issues Will Drive Market Trends – PART II - 14th May 19
The Exter Inverted Pyramid of Global Liquidity Credit risk, Liquidity and Gold - 14th May 19
Can You Afford To Ignore These Two Flawless Gold Slide Indicators? - 14th May 19
As cryptocurrency wallets become more popular, will cryptocurrencies replace traditional payments? - 14th May 19
How US Debt Will Reach $40 Trillion by 2025 - 14th May 19
Dangers Beyond a Trade War with China - 14th May 19
eBook - Greatest Tool for Trading? - 14th May 19
Classic Pitfalls for Inexperienced Traders - 14th May 19
Stock Market S&P 500 Negative Expectations Again - 13th May 19
Why Rising Living Standard in China Offers Global Hope - 13th May 19
Stock Market Anticipated Correction Starts On Cue! - 13th May 19
How Chinese Trade Issues Will Drive Stock Market Trends - 13th May 19
Amazon SCAM Deliveries for Fake Verified Purchaser Reviews "Brushing" - 13th May 19
Stock Market US China Trade War Panic - Video - 13th May 19
US Stock Market Leading Macro Economic Indicators Update - 12th May 19
SAMSUNG - BC94.L - Investing in AI Machine Intelligence Stocks - 11th May 19
US Increases Trade Tariffs Against China – Stock Markets, Gold, and Silver - 11th May 19
Who Has More To Lose In A No Deal Brexit? - 11th May 19
Gold at $1,344 Will Start Real Fireworks on the Upside - 11th May 19
Make America’s Economy Great Again - 10th May 19
Big US Stocks’ 2019 Fundamentals - 10th May 19
Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - 10th May 19
Stock Market Shake-Out Continues – Where Is The Bottom? - 10th May 19

Market Oracle FREE Newsletter

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

Gold Gains as Stock-Rally Fades on Collapse in World Trade

Commodities / Gold & Silver Oct 29, 2008 - 11:45 AM GMT

By: Adrian_Ash

Commodities

SPOT GOLD PRICES jumped to a one-week high of $765 an ounce at Wednesday's New York opening, gaining 12% from Friday's 12-month low as the strong rally in world stock markets faltered.

Wall Street futures pointed lower ahead of today's Federal Reserve decision, widely expected to deliver a further 0.5% cut to US interest rates, taking the returns paid to Dollars back to the 6-decade lows now blamed for the sub-prime housing bubble of 2001-2007.


Today the People's Bank of China cut its target interest rate for the third time in six weeks. Further cuts are now expected from the European Central Bank (ECB) and Bank of England.

Even the Bank of Japan may cut rates, despite already paying just 0.5% per year in a bid to reverse the deflation in asset-prices and wages that has mauled the world's second-largest economy since its own real-estate bubble burst 19 years ago.

"If interest rates are low, money is very cheap and it's very easy to create an inflation bubble," said Liran Kapeluto of trading-system firm Fintoec in London to Bloomberg earlier.

"[Now] is a buying opportunity for gold. The selling pressure on the Dollar is high."

Crude oil also jumped today, adding 6% to $66.50 per barrel while food-stuffs and base metals also shot up.

That took the Reuters-CRB index of the most heavily-traded raw materials more than 1.5% higher from Tuesday's near-4 year low.

The US Dollar meantime held steady on the currency markets after falling Tuesday for the first time in four sessions, allowing non-US currencies to weaken in bullion terms, too.

It also showed that this morning's 2% jump in Gold Prices came from strong buying in the professional market, with gold vs. Euros touching €600 an ounce for only the third time in the last two weeks.

Over on the world's equity markets, in contrast, an early 7% gain in Tokyo failed to buoy the rest of Asia. Germany's Dax index fell 1.5% even as London's FTSE100 added 200 points to a three-session high.

"It's like standing on a beach watching a tsunami, knowing that it's coming," says Scott Stevenson, head of the World Bank's private lending division, of the shutdown in global trade credit.

The Baltic Dry Index – which measures shipping costs worldwide – fell Tuesday below the 1,000 mark for the first time since 2002. It's now lost almost nine-tenths so far this year.

"We only see this kind of shock when we have outbreaks of war, or maybe the oil shocks of the 1970s," warns Kjetil Sjuve, commodities shipbroker at Lorentzen & Stemoco in Oslo, Norway.

"This lack of credit was a shock to the entire economy. We were hit second after the banks."

Here in the UK, non-financial businesses cut their borrowing by £2.3 billion ($3.7bn) in Sept., the Bank of England said today. Stock brokers and other non-bank financial companies, in contrast, grew their debts by a record 35% from this time last year, up £37.4bn ($60bn) last month alone.

Back at the rock-face, London's Accountancy Age magazine now says "mining finance is on the rocks" due to the global shutdown in lending to non-financial business.

"For some early stage companies there could be severe consequences, with projects put on hold or companies entering administration."

But while the credit drought, plus a surge in mining costs, is crimping Gold Mining stock profits – led by the 50% drop in third-quarter earnings reported Wednesday by US giant Newmont Mining – demand for the metal continues to grow.

" Diwali commenced on a cheerful note," reports the Press Trust of India today, referring to Tuesday's start to the Hindu festival of lights. Indian Gold Sales had already jumped more than 50% year-on-year on Sunday, adds the Business Standard in Mumbai, "due to the overwhelming response from buyers on the auspicious occasion of Dhanteras – a day in the Hindu calendar which ushers in the festival of lights, celebrated with the purchase of precious metals as a form of good luck."

One analyst estimates Sunday's gold sales at 90 tonnes, sharply higher from 2007's Dhabteras sales of 60 tonnes.

"India has witnessed a spurt in demand for gold not only because of tradition but also because it is now considered an attractive investment option," says Sumanth Kathpalia, head of the consumer banking at IndusInd Ltd., speaking to the Hindu Business Line .

"People have come to realise that in the present situation there is not much money to be made in the stock markets," agrees According to V.Krishnaswamy, head of the Indian Overseas Bank.

"So gold buying, both for investment and consumption purposes, has seen a significant rise."

Gold Fields of South Africa, in contrast – the world's fourth-largest Gold Mining stock – today reported an 8% drop in June-to-Sept. production from its global operations.

Safety work at the long-running South Deep, Driefontein and Kloof in South Africa – formerly the world's No.1 gold-mining nation – cut output in Gold Fields' home country by 11% from the same period last year.

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