Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Strong as Global Money Inflation Sparks Political Battles

Commodities / Gold & Silver 2009 Mar 25, 2009 - 09:05 AM GMT

By: Adrian_Ash

Commodities Best Financial Markets Analysis ArticleTHE PRICE OF GOLD ticked lower once more early Wednesday, bouncing higher from $918 an ounce for the second day running in London as world stock markets rallied on a strong Wall Street start.

Like the German Dax and UK FTSE100, however, the S&P index stood more than 10% below its start of the year.


Gold Prices for German, UK and US investors held 5% higher from New Year's Day, but the US Dollar strengthened once more, knocking one-third off the Euro's sharp rally of Wednesday last week.

Government bond prices slipped. Crude oil fell more than 2% to $52.70 per barrel.

"Serious downside risk is unlikely in gold," writes Lawrence Williams today for MineWeb , "bar an end to the world's financial ills.

"So gold remains probably the best wealth protector out there. Gold ETF holdings and physical metal coin and bar purchases suggest an underlying strength in the market."

Looking further ahead, " Gold Prices are expected to surpass last year's record," claims the New York-based CPM Group, launching its annual Gold Investment report.

"Continued volatile and weak financial and economic conditions are expected to be supportive of strong investment demand this year."

New data today showed Japanese exports collapsing by one-half in Feb. from the same month last year.

The Bank of Japan hinted that Yen interest rates may go back to zero from their current 0.1%.

Bank governor Masaaki Shirakawa also refused to rule out using quantitative easing ( a.k.a. Printing Money ) to devalue the Yen and side-step a return of domestic price deflation.

New data in the US meantime showed new mortgage approvals jumping by one third last week, after the Federal Reserve promised to buy $750 billion of home-loan investments, squashing interest rates to all-time record lows.

The rates charged on 30-year loans remain high, however, compared with government bonds. Data from Bankrate.com shows the gap above 10-year US Treasury bond yields reaching 2.4% – nearly one whole percentage point above the last decade's average.

Auto loans in the US now cost 7.7% more than one-month interbank loans, says Bloomberg, more than four times the average gap since 1999.

"We don't want a situation in which some countries are making extraordinary efforts and other countries aren't," said Barack Obama – now 65 days into the job of president – in a speech reported worldwide today.

He also claimed that the Strong US Dollar – up by more than one-fifth from its record low of last summer – reflects global faith in America's strong economy.

But Obama's budgetary and bank rescue plans "will undermine the stability of the global financial markets," charged Czech prime minister Mirek Topolanek – current president of the 27-nation European Union – in Brussels this morning.

"All of these steps, these combinations and permanency, are the way to hell. We need to read the history books."

"The biggest success of the European Union is the refusal to go this way."

Yesterday Topolanek's government was hit by a vote of no confidence at home in Prague.

"Gold has fallen in the past few days because equities really shot up," said Tetsuya Yoshii, head of derivative products at Mizuho Corporate Bank in Japan, to Bloomberg News this morning.

"But with all the money being pumped into the system everywhere in the world, inflation is going to be a problem in the future – and that will keep gold stable in its current $850 to $950 range."

Today the US Congress will begin debating the latest government budget proposed by Barack Obama – now 65 days into the job of president.

His estimates put the 2010 fiscal deficit at $1.17 trillion, but the independent Congressional Budget Office (CBO) says it's really one-fifth larger.

By 2019, the CBO warns, Obama's proposals would take Washington's outstanding debt to $9.4 trillion – some 82% of the US economy and the worst level since the post-war recovery of five decades ago.

Late on Tuesday, the Federal Reserve confirmed that its $300 billion program of " Quantitative Easing " will include buying long-dated, 30-year US Treasury bonds with newly created money.

Here in London – where the Bank of England is already buying public debt with freshly created cash – an auction of 40-year government gilts today failed to find its full quota free-market bidders, selling only 93% of the total £1.75 billion offered.

"Basically it's the first failed auction in 14 years," says John Wraith, Sterling strategy chief at RBC Capital Markets in London, speaking to Bloomberg.

"They didn't receive enough to cover it all, so the [gilts] market has obviously sold off extremely heavily."

For UK investors now Ready to Buy Gold , meantime, the price rose to recover one-third of Tuesday's £35 drop, trading at £625 an ounce as the Pound fell hard on the currency markets.

"Monetary policy should bear the brunt of dealing with the ups and downs of the economy," said Bank of England chief Mervyn King yesterday, challenging the Keynesian consensus amongst politicians in what the British press calls a "stunning attack" on the government.

"Given how big those [government] deficits are," King went on – just before prime minister Gordon Brown left for the United States to promote deficit-spending ahead of next month's G20 summit – "it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits."

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

© 2005-2022 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