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 Leaps to $905 as FBI Arrests Bear Stearns Hedge Fund Managers

Commodities / Gold & Silver Jun 19, 2008 - 09:18 AM GMT

By: Adrian_Ash

Commodities

SPOT GOLD PRICES leapt against all currencies at the US open on Thursday, surging to a four-week high above $905 per ounce on what looked to be one or more large New York orders amid an otherwise quiet market.

Crude oil bounced from an overnight dip as the US Dollar ticked gently lower on the forex market and energy-giant Shell closed 200,000 barrels of daily production in response to militant attacks in Nigeria .


In New York , two former Bear Stearns fund managers were arrested on charges of securities fraud charges.

"We hold our one month forecast for Gold at $900," says John Reade, head of metals trading at Swiss bank UBS, today.

"Although we believe gold is set for a big move, we are unsure of which direction. While the market remains above the 200-Day Moving Average we remain cautiously bullish.'

"Credit spreads widened," notes Manqoba Madinane for Standard Bank in Johannesburg of yesterday's 0.8% gain in the Gold Price . "That indicates US credit markets are coming under strain.

"As a result, equity markets might come under pressure, enhancing the relative attractiveness of commodities."

Indeed, "as inflation psychology becomes more and more embedded and people become desperate to have a source of value," said Christopher Wyke, a commodities analyst for the $277bn Schroder funds, to a Hong Kong conference today, "you could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000 an ounce or beyond."

In March, Wyke forecast Gold Prices of $1,200 to $1,500 per ounce within 12 months. Noting today that two-thirds of the world's population face price inflation above 10% per year, Wyke says central banks will now become net buyers of gold for the first time in two decades in 2008.

The move will be led by developing countries trying to defend the value of their export-earned currency reserves, Wyke is quoted by Bloomberg .

World Gold Mining Output , meantime – which fell to seven-decade low in 2007 – continues to slip lower, with South Africa , the former world No.1, reporting a 10% fall in April's production from the same month last year.

Since 1998 South Africa 's annual gold-mining output has halved. Adding to the pressure on mine operators today, the National Energy Regulator (NERSA) announced that Eskom, the state-owned power utility, can raise its electricity prices by an average of 27.5%.

"Rising electricity costs will increase the cost of [mining] production," says an emailed comment from Walter de Wet at Standard Bank. "Many mines remain dependent on Eskom for their energy needs."

Of greater concern, however, "is the [actual] electricity supply to mines" he believes. A power outage closed South Africa 's entire mining industry for five days in January.

On the data front today, Canada reported a jump in consumer-price inflation from 1.7% to 2.2% annually, while new US jobless claims for last week came in ahead of expectations at 381,000.

Here in London , retail sales in May were reported 8.1% greater than the same month last year, led by a 9% jump in clothing sales.

The British Pound surged to a one-week high above $1.9700 on the news, but the jump in gold still pushed the Gold Price in Sterling up to a three-week high of £458 per ounce.

Warning that the Bank of England is likely to raise interest rates in a bid to quell price inflation, "today's very strong set of retail sales numbers suggests that, despite all the doom and gloom, the UK consumer continues to shop," says Ian Kernohan at Royal London Asset Management.

"Unfortunately this 'shop till we drop' attitude will sow the seeds of its own demise."

With London's banking sector under siege from short-sellers looking to profit as finance shares continue to fall, little-seen data from the Bank of England today showed UK lenders buying back £4.6 billion ($9bn) of securitized debt which they'd previously sold to investment funds.

Taking these debts back onto their balance-sheets, the banks' new net lending to UK consumers and business sank by more than 99% in May from April, reaching its lowest monthly total since Oct. 1997.

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

© 2005-2022 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