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Gold Crashes by 5% But Posts Strong Annual Gain in Sterling

Commodities / Gold & Silver Dec 02, 2008 - 06:50 AM GMT

By: Mark_OByrne

Commodities Best Financial Markets Analysis ArticleGold fell sharply yesterday and gave up some of its recent gains. Gold for February delivery dropped $42.20 to end at $776.80 an ounce or 5.4% on the New York Mercantile Exchange. The sell off begin in Asia on sharply lower oil prices and continuing dollar strength but continued as European and US stock markets again fell sharply.


US markets fell sharply with the ‘news’ that the US economy has been in recession since last December (we have said as much for many months). The Dow Jones was down 7.7% and markets in Asia also came under pressure with the Nikkei falling by 6.35%. However, markets in Europe are proving more resilient this morning and have mounted something of a rally this morning after the sharp falls yesterday (FTSE -5.2%).

While gold fell sharply yesterday in dollars, it is important to remember that most currencies fell against the dollar again yesterday and thus gold has again acted as a safe haven in the domestic currencies of investors internationally.

The London AM fix yesterday was $795.50 (USD), £529.77 (GBP) and €629.40 (EUR) and today it was $772.50, £521.33 (GBP) and €610.33 (EUR) (see http://www.lbma.org.uk/?area=stats&page=gold/2008dailygold ). Thus gold fell by a modest 1.6% in British pound terms and by 3.1% in euro terms yesterday. Gold has been correlated with stock market movements in the very short term in recent months and when stock markets have fallen gold has also fallen but nearly always by far less in percentage terms. In the days following the many sharp sell offs in stock markets, gold has recovered and bounced more sharply than stock markets.

Gold in pounds sterling

This has led to a sharp outperformance of gold vis-à-vis every stock market in the word (see Chart and Performance table).

On January 2nd 2008, gold’s London AM Fix was at £424.81 and €573.34. Today’s fix was £521.33 (GBP) and €610.33 (EUR). Thus gold is up by 22.7% in pound terms and 6.45% in euro terms. Conversely, the FTSE is down by 35% since January 2nd.

Considering that gold had already outperformed all other asset classes in the last 7 years (a roughly 20% return per annum), this is quite an achievement. Especially given the extraordinary and unprecedented financial and economic times that have confronted us in 2008.

By Mark O'Byrne, Executive Director

Gold Investments
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Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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