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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Hits All-Time High for British Investors; Surge in Bond & Equity Markets Gives the Fed "No Alternative" to Destroying the Dollar

Commodities / Gold & Silver Oct 29, 2007 - 09:10 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES surged at the Asian opening on Monday, quickly gaining another $10 from last week's 27-year closing high and racking up a new all-time high against the British Pound.


Trading above $794 per ounce, the metal recorded a Morning Fix of £385.12 in London – beating the previous all-time high of £382.73 made on 12th May 2006 – before dropping 0.8% from the top as the Wall Street open drew near.

For British investors wanting to Buy Gold Today , the new high came even as the Pound rose towards new 26-year highs against the US Dollar on the currency markets. The European single currency hit fresh life-time highs above $1.4420.

In the broader commodity markets, copper, wheat and rubber prices all turned sharply higher this morning, while a shutdown in Mexican oil production in response to a hurricane threat sent crude to new highs above $93 per barrel.

Asian and European stock markets also rose, pushed higher by traders expecting a cut in US interest rates when the Federal Reserve meets on Wednesday.

"Demand from [gold] investors has continued to remain strong, driven by the longer-term strategies in reaction to the problems of the global financial systems in the aftermath of the credit-crisis in the USA ," says Wolfgang Wrzesniok-Rossbach in the latest Metals Weekly for Heraeus, the German refining group.

Pointing to the surging oil price and the incredible shrinking Dollar, "the usually short-term profit-taking speculators have been also adding metal to their books," says Wrzesniok-Rossbach.

"For the next few days no change in trend is noticeable, though one should stay warned that the present situation is not a one-way street. Profit-taking will be triggered at some point and this will put some pressure on the metal.

"[But] given the overall environment, a complete collapse, as seen in 2006, is not to be feared."

Pundits elsewhere tempted the sharp pullback in Gold Prices , however. "I think the market will aim for $800," said Darren Heathcote of Investec Australia to Reuters earlier.

"All news is in favor of gold," agreed Ronald Leung of Lee Cheong Gold Dealers in Hong Kong . "Maybe we'll see $800 this week."

Ross Norman at TheBullionDesk continues to believe that spot gold will hit $850 per ounce – its all-time top vs. the Dollar of Jan. 1980 – by the end of this year. Out of 25 analysts surveyed by Bloomberg, only two advised Selling Gold today.

Three were undecided. The other 18 gold professionals believe the Gold Price will rise yet again between now and Friday.

The spot Gold Market has now gained more than one-fifth since the Federal Reserve – acting in response to the financial crisis sparked by huge losses on subprime mortgage investments – began cutting US rates on Aug. 20th.

Last Friday, the Gold Price completed its 9th weekly gain in ten, hurting demand in the key Indian jewelry market as the traditionally strong Diwali festival approaches.

"I don't have many orders here to keep watch prices for," said one Indian dealer to Reuters overnight. "I'm just sitting idle.

"Last year at this time people were buying even though prices were rising. This time, they are waiting and watching."

Further east in Tokyo overnight the Nikkei stock index rose 1.2% while gold futures for delivery in Aug. '08 gained more than 1.8%.

Gold has now gained nearly 20% for Japanese investors since the start of this year. Today it also hit a new all-time high in the Vietnamese Gold Market , breaking above 15 million VND per tael, the local unit of gold weight.

The Hang Seng index of Chinese stocks traded in Hong Kong shot 3.9% higher. Here in London , the FTSE100 index added 2.0% within the first three hours of trade.

US government bond yields ticked lower, meantime, as prices were driven higher in anticipation of the Federal Reserve cutting Dollar rates when it meets on Wednesday.

US interest-rate futures now say a cut to 4.50% is a dead-cert – and with stocks, bonds and commodities all bid higher in anticipation of the Fed's decision, "it seems that the Fed has no alternative but to cut rates this week," reckons Cyril Beuzit at BNP Paribas in London.

Put another way, the bull market in US bonds and global stocks is only putting further pressure on the central bank to devalue the Dollar further, cutting the returns paid to savers in the hope of forestalling a collapse in US house prices and the recession that looks increasingly likely to follow.

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 2007

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

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