Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Gold Drifts Ahead of US Fed Interest Rate Cut

Commodities / Gold & Silver Jan 30, 2008 - 12:29 PM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES sat tight in a $6 range early Wednesday, bouncing 1.3% below yesterday's new record high before recording an AM Fix in London of $923.75 per ounce as the world's stock markets ticked lower in quiet trade.

"All eyes today are on the upcoming US rate decision," says Brandon Lloyd for Mitsui in Sydney , "widely expected to lower rates again to support the aggressive 75-basis point emergency cut last week.

"There is a 75% chance of a 50 basis point cut already priced into the market and anything but this amount would now be a surprise."

Shanghai 's stock market fell 0.9% this morning to reach a six-month low as heavy snow brought much of China to a standstill. Aluminum prices, on the other hand, jumped the most in 16 years as power cuts caused by the storms knocked out one quarter of China 's smelting output.

Crude oil rose for the fifth session running, meantime – its best run since Oct., according to Bloomberg – ahead of today's US Federal Reserve announcement at 14:15 EST. But the promise of cheaper money to come failed to stop the broad MSCI Asia-Pacific index losing 1.2% for the day.

Japanese gold futures in Tokyo also slipped, giving back 0.2% of yesterday's new quarter-century record vs. the Yen to equal $926.59 per ounce.

"There has been some talk about restarting gold mines in South Africa ," said Dan Smith at Standard Chartered to Reuters today after Eskom – the state-owned utility – agreed to raise the proportion of power supplied to gold miners from 70% to 90% following last week's shutdown.

The world's second-largest gold producing nation, South Africa has seen its annual output more than halve over the last decade. But for the Gold Market, "the Fed meeting is going to be critical," Smith believes.

"The previous 75-basis point cut gave the impression that the Fed is panicking, which encouraged a lot of interest in gold as a safe-haven.

"If the Fed is seen overdoing and panicking, then it's likely to push gold up again."

Urging Ben Bernanke's team to slash rates still further was news on Tuesday that home prices in the ten largest US cities fell by a record 8.4% in the year to November. The Federal Bureau of Investigation (FBI) is meanwhile investigating 14 companies for accounting fraud and insider trading related to subprime mortgage-backed bonds.

Twenty-six firms are already being sued by the New York authorities and their pension funds after underwriting home-loan securities issued by Countrywide Financial, America 's largest mortgage lender. And today UBS – the world's largest wealth management group – admitted an extra $4 billion in new write-downs, taking the Swiss bank's total subprime-related losses so far to $18.4bn.

"One could become very emotional about UBS," smirk analysts at J.P.Morgan in a note – "continuously behind the curve in write-downs and hence always topping-up; exposure disclosure is poor to new write-downs; and management leadership [is a] vacuum."

Shares in UBS have now dropped by 40% on the Zurich stock market, but J.P.Morgan itself reported a 34% fall in fourth-quarter profits after writing down $1.3bn of its subprime investments.

"Until recently," writes Bill Gross, head of Pimco – the Californian bond fund with $720 billion under management – in his February Outlook , "US and therefore global demand has been driven by the ability to lower interest rates and extend credit to an increasing majority of Americans.

"[The trend] was bolstered and supported by innovative, securitized finance which in turn was nurtured by lax regulation and a belief that things could not go wrong.

"Now government spending needs to fill the gap," says Bail 'Em Out Bill – "not consumption. Writing [tax rebate] checks for American consumers which then flow to foreign central banks [via the trade deficit] is not the permanent solution."

Currency traders sided with Gross's view this morning, pushing the Euro up to a 10-session high vs. the Dollar of $1.4815, while the British Pound – ignoring news that new UK mortgage approvals fell to a 13-year low in Dec. – rose to a new five-week high above $1.9940.

Bank lending to City stock-brokers, hedge funds and other finance companies, on the other hand, leapt by more than one-quarter in the year to last month.


The Gold Price in Sterling today held below £464.50 per ounce, while French, German and Italian investors wanting to Buy Gold today saw the price drop 1.2% from Tuesday's new record high to near €622.

"Although fresh central-bank gold sales from Portugal and Belgium are possible in 2008," says today's Official Sector Gold Activity report from GFMS on behalf of SocGen, "their combined volume would probably be limited and insufficient to prevent a significant shortfall from the 500-tonne CBGA limit."

Western Europe 's central banks agreed in 1999 to limit their annual sales of Gold Bullion , and they only just under-shot their quota in the year-to-Oct., led by a sale of 240 tonnes from the Banco de Espana.

"Spain was left with a little more than 280 tonnes at end-Dec.," the GFMS report goes on, noting that further sales are unlikely after 2007's reserve reduction "created quite a lot of controversy in the country, particularly in the light of subsequent increases in Euro gold prices."

On the other side of the ledger, winks the report's author – and most likely referring to China, Russia and the Middle Eastern authorities – "gold purchases that take place [in 2008] will probably come from certain central banks seeking to diversify away from the US Dollar, be that due to the latter currency's bleak outlook or to political motivations.

"It should be noted here though, that as gold remains close to all-time highs some of the potential buyers could decide to postpone purchases until a correction has taken place."

By Adrian Ash

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 , 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 - 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