Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Weak on US Stimulus Package

Commodities / Gold & Silver Jan 18, 2008 - 09:41 AM GMT

By: Adrian_Ash

Commodities SPOT GOLD PRICES bounced but held inside the week's downtrend early in London on Friday, recording an AM Fix of $872.50 per ounce – the lowest fix in nine sessions.

"Overnight gold traded as low as $870," says today's Gold Market note from Mitsui, "as investors begin to liquidate positions.


"All the precious metals are now looking below to see where the next support level will come from...[and] it is not only a Friday but it is a long weekend in the US. So beware of further volatility today."

For British investors looking to Buy Gold today, however, the price rose 1.2% from last night's 10-day low after the weakest retail data in 12 months knocked the fast-weakening British Pound 1.5¢ lower vs. the Dollar.

Retail sales volumes fell 0.4% in Dec '07, said the official statistics agency, "surely enough to cement a February rate cut and more cuts thereafter," according to Vicky Redwood of Capital Economics.

"Judging by the way the leading indicators are pointing," say analysts at Bear Stearns, "the Bank of England needs to get rates down to at least 4.50%...and probably needs 4.0% rates before it starts to fan some extra stimulus into the economy."

Economic stimulus for the United States is expected today from the White House after chairman of the Federal Reserve, Ben Bernanke, told Congress on Thursday that he would support a presidential package of aid.

"Fiscal and monetary stimulus together" would help the world's largest single economy avoid recession, Bernanke believes, clearly signaling further cuts to the value of the US Dollar ahead.

George W.Bush has already backed government aid for sub-prime US mortgage debtors. Friday he was set to announce $800 tax rebates for individuals and $1,600 rebates for households, plus time-limited tax breaks for business.

Against this inflationary outlook, "gold is taking a breather," believes Carlos Sanchez, an analyst with the CPM Group in New York . "I think people are on the sidelines waiting to see what kind of stimulus plan this will be and where the economy is."

Financial stocks in Europe meantime lost up to 5% of their value by lunchtime today after Thursday's torrid day for bond insurance firms on Wall Street.

The so-called "monoline" insurers – which now provide guarantees worth some $2,400 billion to corporate bond and credit investors – lost up to 44% of their stock-market value when Merrill Lynch blamed $1.9bn of its latest write-downs on the threat of non-payment from ACA.

A "tiddler" in the monoline world, according to the Financial Times , ACA sold $61 billion-worth of protection to 31 counterparties during the first six months of 2007 alone, promising to insure sub-prime and other collateralized debts.

Now classed as "junk" by the leading credit ratings agencies, ACA may be joined by market-leaders MBIA and Ambac Financial after a review of their crucial AAA-rating was announced by Moody's and Standard & Poor's on Thursday.

Without the very highest credit ratings, the monoline insurers would be unable to borrow and finance the insurance pay-outs they've promised, threatening a collapse in global bond market confidence. Whereas gold, in contrast, "has been safe for six generations" according to one Chinese gold-jewelry shopper interviewed by CNN overnight. "Gold never loses its value."

Never mind that Gold Prices go down as well as up – or that they fell for two decades straight starting in Jan. 1980. Chinese consumers, savers and investors are now able to Buy Gold both for investment and jewelry, and not only as physical metal but also via gold futures contracts, listed for the first time last week on the Shanghai Futures Exchange.

"This will be a big, important development for the Gold Market , because for the first time the Chinese can Buy Gold and trade it," says Puru Saxena, the Hong Kong-based money manager. "The Chinese like gold."

On the other side of the trade, meantime, China overtook South Africa to become the world's largest gold-producing nation in 2007, says new analysis from the GFMS consultancy.

Mining a total of 276 tonnes last year, China grew its gold output by 12%. South Africa 's output, in contrast, has now halved from a decade ago.

Total world mining supplies fell 1% in 2007, says GFMS, reaching the lowest levels since 1996.

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 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 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

6 Critical Money Making Rules