Gold rose against all currencies on Tuesday, breaking above $1200 an ounce as world stock markets sank for the third time in 5 sessions.
"We are not bullish on Gold because of inflation expectations," says Walter de Wet at Standard Bank, "but because of monetary policy.
"Inflation-linked bonds now see inflation averaging only 1.18% per year over the next 10 years. [So] we expect monetary policy to remain accommodative for longer.
"Accommodative policy favors especially Gold."
The British Pound and European Euro today reversed early losses against the US Dollar, but risk-assets continued to fall regardless.
Versus the Japanese Yen, the Euro fell to ¥109 – its lowest level since Dec. 2001, and more than one-third below the record peak of August 2008.
New York's Dow Jones index fell through 10,000 – a level first breached on the way up in early 1999.
Crude oil sank towards $68 per barrel. Silver Prices dropped back towards Friday's near-two month lows.
"We have some risk, we have the situation in Europe we're watching very closely, but...the economy is doing fairly well so far," said US Federal Reserve executive James Bullard, president of the St.Louis Fed, in an interview with Reuters.
"We'll see how things proceed through the fall and into 2011."
Ten out of 17 primary dealers on Wall Street see the Federal Reserve hiking interest rates in 2011, says the newswire.
London's inter-bank lending rate – known as Libor – today rose further above 0.50%, more than doubling over the last 90 days, hitting a 10-month high, and suggesting growing concerns over institutional bank liquidity.
The global financial crisis is typically said to have begun on 9 August 2007, when Libor leapt and interbank lending froze.
Four Spanish "caja" savings banks today announced plans to merge after the Bank of Spain seized control of a failing competitor at the weekend.
"When a clear, large negative shock threatens to pull the [business] cycle down into severe contraction," said Bank of England policymaker Adam Posen in a speech last night, "central bankers...have to intervene, and do so pro-actively.
"No one should be over-confident that the shock can be costlessly offset or restored fully to status quo ante bellum."
Gold Bullion sales meantime continued apace in the retail-investment market, with the US Mint reporting May-to-date sales of Gold Eagle coins in excess of six tonnes.
Australia's Perth Mint is taking on new staff to help cope with demand.
Germany's ProAurum coin shop online today showed 216 of the 246 precious-metal products it carries as "Not available".
In the institutional Gold Investment market, New York's SPDR Gold fund – the world's largest single exchange-traded gold trust – added 1.3% more bullion to its holdings on Monday as demand for its shares rose.
The trust has added 77 tonnes to its hoard so far this month, taking it to all-time records above 1230 tonnes.
"Investors are clearly seeing the ETF as cheap here," says one London dealer.
"It felt overall [on Monday] as if last week's long liquidations were for the most part done," say Swiss dealers at MKS Finance in a note, "and the market could start from a fresh base."
Over in India – home to the world's hungriest physical gold market – "Demand for gold in Q1 has been robust and growth in value terms was in double-digits, close to 40-45%," says Ajay Mitra, managing director for India and the Middle East at marketing-group the World Gold Council.
Speaking to Reuters ahead of tomorrow's formal data release, India's demand figures "look close to 2007 numbers," Mitra said, citing the 'banner year' for record Indian private demand.
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