Gold News

Gold Jumps into New York Open as Crude Oil Rises, Euro Stocks Fall; Price Inflation "Unabated"

Spot Gold Prices spiked into the US open on Wednesday, moving 2% above yesterday's low as world stock markets fell and crude oil rose back above $134 per barrel.

The Dollar held flat vs. the Euro after European construction output showed a 2.4% slide from this time last year.

US mortgage approvals in the week to last Friday fell almost 9%, the latest data said.
"A very nasty period is soon to be upon us – be prepared," says Bob Janjuah, credit strategist at the Royal Bank of Scotland in London, in a new report.

RBS warns of a 20% fall in the S&P index by Sept. as "all the chickens come home to roost" from the ongoing global banking crisis.

The value of high-yield corporate bonds could push credit spreads out to 700 basis points, Janjuah reckons, advising that in the turmoil to come "this is about not losing your money."

Gold Prices jumped 54% during the first seven months of the current world banking crisis, topping out above $1,000 an ounce as the Federal Reserve took unprecedented action to support J.P.Morgan's fire-sale purchase of Bear Stearns.

Today Tokyo gold futures for April '09 delivery ended the day flat at €3,106 per gram, but the Tocom commodities exchange said it wants to launch exchange-traded investment funds based on its prices.

The Tocom's move follows news that State Street, sponsor of the world's largest Gold ETF, will list its SPDR Gold Shares in Tokyo at the end of this month.

"Unfortunately, the Gold ETF doesn't have any direct link to our exchange's prices," said Tocom chairman Masaaki Nangaku Nangaku at a news conference in Tokyo.

"But I believe the launch of commodities ETFs will have an impact in helping to develop both the commodities and securities markets, so I welcome the move."

Over in New York last night, "the gold and silver ETFs moved in opposite directions," notes today's Gold Market note from Mitsui, the precious metals dealer, "with the StreetTracks Gold ETF adding approximately 400,000 ounces and the iShares Silver ETF liquidating approximately 1.5 million ounces.

"Combined, this reflects the consolidation these markets are currently going through and until there is a break out of this convergence triangle, the metals will continue to track sideways. Gold's target is $900 and silver needs to break $17.70 per ounce."

Pointing to the 200-day moving average in the Gold Price – seen by many technical analysts as 'key support' since the bull market began in 2001 –"any meaningful bounce from the [current level at $856 per ounce] could bring back a lot of money into Gold," says analysis from Swiss bank UBS, "as happened last year."

Trading right on its 200-day moving average during the typically quiet "summer doldrums" between late June and Sept., the Gold Price then leapt sharply higher in autumn '07, adding 53% inside the next six months.

Prior to last year's jump, however – sparked by the US Federal Reserve slashing the cost of borrowing below the rate of consumer-price inflation – the market dipped below Gold's 200-Day Average seven times since starting this bull market against the Dollar in spring 2001.

Back in the stock market, meantime, London's FTSE100 gave back all of Tuesday's gains by lunchtime on Wednesday, led lower by banking and finance stocks playing catch up with yesterday's losses on Wall Street.

US Treasury bonds were bid higher, pushing yields lower, while European government debt sold off once again.

Jürgen Stark of the European Central Bank repeated the ECB's warning that it "will do everything necessary" to fight price inflation, now running at a 16-year high in the Eurozone.

"The risks to price stability have increased," Stark told an interviewer this morning.

British manufacturers expect the rise in prices of manufactured goods "will continue almost unabated" over the next 3 months, according to the latest CBI survey.

In Argentina – where a 100-day farming strike threatens to spark the second government bond default this decade as tax revenues dry up – inflation expectations have doubled to average nearly 35% per year according to the finance dept. of Torcuato di Tella University.

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Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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