Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
The Gold Stocks Correction and What Lays Ahead - 19th Oct 19
Gold during Global Monetary Ease - 19th Oct 19
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Bailouts and Low Interest Rates to Inflate Gold Price Bubble

Commodities / Gold & Silver 2009 Jan 29, 2009 - 08:21 AM GMT

By: Adrian_Ash

Commodities Best Financial Markets Analysis ArticleTHE PRICE OF WHOLESALE gold bullion slipped to a four-session low early in London on Thursday, dropping more than 4% from Monday's 3-month high to bounce off $875 an ounce.

Crude oil meantime slid back towards $41 per barrel, and European stocks stood 1.2% lower on average by lunchtime in Paris, where hundreds of thousands of workers and students joined street demonstrations to "sound a cry of anger" at the global financial crisis.


The US Dollar was volatile but held flat overall vs. the Euro and Sterling, pushing the Gold Price for European and UK investors down to one-week lows of €662 and £613 an ounce respectively.

"Combined with an aggressive fiscal policy, it is clear that the authorities are going 'all-in' to try to mitigate the near-term effects of the economic collapse," says David Einhorn, head of the Greenlight Capital hedge fund whose short-selling of Lehman Bros.' stock in 2008 failed to prevent his fund losing 23%.

"Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed. Our instinct is that gold will do well either way.

"Deflation will lead to further steps to debase the currency, while inflation speaks for itself."

Telling clients that Greenlight has just taken positions in Gold Bullion as well as Gold Futures and mining stocks, "To everyone's dismay, we believe that some of Grandpa Ben's predictions are playing out," he adds – referring to his grandfather's "gold bug" faith in the metal during the long bear market of 1980-2000.

"I think gold is rising because of fiscal deterioration and the prospect that the US [Treasury's debt] may be downgraded," says Tom Sowanick at the $22 billion Clearbrook Financial funds in Princeton, New Jersey.

"They are printing trillions of dollars worth of currencies," agrees Robert Lutts of the $400 million Cabot Money funds in Massachusetts, also speaking to Bloomberg, "and there is no real asset behind it.

"So every single Dollar in my pocket is going to be worth less and less every day."

Following Wednesday's US approval of President Obama's $825 billlion stimulus package – as well the Federal Reserve's vote to begin Quantitative Easing – new Treasury secretary Tim Geithner said overnight that he's working on a fresh plan to "repair the financial system," but refused to give details.

Unnamed Treasury sources tell the Wall Street Journal that the plans will cost between $1-2 trillion.

Clearbrook's Sowanick now sees the top of this bull market in gold reaching $1,700 an ounce.

Short-term, today's Gold Market note from Standard Bank in Johannesburg pegs "primary support" at $877, with resistance at $893.

"Inevitably, low interest rates lead to a gold bubble," says David North, head of asset allocation at the UK's No.1 institutional investor, Legal & General.

The company's $500m offshore and onshore hedge funds now hold one-third of their value-at-risk in gold, he tells the Financial Times .

Minnow hedge fund Osmium Capital Management – running some $178m from Bermuda – today launched a new class of shares denominated in gold rather than Dollars or any other official currency because "those currencies are clearly deteriorating with governments assuming more debt and having lower revenue and more expenditure," according to the chief executive.

But while Western funds continue turning to Gold Investment , Indian gold consumers – the world's largest single source of physical gold demand – slashed imports by more than 90% to just 1.2 tonnes this month, the Bombay Bullion Association said earlier today.

"Banks have a lot of carryover stocks from December and also November," said BBA president Suresh Hundia to Reuters this morning.

"That's why imports were less. Prices were also high" above new record highs of 14,000 Rupees per 10 grams.

On the supply side of the Gold Investment market today, world No.4 miner Gold Fields reported a 5% rise in output for the last 3 months of 2008, but said it will this quarter's target of one-million ounces thanks to lower copper production from its Cerro Corona gold and copper mine in Peru.

World No.1 Gold Miner Barrick Gold said today it's put its Kainantu project in Papua New Guinea onto "care and maintenance".

Newmont Mining, the world's No.2 gold producer, said it's raised $1.56bn to help fund its purchase of the Boddington Mine in Australia from AngloGold Ashanti.

Developing the Boddington site will cost an estimated $2.6bn, with Newmont targeting up to 5.5 million ounces of output once full production begins next year at cash-costs of $440 per ounce.

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 2009

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.


Comments

David Fredin
30 Jan 09, 09:28
We don´t see deflation in Mexico

Mr. Ash,

About all this deflation concerns, Be asured that what we are looking at, in many countries, is strong inflation. May be due to the huge dollar rally of the past months. However this event, though maybe transitory, is taking inflation here to two digits. we are alarmed.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules